Select Committee on Welsh Affairs Minutes of Evidence


Examination of Witnesses (Questions 906 - 919)

TUESDAY 21 APRIL 1998

MR MIKE GRIMWOOD and MR VINCE CRAIG

Chairman

  906. Good morning, Mr Craig and Mr Grimwood. It is very kind of you to come. I am sure you are aware of what we are looking into. I will not go into that again. If we can go straight into the introduction, your company has clearly grown markedly over the last few years. Do you expect that growth to continue and are you planning further expansion in Wales?

  (Mr Craig) Our company has grown from a very small operation based in Derby where we were a very small pickle manufacturer up until the mid-1970s. Since that period under the direction of our current chairman, the company has grown significantly. I do hope you enjoy the water today because we bottle that in Scotland. During the 1980s, we were very much a growing company, into diverse markets both in the UK and in continental Europe. Currently, about 20 per cent of our operation is in continental Europe. During this process, we bought a number of companies in Wales. We currently have a tomato growing operation in south Wales and a distribution company based in Carmarthen, in New Town. Probably most significantly, we have three major manufacturing companies in north Wales which are in our ready meals division which Mike has responsibility for.

  (Mr Grimwood) In north Wales, we run two pure ready meal plants making chilled and frozen ready meals. One is in Wrexham and one is in Flint. We manufacture approximately 1.75 million meals per week. Also in Wrexham, we have a fish breading and processing operation whereby we take in Scottish cod and Scottish haddock, bread it and put it onto retail shelves. We employ well over 1,000 people in those operations. The investment over the years has been £28/29 million and it continues. We will probably invest £2.5 to £3 million in the forthcoming financial year and, yes, the business is growing and expanding. It is continuing to develop.

  907. One of the reasons for that success you say has been continued innovation. Can you expand on that?

  (Mr Craig) As you are probably aware from our document, we are predominantly a private label manufacturer, so we manufacture for the major retail customers of this country and the major retail companies, particularly in Holland. An integral part of that success has to be innovation. We employ large numbers of chefs as well as technical product development and process development people. It is the continuous innovation of those people that allows us to survive. Standing still in this market place is a death knell situation so we put a tremendous amount of effort into product and process innovation in order to allow us to be the lead player in the fields that we work in.

  (Mr Grimwood) To give a statistic, in the two ready meal plants last year, we launched over 90 new products, which is a large proportion of our portfolio. Similarly in the fish operation, we have launched something in the order of 20 on that site.

Mrs Williams

  908. You have a number of small brands but you are, are you not, a supplier of customer brand products?

  (Mr Craig) Yes.

  909. Can you explain the reasons for this? Does it limit your freedom of operation perhaps?

  (Mr Craig) That is quite a difficult question to answer. I think the best explanation of it is almost to explain it on a historical basis. As a small company which was growing, the last thing we could afford was to grow a brand at the same time. As the company grew, own label development was becoming a normal thing, so the big manufacturers like Tesco and Sainsbury developed their own label strategy in the late 1970s/early 1980s, at a time when we were expanding. It was a logical thing for us to do, to work in partnership with those retailers to develop our growth and to develop their growth. We do not find it restricting at all. If anything, we find it much more refreshing than brand because it allows us to come into the market place. Our retail customers expect us to come to them with ideas saying, "We think there is an opportunity here that we could manufacture for you." In a branded situation, that process would take a much greater length of time. It would not be unusual for us to come from having an idea to having a product on the shelf in three to six months. In some instances, we have seen situations from idea to final concept in less than six weeks. I do not think you could do that in a brand situation.

Mr Paterson

  910. You say that the quantity of UK meat you buy has increased recently. The majority is not from the UK?

  (Mr Craig) That is correct.

  911. Can you quantify this for beef and for lamb?

  (Mr Craig) The actual quantities of beef that we purchase and handle within the total group, in the UK—I have not looked at the quantities in continental Europe—are approximately 6,400 tons of beef and just under 300 tons of lamb. We are not a major user of lamb. It is in very specific areas of our business.

  912. To what extent do your retail customers seek to influence your sourcing policy?

  (Mr Craig) I would confirm what some of the previous speakers have said. We have frighteningly detailed specifications. As a technical manager in a plant, you would grow to hate the detail that they go into. All the specifications will have detail of the source of origin. That specification will be agreed with the retailer. In some instances, the retailers go into even more detail and will specify specific sources and specific companies to buy from but generally they will be totally aware of where we buy the meat from and would be very displeased if we changed without telling them.

  913. Is the reason technical or is it price? Is it quality consistency or is it price?

  (Mr Craig) I think it depends totally on the product that we are manufacturing. If we are manufacturing something like a beef paste, then the quality parameters that we require for that beef paste are totally different than for a ready meal where we are requiring diced pieces of meat. In that sort of situation, the consumer—and I think we have to remember that is what we are here for; we are here to sell a product to the consumer—expects the dice size to be consistent and obvious, so the meat has to be able to handle that. The consumer also expects that the product will be lean and consistent. He or she does not want a fatty piece of meat today and a totally lean piece of meat tomorrow. They want lean, obvious meat that is consistent, good quality and of course, predominantly and most importantly, safe.

  914. Which is the predominant factor? Price or quality?

  (Mr Craig) In this instance, any product that we manufacture will be manufactured for our major, own label customer with a given price point. That price point will determine the amount of meat.

  915. It is price.

  (Mr Craig) No, it is not price. I would like to disagree with you, because we could in many instances buy poorer quality meat cheaper but that quality would not be sufficient to meet our consumers' expectations.

  (Mr Grimwood) Our customers, if they were here, would say that quality comes first and then price will follow.

  916. I guess what I am getting at is that we are going back to the proportion that is imported and UK produced.

  (Mr Grimwood) The fitness for purpose would be our starting point. The item that we have to buy, whether it be meat, potatoes or onions, must be fit for our purpose and that purpose can vary from product to product type.

  917. Can you give us an indication of how much cheaper imported meat actually is?

  (Mr Grimwood) I can certainly tell you what we have been paying for meat and if, as we did yesterday, we went into the market place and bought meat, what we would be paying at. Unfortunately, my buyer still works in pounds so I will talk about pence per pound. We buy ITQ beef under the GATT scheme at the moment and this year, in January, February, March and April, we purchased at 65 pence per pound. During 1997, the price range varied from 56.5 pence a pound to 66 pence a pound at the latter end, averaging it out at 60p. In 1996, we had reached 65p with a range from 62.2 to 77p a pound. If we stepped into the market place today and went for open market pricing, then we would pay on the open market 110p a pound but I have to say that would not be our normal purchasing policy. Normally, we would go out and set up long term contracts for 12 or 18 months or two years so that price would come back slightly.

  918. When you say "open market", you mean UK?

  (Mr Grimwood) Yes. We just phoned one or two suppliers yesterday and said, "If we wanted to buy this quality of beef, how much would you be charging us?" and that was the price that came back.

  (Mr Craig) I would equally emphasise that, in the case panel work that we have tried in the past, it is questionable whether we could actually get the quality of meat, particularly in Mike's division for ready meal production, to be consistent. The ITQ beef we find remarkably consistent for quality. In the just over two and a half years we have been buying the material, we have not rejected a single delivery.

Chairman

  919. Can you explain ITQ beef?

  (Mr Craig) Import Tariff Quota.

  (Mr Grimwood) Certainly, when we have stepped in for British sourced beef, because we buy very, very lean beef, 95 per cent official lean, right at the top end of the specification, if it is specialist for our requirements, when we have stepped into the market place, we have consistently found that people have not been able to supply the sort of quantities that we would want to purchase.


 
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