Examination of witnesses (Questions 1
- 19)
WEDNESDAY 3 MAY 2000
MR GORDON
SUMMERFIELD and MR
DAVID MCNAIR
Chairman
1. Gentlemen, welcome. This is not exactly a
new sort of inquiry but we thought from time to time amongst our
rather longer inquiries we would like to sit and have a quick
microscopic look, as it were, at various agencies to see how they
are getting on and you came first out of the bag, probably quite
appropriately in light of the latest figures for food trade. You
started off with really quite a wide remit but as a result of
various reviews, quinquennial reviews and other reviews, you have
now ended up with a much tighter focus. I think it might help
us if you were just to fill in for us precisely what your remit
is at the moment, where you see that, and then perhaps you might
just add a line as to how relevant are you in comparison with,
let us say, the relationship between the pound and competitive
currencies? In other words, do you matter a row of beans, quite
frankly, in relation to the broader picture? That is a legitimate
question and I will toss you that at the beginning. Could you
just identify yourselves. I will tell you now that I imagine your
words of wisdom will be on the internet tomorrow morning. No,
they will not be on the internet tomorrow morning. Most people
have their words on the internet the next morning for those sad
people who spend their time surfing the internet. Now it is over
to you.
(Mr Summerfield) Thank you, Chairman. I am Gordon
Summerfield, I am the Chairman of Food From Britain and I was
appointed to this role as from 1 January this year. To my right
is David McNair, who is the new Chief Executive in Food From Britain
who was appointed during January of this year, so we are both
quite new in post. I thought it might help if we did talk to you
and tell you a little bit about Food From Britain and talk about
its aims and objectives and explain our organisation and how we
are set up and so on and so forth. Broadly speaking, our aims
and objectives remain as agreed following the Stevenson Report,
which I am sure a number of you know about. Those are two-fold
really, the first to help promote and develop the marketing of
British food and drink products worldwide and then to support
the speciality food sector in the United Kingdom which, as you
know, is generally small companies and medium sized businesses
rather than the very large multinationals and conglomerates. Those
are broadly our aims and objectives. We do this through our organisation
which has a London office which offers marketing services, business
development, exhibitions and research services for new exporters
and entry into new markets. Then we have our speciality foods
part of the business which supports the Regional Taste Groups
that I am sure you have read about and there are six of them in
the United Kingdom. Within the other part of Food From Britain
we have 13 international offices around the world, ten of them
in Europe, three of them outside of Europe. They are all privatised,
so since the last time that this Committee looked at food and
drink we have privatised offices in the world. What that means
is we help to support their overhead and we make some funding
arrangements for those offices but they are stand alone businesses
that have to show a return. These businesses offer a range of
business consultancy and marketing services to the UK food businesses
and drink companies and they are the experts in their country.
If I can just example that alongside the Sopexa organisation,
the French organisation similar to Food From Britain, that has
42 offices across 34 countries, so quite different, and later
on I am sure we will talk about how they are funded and how we
are funded. Our supervision is accountable to Westminster, Edinburgh,
Belfast and Cardiff and we have regular meetings with MAFF, quarterly
reviews, against agreed targets and over the past five years we
have achieved 79 per cent of those targets. We have a council
of directors of large and small British exporters, primary agriculture
through the NFU, MLC and HGCA, the Home Grown Cereals Authority,
and observers from the devolved regions and their ministries and
MAFF. I have a list of those council members should you wish to
append them to your papers. In 1970 the ratio of Government to
industry funding was 60/40 and by 1999 this ratio had switched
to 44/56 as FFB successfully increased support from industry and
that, of course, is one of our main thrusts today, to ensure that
we see continued growth. In 1990 FFB's total income was some £7.5
million, of which Government funding was £4.5 million, whereas
Sopexa in France received £27 million from a mix of government
and trade levy funding. That was in 1990-91. In 1999 FFB had funding
from Government and that had increased from £4.5 to £5.3
million, which actually was a decrease in real terms of some £300,000
since 1991, whilst in the sister operation in Sopexa funding had
risen to 600 million French francs of which 23 per cent was government
funding, some £13 million. Our clients include levy bodies
such as the Home Grown Cereals Authority and the MLC. Chairman,
I could go on but I think I will stop there and answer questions
and pick up some of the other activities we are involved in later
as questions arise from your Committee.
