Examination of witnesses (Questions 20
- 39)
WEDNESDAY 3 MAY 2000
MR GORDON
SUMMERFIELD and MR
DAVID MCNAIR
20. Can we turn back to the money issue. There
are two things. First, you have obviously had considerable success
in raising money from the private sector over the last few years,
however it has been a partial success because, as your Annual
Report concedes, there have been instances of your having to pull
the various initiatives for lack of private sector support. I
think there were some exhibitions in Latin America, for example,
which were pulled through lack of support.
(Mr Summerfield) Absolutely, yes.
(Mr McNair) That is a good example in terms of us
having to be sensitive to being both proactive and reactive. We
can identify opportunities in different parts of the world, highlight
that as a potential area that companies could be looking at, and
we can take a horse to water but we cannot make it drink. If an
individual company is determined that is not an important priority
for them then that initiative will collapse because of lack of
support.
21. In your Corporate Strategy, in your SWOT
analysis, you identify as a weakness exports still low on the
priority list of industry.
(Mr McNair) Yes.
22. A problem in terms of raising money from
them.
(Mr McNair) It goes back a step further than that.
It is about raising exports up the agenda of many companies, particularly
medium and large companies. With regard to large companies, it
tends to be those that are conglomerates, such as an ABF, where
they are a group of smaller companies operating on an individual
basis.
23. You are sitting next to someone with some
good experience in this particular field, it is nice to see you
back and I have exchanged words with you before. This is a sleepy
sector, as I have said previously, in terms of its performance
certainly on the stock market. How frustrating is it to deal with
businesses which do not seem to see these opportunities and choose
to exploit them?
(Mr Summerfield) I think that is a very fair question
to ask.
24. Will you give a different answer now in
your different role?
(Mr Summerfield) No, not at all. I have been on both
sides of the fence. I do see that it is an important issue for
myself and David as new incumbents to try to raise awareness of
larger companies about the importance of exports and certainly
to get them to understand how we as an organisation can help them
because we actually have people on the ground. To example that,
our office in Japan has a very competent team and there is no
way that you can sell into Japan unless you have people on the
ground there. What we have to do is to raise the awareness of
our services to those businesses and then go and talk to them
about getting exports on to the agenda and into the boardroom
of those companies.
(Mr McNair) That is part of the challenge in terms
of funding. We are both new to the job and one of the things when
we look at the deployment of the funding is that it has been quite
rightly focused towards providing those services but perhaps what
we have not identified is the funding that is required in order
to advertise and publicise those services to more businesses so
they can make use of those opportunities.
25. The number of targets that you set for yourselves
last year was, let us see,—
(Mr McNair) Just over 60.
26. Yes. Arguably, certainly from my experience
of running a business, that is a very large number of targets,
perhaps too many, for a relatively small organisation. I note
that you had rather fewer in the earlier part of the 1990s. Is
there an argument for saying that you throw your net a bit wide?
(Mr Summerfield) Can I just respond to that first
and then I will get David to talk about it. I arrived about three
weeks before David did and I saw this at an early stage and said
I did not think there was any way we could live with that number
of targets. It is easy to say but we were not there at the time.
We recognised, coming from industry very recently, one could not
live with that amount of targets. We have talked to MAFF about
this and reached an accommodation where we have a new look at
how we measure ourselves and, David, perhaps you might just explain
where we are now with this coming year's budget.
(Mr McNair) Purely by coincidence, given the direction
that both Gordon and I have come from and our commercial backgrounds,
the discussions that we have had with MAFF actually match the
guidance which has come out from the recent Cabinet Office document
on key measures for NDPBs, which is in order to ensure focus of
the organisation you should be looking at eight to ten key measures.
The confusion that arose in terms of the greater number of measures
that we historically had was really when you cascaded those targets
down a level to the individual directors within Food From Britain
and to the individual country directors as well. What we are saying
and what we have agreed with MAFF is that we will have those fewer
measures which provide key focus, but we will still have, as management,
cascaded targets within the organisation and a broader range to
reflect the diversity of tasks that we set for the directors within
the business and their teams.
27. Today who sets the targets?
(Mr McNair) Those targets arise from discussion with
MAFF in relation to the policy and funding that they provide,
particularly in relation to the number of small and medium size
enterprises that we should be providing services and advice for.
The other set of targets are really related to the commercial
running of the organisation in terms of the monies which the individual
markets need to generate on consultancy fees to pay for their
business.
