Memorandum from J Sainsbury plc
1. GROUP PROFILE
1.1 J Sainsbury plc is one of the world's
leading retailers, operating three separate store chains and a
bank in the UK, and one store chain, Shaw's, in the USA. Together
these businesses employ over 170,000 people serving more than
12.5 million customers a week.
1.2 Sainsbury's Supermarkets Ltd is the
largest part of the Sainsbury Group. It operates 390 stores. Eight
of these stores are in Wales.
1.3 The other UK retail businesses are Savacentre,
the country's only specialist hypermarket company, operating 13
stores, and Homebase, a chain of 295 home improvement and garden
centres.
1.4 Shaw's Supermarkets Inc operates 121
stores in New England.
1.5 Group sales for 1996-97 were £14.3
billion.
2. THE DIFFICULTIES
FACING THE
BRITISH LIVESTOCK
INDUSTRY
2.1 BSE continues to be the biggest problem
facing the livestock industry in the UK with significant impact
on the turnover and profits of everyone involved in supplying
fresh meat to the British consumer.
2.2 Consumer confidence in British beef
continues to be fragile with huge dips in sales as soon as the
Government makes a statement as to the safety of beef. These sales
recover slowly until the next statement when they plunge again.
2.3 To re-establish consumer confidence
has required a great deal of costly promotional activity. Campaigns
have been run by all parts of the fresh meat industry aimed at
assuring customers of the safety of British meat. In our stores
we have engaged in high profile promotion of British beef.
2.4 Other costs have been incurred in relation
to the additional procedures which the Government require farmers
and processors to perform in order to tackle BSE.
2.5 The current strength of Sterling adds
to the difficulties of British livestock farmers. It diminishes
the value of the CAP subsidies they receive and encourages those
businesses which import fresh meat, generally restaurants, to
import more and buy less from the UK.
3. SAINSBURY'S
RELATIONSHIP WITH
WELSH LIVESTOCK
FARMERS
3.1 90 per cent of the food we sell which
can be sourced from the UK is British and we have a long history
of working actively with British farmers to promote foods from
all parts of the United Kingdom. We currently source 95 per cent
of our customer's beef requirements from the UK. The remainder
comes from two suppliers in Ireland.
3.2 Our relationships with Welsh livestock
farmers are excellent and of long standing. Because of its quality,
Welsh beef farmers supply us with 600 cattle each week and Welsh
lamb farmers provide 25 per cent of all the animals we sell. Welsh
lamb is sold in all our 192 Welsh and English stores which offer
a fresh butchery service. Welsh lamb is also sold prepacked in
all our Welsh stores.
3.3 We have a policy of offering locally
produced fresh meat. This practice is in line with our desire
to sell products locally to where they are produced. Welsh lamb
and beef are to be found in all of our Welsh stores. In our stores
in Scotland and Northern Ireland locally produced beef is offered.
3.4 At this time of year we sell a range
of New Zealand lamb in addition to maintaining a full range of
British lamb in all our stores. Providing a range of choice to
our customers is central to our success as a retailer.
3.5 We frequently promote Welsh lamb in
all our supermarkets. We also promote Welsh beef. Topside and
ribs were offered at a very competitive £1.99 per lb for
Christmas 1997. Other cuts also benefited from special promotion
throughout January 1998. We will continue to promote Welsh lamb
and beef throughout the year. We are already supporting the Meat
and Livestock Commission's "Lambtastic" promotion on
British diced and stir fry lamb.
3.6 In addition to this store activity,
we have been vigorous in our support for the current plight of
Welsh farmers. During December, our senior trading team met a
delegation of NFU members along with Ben Gill and Sir David Naish
to discuss what further support we can give to the Welsh livestock
industry.
4. Carcass prices and retail prices
4.1 We are aware that there is concern amongst
Welsh farmers about the apparent disparity between carcass prices
for beef and the ultimate price charged by retailers.
4.2 The live body weight price for a 620kg
steer has reduced from £620 in 1996 to £528 in 1997,
a drop of 17 per cent in the farmer's income from each animal
sold.
4.3 The abattoir owners who slaughter and
pack the beef for us have suffered increased costs due to the
BSE crisis and the need to remove special risk material such as
specified bovine offal. These parts of the animal can no longer
be sold and have to be thrown away.
4.4 The cost of inspection by the Meat Hygiene
Service has risen and the money that abattoirs can earn from the
sale of the "fifth quarter" (hide, head, fat and bones)
has fallen from £130 per animal in December 1995 to £62
now. Adding to this the cost of lost export markets and we calculate
that our suppliers costs have increased by around £100 per
animal. (See annex 1.)
4.5 Once the abattoir has finished rendering
an animal there is only about 30 per cent of it left that the
retailer can sell. To off-set the additional on-costs which the
BSE crisis have forced on to our suppliers they have increased
the price at which they sell beef to us by 12 per cent. (See Annex
2.)
4.6 Despite this the price at which we sell
beef has fallen by 5 per cent year on year due to the need for
additional promotional activity to off-set customer uncertainty
as to the safety of beef.
5. Conclusion
5.1 The problems facing the livestock industry
are national. All those involved in the supply of fresh meat to
the UK consumer—farmers, abattoirs and retailers have seen
their profitability significantly affected by the BSE crisis.
5.2 We welcome the efforts the Government
is making to speed the lifting of the beef ban. We are pleased
that the EU is making more money available for the promotion of
high quality cuts of beef through the European Quality Beef Scheme.
5.3 What is needed is for the Government
to provide some additional short term support to UK beef farmers
to ensure that there is still a viable industry in the UK once
the beef ban is lifted. The danger, if adequate support is not
forthcoming, is that the number of farms rearing beef will decline
to such a degree that UK farmers will not be able to supply retailers
and hence consumers with the same amount of high quality fresh
meat as they do at present.
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