Examination of Witnesses (Questions 220
- 239)
MONDAY 23 FEBRUARY 1998
MR LAURENCE
BERNTHAL, MS
DAWN BLAKE
and MR JOHN
COLLIN
220. Thank you very much and thanks for the
investment in Ystradgynlais, it is in my constituency. I declare
an interest there.
(Mr Bernthal) Is it a good store for you?
221. Yes, it is. It is in a very good position.
We will not go any further down that path I think. First of all,
obviously it is welcome that you are investing in processing.
A lot of livestock from Wales is processed outside Wales. Do you
foresee an expansion in processing of the home produced meat in
Wales at all? Do you have any further plans or anything of that
kind?
(Mr Bernthal) At this stage, no. We have no plans
for extra processing facilities. I believe that the capacity we
have with the plant at Pontardawe, obviously serviced by John's
other plant at Newport and the plant we have at Cross Hands, is
sufficient.
222. You referred there to the plant at Cross
Hands, Dawn Pac. It is my understanding that that is an Irish
company, is it not?
(Mr Bernthal) Indeed. The parent company of Dawn Pac,
Dawn Meats, is an Irish company.
223. Is not a certain Mr Larry Goodman involved
in that who has had a rather rough record, shall we say, in the
Republic with going bust a number of times and a certain notoriety?
(Mr Bernthal) I would not want to comment on the characteristics
of Mr Goodman, fine upstanding character as he is. Dawn Meats
has no relationship with Larry Goodman. Larry Goodman is Anglo-Irish
Beef Processors, AIBP, or ABP, Anglo-Beef Processors.
224. Are you satisfied at the quality of material
and the origin of material coming out of that particular plant?
(Mr Bernthal) Yes, I am happy with the quality and
that is readily identified within our stores. I think the product
we are presenting to our customers from that plant, and indeed
from John's plant, is I would suggest the best in the High Street.
Yes, I am happy with the source of that material given the traceability
that we have and our quality technicians and my buyers who get
into the plant.
225. Are you buying only British product from
that plant? Can you verify in every single store that in fact
it originates from Wales or the rest of Britain?
(Mr Bernthal) Yes, I can. Yes, I am happy it is procured
within the UK.
226. So you are refusing offers of meat that
is coming from other sources?
(Mr Bernthal) I have not procured—sorry, procured
is a weasel word—I have not bought, nor have Dawn Meats,
nor have Sutcliffe's bought on our behalf, meat for packing into
our retail packs or into primals from any other source apart from
the UK.
Mr Livsey: Thank you very much.
Ms Lawrence
227. I was listening intently to that last question,
I think it is a very important one. You mentioned in paragraph
3.1.2 of your evidence a significant change towards centralised
packing. Can you tell us what the driving force is of this centralised
packing at key supplier locations?
(Mr Bernthal) Excellent question. Many, many areas
that are part of the decision process go into the central preparation.
I think one is we have to understand that the skills within the
meat industry have dissipated over the years and I think most
retailers would readily admit that they would have difficulty
finding the skills necessary to sustain in-store preparation in
every store that they have. That is one of the drivers, lack of
skill base. Two is consistency of product. It is very, very difficult
to manage a business, particularly one as diverse as we have where
at the moment we have meat in 375 stores, to try and get consistency
of cutting standards. No matter how you do it, no matter how good
each individual person is at the store, you will get variation.
One of the major advantages through central packing is that you
get consistency of product, or consistency should I say at this
stage of presentation of product, which is very, very important.
That would go back to my original statement of right product,
right place, right time but it also presents it in the correct
way for the consumer. Also you get consistency of raw material
coming in. In the case of John, he will be selecting all the product
that is coming in and he will have his consistent view of the
product that is coming in to go through the processing to go through
to our stores. That quality control function before anybody puts
the knife in it is very, very important. Also there is the economies
of scale. It is very important in keeping costs down in an industry
that at the moment is reeling under more and more costs being
levelled right the way through the system. Hopefully it is a way
of maintaining the costs before they spiral completely out of
control. Is there anything else you would put into that, John?
(Mr Collin) Not really.
(Mr Bernthal) Does that answer your question?
228. Yes. You mentioned economies of scale there
so one assumes that it is therefore cheaper for you.
(Mr Bernthal) That is the theory behind it, yes.
229. What are the consequences do you think
of this drive that will impact on the farm sector?
(Mr Bernthal) Are you specifically referring to CRS
or as an industry, the industry-wide impact?