2. Can I ask you about the second half of my
first question. If you did not exist, would it matter?
(Mr Summerfield) I think it would certainly.
3. Why?
(Mr Summerfield) I think the small companies, particularly
small to medium sized exporters, would not find their way to some
of the markets that they find their way to now. They get a lot
of expertise from the London office in terms of marketing services,
business development, exhibitions that we put on throughout the
world, and they are very important to the small to medium sized
organisations.
4. You are basically an export management consultancy
which happens to be specialising in food.
(Mr Summerfield) Food and drink.
(Mr McNair) The skill is not just consultancy, it
has also got implementation skills. For example, in terms of our
relationship with the Home Grown Cereals Authority, in the past
year we have undertaken just under 30 projects with them which
have actually delivered an incremental tonnage of 6,000 tonnes
of British cereal products and that is done through very specific
project proposals within each market with major supermarket chains
selling those products.
5. How much tougher is it to do it in a climate
like today with the relationship between the pound and the euro
in particular when there is such disequilibrium?
(Mr McNair) I think that is reflected in two ways.
First of all, when you actually look at the performance of food
and drink exports, whilst within the EU they are down by 6 per
cent, if you look at non-EU markets they are only down by 3 per
cent. What we are seeing in the Far East where we are getting
an economic recovery is exports are up by some 16 per cent and
in the USA, where there has been much more stability in terms
of exchange rates, we see performances there are some 10 per cent
up year over year. Currency exchange has got an influence in terms
of food and drink but it is not the only thing. When you look
at issues such as the trade gap, we see that in areas such as
fruit and vegetable clearly there is quite a negative gap there
which has an impact in terms of overall performance and, indeed,
world prices particularly within the meat area also have an impact
on overall performance. Our focus has been much more in terms
of looking at added value products where there is the need for
processing skills and, therefore, the competitiveness arises from
the distinctiveness of the products that we can offer and the
value for money, not necessarily the cheapest but the value for
money, that comes from those processing skills in relation to
the costs of making them.
Mr Paterson
6. Can you give us a couple of clear examples
of products which have penetrated export markets that would not
have done so without your help?
(Mr McNair) I think a very good example is we have
just returned from France from reviewing our operation there and
the team there has worked very closely with Marks & Spencer
as they have developed a business in Europe, to the extent now
that Le Figaro actually carried the headline the other
week "Is the English sandwich about to overtake the Big Mac
in Paris?" Working closely with Marks & Spencer in terms
of developing the English food option within their range has had
a knock-on effect because if you now go to French supermarkets
you will find that they are stocking le pain anglais which
means that we are bringing in other English suppliers to the French
market as a result of that initial work.
Mr Mitchell
7. What are the proportions for export between
what you might call commodity trade, in other words the stuff
that is going to be hit by the high pound where the market is
very competitive, and the specialised foods?
(Mr McNair) I cannot remember that figure immediately
offhand. We will report that specific figure back. Clearly one
of the key issues we have been looking at is in food and drink
exports Scotch whisky in particular is such an overwhelming influence
that what we have tended to do is separate that out from our other
activities.
8. That is an addiction. That is drug dealing
really, people are addicted to it. Is the majority of your trade
classified as commodity?
(Mr McNair) The majority of the trade that we are
dealing in is processed foods.
9. Do you deal in what you might call ethnic
stuff for expatriate poms overseas?
(Mr McNair) It is not necessarily just for expatriates.
10. Do you deal in stuff like haggis and black
pudding and frozen Yorkshire puddings?
(Mr McNair) That is a very good example in terms of
looking at the whole supply chain through the appreciation of
the richness and diversity of products that we have got within
the UK which we support and develop in the speciality foods area.
There are many opportunities for us to be looking at encouraging
export of those products. The interesting thing is that it ties
in with the food trend we are seeing worldwide increasingly with
food service and with home meal replacement. There is a great
demand for convenience foods, for sauces and pickles. Because
of the cosmopolitan nature of the business that we have in the
UK now a number of suppliers, such as Noon Products, Pataks, Costa,
who have developed a very good business in ethnic foods in the
UK are now at the forefront in developing the sales of those products
worldwide. This was an item that was picked up in an article in
the Financial Times yesterday which gives you more detail
of that.
