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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