Examination of Witnesses (Questions 540
- 559)
MONDAY 9 MARCH 1998
MR STEVE
MURRELLS and MR
DAVID SAWDAY
540. I am sure. That was the intention.
(Mr Sawday) On their part, not ours—if
that is true.
541. How much are you paying London Economics
for this study?
(Mr Sawday) We have not actually quite
concluded the figure yet but it will be several tens of thousands
of pounds.
542. Can we have an accurate figure on that?
(Mr Sawday) Yes. We have not got the
final figure yet but it is going to be in the region of £40,000.
543. When are you expecting the report to be
published?
(Mr Sawday) Hopefully in the early summer.
Say June.
Ms Jackie Lawrence
544. You say in 1997 90 per cent of your fresh
beef was British. What percentage of that was Welsh?
(Mr Murrells) We secure between 500-600
cattle a week—which is around 10 per cent of our weekly
requirements—from Wales.
545. So only 10 per cent of the UK—
(Mr Murrells) Yes.
546. Can you give us comparable figures for
beef and beef products?
(Mr Murrells) I am not in a position
to do that. One of the things I would say which might be useful
is that the producer club concept is all about securing raw material
to firstly go into our fresh meat business but then to go into
our further processed business—in other words, our ready
meals. It is very likely, and it will be fact, that more and more
of our product produced in the UK will start now being processed
into our ready meal sector. I cannot give you an exact figure
today but the aim is that that will happen. So it will become
more and more sourced locally within Britain than we have done
in the past in areas such as processed meat.
547. It does seem a quite small percentage of
your overall need bearing in mind Wales' role as livestock producer
in the UK. How else is the breakdown done? Can you give us figures
for other areas in the UK?
(Mr Murrells) The figures I have quoted
to you are for those farmers that actually serve us for our Welsh
beef in our Welsh stores. The fact that one of the our suppliers
is spending £25 million in Merthyr Tydfil would suggest that
more of our product is going to be coming from the Welsh area.
548. Do you purchase meat through Midland Meats?
(Mr Murrells) No, we do not. I think
that is a Sainsbury's supplier.
Mr Livsey
549. Turning now to lamb, you say that 90 per
cent of your lamb will be British in 1998. First of all, just
taking that statement, you say "will be". What has it
been? Let's say in 1995, for example.
(Mr Murrells) The figure we quoted was
the right figure for 1997 and 1998. On fresh lamb we bring in
a small consignment of New Zealand chilled each year at the end
part of the season. We do it for the obvious reason that we need
to guarantee the quality of stock which our customers expect but
by bringing in the small amount we do, it enables us to obviously
support the British lamb farmer.
550. What is a "small amount"?
(Mr Murrells) During the window from
January to April, 25 per cent of our fresh lamb will be from New
Zealand and, if you take that for the whole year, that equates
to 10 per cent coming from outside Britain.
551. You mention chilled lamb. Does this include
frozen as well as chilled?
(Mr Murrells) No. That is purely fresh.
All of our frozen lamb has come from New Zealand for a number
of years now.
552. I gather that this year you did a deal.
When do you normally do your contract deals?
(Mr Murrells) We would normally be putting
in place contracts with the New Zealand companies at the end of
the summer of 1997 for a product coming in January/February 1998.
The reality of that deal, bearing in mind the position of the
UK market, is that that deal will disadvantage Tesco. I think
it illustrates the fact that we have quality uppermost in our
mind and believe that the requirement we need for New Zealand
is there for quality reasons.
553. But is it true you have burnt your fingers
somewhat on this deal that you did with New Zealand, given the
price of British lamb now?
(Mr Murrells) No. Hopefully I have just
made the point it is for quality reasons. The reason why the lamb
market is extremely depressed, as we all know, is there is an
over production—a severe over production—in this country
and sterling is causing tremendous problems for the exporting
of lamb.
554. The depression in the market place for
lamb has been enormous—something like 40 per cent down on
the previous year—with so much lamb being unsold, in fact,
in the last two or three months. Do you think that your buyers
in the market place have been affected by the fact you have done
this contract with New Zealand and you would prefer to be buying
in British markets where it is much cheaper?
(Mr Murrells) No, I do not believe that
is the case. Firstly, they are not our buyers; they are the buyers
for the suppliers. Secondly, the quality of lamb stock this year,
because of the fact that farmers have held on to their stock longer
than they would normally want to, is not of the quality that we
would want and so the price is obviously being depressed. Again
I say that we have brought New Zealand in, and have done it for
the last three or four years and will continue to do it but at
a level that enables us still to take the majority of our stock
from the UK. We have also got fifty lamb producers who actually
are doing very early, new season lamb for us because we are trying
to encourage the lamb farmer in this country, in lowland areas,
to farm earlier on.
555. They may not be your buyers but you may
be specifying that you can only go to a certain price in the market
place.
(Mr Murrells) No. We specify a clear
classification and quality of product and that is what our suppliers
buyers buy to.
556. We would be very grateful if you would
give us that specification when it is convenient to do so.
(Mr Murrells) Yes.
Chairman
557. Can I go back to the 97 per cent figure
for your fresh beef? Where does the other 3 per cent come from?
(Mr Murrells) The 3 per cent is made
up of southern Irish raw material. The problem we face is people
do not purchase the imbalance so there are times of the year where
we actually bring in cuts of meat rather than carcases of meat.
Christmas is a good example where we bought in hindquarters from
southern Ireland. The important point here is that we operate
a level playing field so those suppliers that service in southern
Ireland are adhering to exactly the same standards in the UK.
I took a party in January over to southern Ireland that consisted
of Ben Gill (President of the NFU), Peter Rogers and Brian Radcliffe
(who were part of a number of Welsh organisations that came and
saw us), an independent vet and a farm assurance representative
to let them see that Tesco operates the same standards outside
the UK when they bring in small quantities. You will find that
that was well documented afterwards and that Committee found that
Tesco do deliver what they say they will deliver—the same
standards.
558. When you have 20 per cent of the retail
market for fresh meat, 3 per cent of what you purchase is quite
a large amount and that is bound to affect the market when it
is as fragile as it is in beef. What do you intend to do about
that in terms of strengthening the market within Britain?
(Mr Murrells) I think it is a fact that
we do not trade in imbalance so we will always require at times
to source outside the UK. Whatever that figure is—and 97
per cent is the figure that has been quoted in the last twelve
months—we have a responsibility to make sure that it is
to the same standards. The fact is that, in this country, we are
only 80 per cent self-sufficient in beef production so there will
be times when raw material will need to come in from outside the
UK and I am sure that, once the ban lifts as it has done in Northern
Ireland, we will be a different situation with our farmers being
able to export products abroad.
559. Obviously that is the real answer to strengthening
the market but you do not mention anywhere where you source your
processed beef from?
(Mr Murrells) I think I mentioned that
point earlier on. We want to source more of our processed beef
and lamb through our producer clubs which are based in UK and
Northern Ireland and that will be an on-going process. It will
take time for us to deliver that but that is a definite aim of
the business. At the moment, product will be sourced outside of
the UK for our further processed area with the exception of fresh
burgers (which are 100 per cent British) and frozen burgers (which
are 55 per cent British).
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