(Mr Summerfield) I think your question is a real one
and that is in parts of Spain there are over 500,000 expatriates
and that is quite a big market for our Spanish office. Certainly
foods going from here to Spain are important and they are important
in terms of quality, in terms of the brand. And price is actually
less important to those people.
Mr Drew
11. Can I move us on to the relationship with
Government. I have read the material that you gave us but can
you briefly explain what the relationship is besides funding and,
in particular, what that relationship is with MAFF?
(Mr Summerfield) Other than funding, because that
is the fundamental link and of course one is always respectful
of who holds the purse strings so we make sure that we want to
be able to always ask for more money if we can, in terms of the
working relationship we have an extremely good working relationship
with MAFF. We have a MAFF person on our council and we talk about
our budgets, agree the budgets and the measures, and then MAFF
will measure our performance on a quarterly basis and we review
it on a quarterly basis with the individuals from MAFF. One has
to say that we have a very good working relationship with them.
We feel that we are very independent but always have someone who
can see that we are actually judicious in the way in which we
spend our taxpayers' money and ensure that we get value for that
money.
(Mr McNair) I think that is quite an important point.
When we were talking earlier about the offices overseas being
privatised, clearly we want to measure them in terms of the commercial
success but, also, tied in with the funding we give them to support
their overheads comes the need to service small and medium sized
enterprises and be providing advice and help to new exporters
looking to move into those markets where we are represented.
12. Will the ratio of business funding to Government
funding grow? Will that change the relationship of yourselves
to Government, in other words business will have much more say
on the strategic direction in which FFB will go?
(Mr Summerfield) I think as a general principle we
would put a lot of energy into driving to grow the industry investment
in Food From Britain. Certainly that would be the view of our
overseas offices too. However, funding for some parts of the industry
is going to be necessary. If we take the Regional Taste Groups,
one sees these almost as the seed corn of tomorrow's businesses.
There are a number of very small businesses, probably micro companies
employing less than ten people, that will need help of some sort.
We will always see some funding to the Regional Taste Groups.
I see this in two parts, always funding or helping to fund some
of the small growth opportunities for companies from overseas
offices where they are becoming more dependent on consultancy
and marketing services and probably less dependent on fees and
funds from Food From Britain.
13. Can we look at the regional aspect. Are
any of the responsibilities those that MAFF have now devolved
to the Scottish Parliament or the Welsh Assembly?
(Mr Summerfield) No.
14. So what is your relationship with those
two bodies?
(Mr McNair) We work very closely. We report on a regular
basis to the devolved assemblies. We work very closely with the
Welsh Development Agency, with Taste of Ulster, Scottish Enterprise
and Highlands and Islands Enterprise. That means sitting down
on a regular basis, being clear about what we are both trying
to do strategically and making sure we are not duplicating our
efforts. For example, there is a major exhibition on European
seafood in Belgium this month and seafood is a very important
industry particularly for the Scottish market and, therefore,
it is right and proper that they take the lead in terms of representation
in that market while Food From Britain will have a smaller stand
supporting those non-Scottish companies who also want to have
a representation there who would otherwise be swamped if they
were trying to do it on their own. It is about giving those smaller
companies a degree of economy of scale and economy of quality
in managing those kinds of exhibitions and events. Another example
would be in Spain in terms of getting British foods into the tourist
areas on the coast and on the islands. Many of the small companies
are not large enough to afford their own sales force and what
we can do is subsidise a salesman on those islands this year to
represent the interests of up to ten individual companies in order
to be selling a portfolio of British foods into the restaurants
and stores in those parts of Spain.
15. Can I just move us on finally for my part
to the new relationship that you will have with MAFF since the
inauguration of the Food Standards Agency which obviously is largely
responsible for food policy. How do you see the relationship you
now have changing in that area? In a sense I just wonder what
sort of protocol you will have with the Food Standards Agency
because clearly that will have a very definitive role when it
comes to trying to check that what we export is of a sufficient
standard that we do not ever repeat BSE?
