APPENDIX 13
Memorandum submitted by Sainsbury's Supermarkets
Ltd (Q18)
Thank you for asking Sainsbury's Supermarkets Ltd
to contribute to your investigation into the marketing of milk
in the UK. This letter highlights the work Sainsbury's is doing
to improve the quality and variety of milk available to our customers.
It also expresses concern that not enough is being done by milk
producers to market this highly nutritious product to consumers.
THE EFFICIENCY
AND EFFECTIVENESS
OF MARKETING
ARRANGEMENTS FOR
THE BUYING
AND SELLING
OF MILK
IN ENGLAND
AND WALES
Between 1996 and 1998 the Family Food Panel identified
a significant decline in the consumption of milk across all consumer
age groups. The decline was particularly pronounced among children
and young males.
The lack of marketing activity by milk producers
is one of the reasons for this decline. Since 1995 there has been
no co-ordinated campaign by producers to market milk. In contrast
major soft drinks brands have continued to invest millions in
promoting their own products to children and young adults.
This lack of marketing effort in the UK can be contrasted
with the recent and highly successful "Milk Moustache"
campaign in the USA. This featured numerous celebrities with a
"milk moustache", as the result of drinking a glass
of milk. The widely acclaimed campaign was endorsed by President
Clinton. It has contributed to milk retaining its share of a highly
competitive market.
THE ACTIVITIES
OF SUPERMARKETS
Sainsbury's buys its milk from four major dairy companies.
In recent years we have worked with these suppliers to improve
the product offer to our customers. Through working closely with
the industry we have been able to respond to our customers' needs
and deliver production efficiencies to our suppliers. This is
one of the reasons why Sainsbury's milk is the cheapest it has
been for five years. In October 1994 we sold a two-pint carton
of milk for 55 pence, in June 1999 it is selling for 52 pence.
Other examples of consumer benefits derived from
Sainsbury's working with its suppliers include:
- setting high standards of farm welfare;
- improving the production standards in dairies
resulting in improved quality and longer shelf life;
- establishing industry standard packaging such
as our award winning "pourable" bottle;
- creating a single colour coding for full fat,
half fat and skimmed milk across all multiple retailers;
- introducing regional milk to our stores in the
South West, Wales, Scotland and Northern Ireland.
Without these efforts milk would be inferior in terms
of safety, traceability, welfare standards and packaging. These
changes can only have assisted milk consumption.
Our commitment to the organic milk industry is a
further example of us responding to consumers' wishes. Customer
demand for organic milk has greatly exceeded supply in the last
three years. To help address this problem we have committed to
pay our supplier a premium price and to buy increasing volumes
of organic milk until at least 2004. Our supplier then passes
this price onto the Organic Milk Suppliers Co-operative. The premium
price and the certainty of increased volume (estimated to increase
tenfold in five years) gives existing organic farmers the confidence
to expand their production. It also gives farmers who are keen
to convert to Organic production a guaranteed market for their
milk after their period of conversion. This innovative approach
has received widespread praise from within the industry, the media
and from the National Farmers Union.
THE EFFECT
OF THE
CURRENT STRUCTURE
OF THE
DOMESTIC INDUSTRY
ON ITS
ABILITY TO
add value to raw milk
Any industry that hasn't advertised for over four
years cannot claim to be selling an added value message. We hope
that the work currently being done by the National Dairy Council
with farmers and dairies will result in a new milk campaign will
soon commence. In addition to a new marketing campaign, producers
need to concentrate on innovative product development to ensure
this nutritious and versatile product captures the share of market
it deserves.
We are prepared to play our full part in promoting
milk but we need an efficient, flexible and co-ordinated industry
if milk is to successfully compete against many other products
in our stores. The more transparent and efficient the industry
can be, the more likely it is to be in a position to compete effectively.
The best and most obvious way to add value is by
selling greater volume, flavoured and very importantly organic
milk as mentioned above. The industry structure has not aided
the latter due to the large dairies finding it difficult to segregate.
This will obviously change as volumes increase.
I hope that the committee will find these comments
of value.
15 June 1999
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