230. The industry as a whole.
(Mr Bernthal) Again I think I would get the crystal
ball out on that one. I think it could be very, very positive.
I understand that people could see it as perhaps quite a sinister
move forward but if all retail packing or retail processing was
in the hands of a dozen plants it may have a hold over the raw
material base. I look at it from a different view in so much that
given that the product being produced in that plant is to the
customer's requirement it should be an advantage to the producers
of that raw material, ie the farmers, that they can understand
what is required and they can produce to that requirement. It
then becomes a recognition of what the consumer requires and the
processes it has to go through. Also there are other benefits,
and this really is gazing into the crystal ball. The primary producer
of the raw material, whether it be the beef farmer, lamb farmer
or even pork farms, can get closer to the process in so much that
they will have an outlet for product and a ready outlet for product
rather than being subject to the vagaries of livestock markets,
livestock auctions, which I am sure as everybody who has looked
at it over the last few days have seen have been very, very difficult.
I see it as all being part of that overall advisory and working
together process. There is a major benefit there.
231. One final point. You mentioned economies
of scale and potential for saving costs, has this drive or will
this drive overall have an impact on increased transport costs
for you? Does one balance out the other?
(Mr Bernthal) I have not been in a position to do
all the accountancy procedures on that. I would like to think,
and I am assured by the people who do all the counting of the
figures, that the overall balance of significant saving of packaging
at store level and all the other economies of scale would mean
that you can produce meat at stores without significant extra
costs than you would have by doing it yourself in store. The benefit
to the CRS is at the moment we have stores where there is not
meat and by going centrally packed we can increase our overall
meat sales by putting meat into there and hopefully that will
then create the economies of scale further down the line for us
as well.
Chairman
232. Just a technical point. To what extent
are we talking about two separate lines, if you like, when we
are talking about primals as opposed to centrally prepared meat,
CPM? When you get primals presumably you cut them up in store,
do you?
(Mr Bernthal) Yes indeed.
233. Who controls the CPM process, is it you
or the supplier?
(Mr Bernthal) We control the CPM as indeed we control
the primals. Everything is done to a specification. With the production
of primals we have a specification. It goes into stores and then
butchers cut to a specification in store. With the CPM, centrally
packed meat, in effect the primal is still produced but it is
then broken down into the retail meat packs at the central area
and we control that.
Mr Caton
234. You have just described and justified the
restructuring of meat preparation that you are now undertaking.
Are the costs of this falling on producers at all? Will producers
benefit from this restructuring?
(Mr Bernthal) Can I just tease you on that word "producer".
Do you mean producer as in meat processor or producer as in farmer?
235. I am thinking of the farmer.
(Mr Bernthal) It is my understanding, and I may be
wrong in this, that the farmer would not see any difference between
us changing our operation from primal to retail packing. They
would still continue to deliver to abattoirs, go through the slaughter
process and the production of primal meat whether it be in primal
format or in retail packing. They would not notice any difference.
236. Can you see any benefits for them?
(Mr Bernthal) As I have responded to the previous
question, yes, I think there are major benefits to be had there.
I do not think at this stage that the farming community is monopolising
that great a marketplace. I think the potential is there.
Mr Jones
237. Looking at your flow diagrams for lamb
and beef, could you tell us in which part of the process do you
have most influence and intervention? Does that vary according
to the different cuts and packing options which you employ?
(Mr Bernthal) I think you will have to forgive the
simplicity of this because I did do it in rather a hurry. If we
look at the overall process, and your question is where do we
exert our influence, and again the word "influence"
is perhaps one of these confrontational type words, I would see
us working with everybody from the slaughterer all the way through.
If we were to have any one particular area where we do influence
things, that is potentially where it is cutting for retail packs.
We are retailers, that is our area of expertise. As much as I
do like our processing base, if you put a knife in the hand of
a wholesale meat butcher they will cut it, but they will cut it
certainly very differently than a retailer will cut it, and John
smirks there. At that stage we hold the knife, if you like, and
we exercise our guidance to suggest if you put all the chops in
the same direction they stand a lot more chance of selling than
if you just keep criss-crossing them and throwing them on a tray.
So potentially that is where we have our interests at heart.
238. Okay. Can I just ask you as a matter of
interest, if you look at the flow for beef first there are obviously
additional costs of de-boning.
(Mr Bernthal) Yes.
239. Looking at your lamb, obviously there is
no requirement to de-bone lamb but I gather there are rules now
in place for mutton, are there not?
(Mr Bernthal) Indeed there are.
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