(Mr Summerfield) I suppose one should report through
the Chair that we support the Food Standards Agency and, of course,
as yet it is quite distant because we do not know in detail the
way it is going to come together. It will be involved with many
of our manufacturers, in fact all of our manufacturers, and therefore
we need to stay close to the issues. We are charged with ensuring
that quality and standards of product going abroad are at the
front of mind when they are being dealt with. I think the Food
Standards Agency for us is something that is going to happen and
we will support it in its role.
16. Can I just use the BSE case as an interesting
one and perhaps you could give us a flavour of how you as an organisation
try to turn our foreign buyers around from being, one imagines,
very cautious not just in terms of meat products but in terms
of overall attitudes towards British exports of food?
(Mr McNair) I think it is a particular issue in relation
to meat. Clearly we have worked very closely with the Meat and
Livestock Commission. They have got their own organisation to
do much of that work and they have had their own representatives
historically in a number of the key markets. What we have done
is work very closely with their representatives in being able
to open the doors for them to the key buyers within key organisations
to secure contracts. The other month in the Netherlands it was
Food From Britain working very closely with the Welsh Development
Agency that saw the reintroduction of Welsh lamb through a major
food service company in the Netherlands. Again, down in Spain
the other month at the time of Alimentaria, our major food and
drinks exhibition, it was a team, including the Minister, Joyce
Quin, the Meat and Livestock Commission and ourselves, who re-presented
British beef back to the Spanish market at that point in time.
We do not see ourselves as the lead agency, we see ourselves as
a service and support to the Meat and Livestock Commission and
MAFF in terms of the policy they want to implement to recover
consumer confidence in those markets for our products.
Mr Todd
17. Before I go to the main thrust of my question,
turning back to the regional dimension, have you established relationships
with the various Regional Development Agencies and any food perspectives
within their strategies?
(Mr McNair) Certainly we are doing that at the devolved
territories level in terms of Wales and Scotland. As far as the
English regions are concerned, we tend to work most closely with
the Regional Taste Groups themselves.
18. So you are unaware of the East Midlands
Development Agency's initiative, the University for Food, that
brings together all the elements of the food chain in the East
Midlands with a focus on building and strengthening those businesses?
(Mr Summerfield) We are not unaware of it. We have
been talking to the people involved in the development of that
but at this stage we have not been involved in the detail of it.
Because that is a very large funding requirement we are saying
we just need to watch to see whether or not it is going to get
its funding. We have been more concerned about our Regional Taste
Groups perhaps who are the seed corn of the smaller organisations,
as I said earlier, the micro companies.
19. What do they do? It is a slightly cryptic
phrase, "Regional Taste Groups".
(Mr Summerfield) There are six of them.
(Mr McNair) The Regional Taste Groups are very closely
aligned, in fact, to the geographical territories of the Regional
Development Agencies. Initially we were giving each of those Taste
Groups considerable funding in order to bring together like minded
local producers, many of whom have in fact diversified from agriculture
into developing products to sell. We have been assisting them
in a number of ways in terms of advice and funding in order to
almost become self-help groups. Clearly they have been looking
for funding sources from many other parts of the country as well.
They get funding from local councils historically and they are
looking for funding from Regional Development Agencies. Taste
of the West, for example, has been very successful in getting
funding from the EU on a number of specific projects, also in
terms of support in kind from the NFU. They are looking for support
from quite a broad group of people. What is impressive about them
is that they do become self-help in terms that they pull in hoteliers
who then start to publicise the food and serve the food, local
stores that support them and increasingly, therefore, our role
has been to create more of a national umbrella. The two key things
that we have been doing, which all of the food groups and, indeed,
the devolved territories have found helpful have been, for example,
Meet the Buyer events where we have been speaking regularly with
the buyers in the major supermarkets and making them aware of
the richness and diversity of our regional food to the extent
that many of those small, local, regional suppliers are being
stocked within the retailers' shops within a particular geographical
area. The other area, which is fairly new, we only launched it
at the beginning of March, is that we have created an internet
shopping mall where, for £199, any of those small companies
can actually have their own shopping site so they can be selling
their foods not through the supply chain within the UK but directly
to customers either in the UK or in overseas markets.
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