28. To what extent do you reflect your customers
in the targets that are set? How do they have an input? You have
mentioned that some of the failures are where promotions have
been organised and it is found that there is no one else to party
with. Is there, perhaps, a lack of sync sometimes between what
you are trying to do and what your constituency objectives are?
(Mr McNair) I would turn it round the other way. What
tends to happen is that when we are going through this strategic
process and building plans, clearly we discuss with a wide range
of our customers what their plans are for the following year.
What emerges as the year goes on is that some of them will re-prioritise
and, perhaps, withdraw from one activity and move to another and,
therefore, we have to be flexible to those requirements. At the
beginning of the year you will get a greater commitment to an
exhibition than inevitably occurs once people have set their budgets
internally and have decided on their priorities.
(Mr Summerfield) You said, "Who sets them?"
At the end of the day, we set them. We set them as the executive
management of Food From Britain, but then agree them with our
council and with MAFF. So we would have a process of going through
them with our overseas offices and look at our directors who are
budget holders within the organisation, so the director for specialty
food or the director for marketing is a budget holder. We would
agree their targets internally and then we will agree them with
MAFF and with the Council. So it is all part of the process of
getting the budget endorsed.
29. What are the implications of losing the
£400,000 sector challenge?
(Mr McNair) In fact, there was no impact on that.
What happened the year that that occurred was that we were invited
to bid for additional monies from MAFF. We put in for four projects
and we got funding for three, which came to £390,000 against
the sector challenge of £400,000. In this year's budget that
sector challenge money has been restored within our basic funding
from MAFF.
Mr Paterson
30. Can we turn to changes in the industry?
Your predecessor, in the annual report, talked about the various
world trends affecting industry. What would you highlight as the
main changes we are likely to see in the food industry at home
and abroad in terms of consumption?
(Mr McNair) The main ones are in terms of food service
and homemeal replacement. In the United States, homemeal replacement
accounts for about 50 per cent of their food consumption, and
that is an area where Europe is going in the same direction. I
have touched on the English sandwich already in Paris. We have
talked about the development of sauces and the like. The other
areas, in terms of appeal, are the much broader range of ethnic
foods and own labels. When you think about the strength of own
label foods in the United Kingdom, they probably account for about
40 per cent of supermarket food sales. In Europe it is probably
around 20 per cent, but you must bear in mind that when you actually
look at Europe in terms of who the major retailers are, there
are not many United Kingdom retailers in that top ten. They are
looking at a lot of the learning from the United Kingdom market
and are looking to copy and develop the successful trends that
they have seen here. There is much greater demand for companies
who can meet their requirements of convenience meals, ethnic foods
and own label products, all of which we believe the British food
and drink industry are well positioned to supply. One of the areas
that our country directors are very adept at is bringing together
the buyers from those markets with suppliers in the United Kingdom.
31. Who leads whom? Is it your officers on the
ground who bring back ideas to the food industry, or is it the
food industry going to you and saying, "We have a good product
here. Can you help us sell it in such and such a country"?
(Mr McNair) It is a mixture of both.
Because we work very closely with the buyers in the individual
markets we are aware of what their wants and needs are and are
able more quickly and better to direct them to United Kingdom
companies that can meet those requirements. At the same time we
do get benefits from United Kingdom retailers who are now expanding
abroad. Tesco's development into Central Europe and into Japan
has meant that we are in discussions with them to identify United
Kingdom suppliers who will be able to meet their requirements
in overseas markets. This year, as you have probably noticed in
the export figures, Ireland has overtaken France as the number
one food and drink export market. That is partly a reflection
of the number of United Kingdom retailers looking to move into
that market and actually taking suppliers from the United Kingdom
over into the Irish market.
32. Which predominates? Is it the producers
here pushing you or you coming back with the ideas?
(Mr McNair) It is a mix of both. My Chairman can obviously
talk about Unigate's experience in terms of identifying companies
which they wanted to acquire in Europe for development.
(Mr Summerfield) I do not think it is just exports,
I think one of the services that I saw in my previous life was
that Food From Britain could offer consultancy services throughout
most of the European countries. When we were looking at an acquisition
it was important to try to identify from a distance, without being
transparent about it, what happens in those markets, and Food
From Britain was extremely helpful in delivering to us, across
eight countries in Europe, the market conditions; who was penetrating
what particular market, who was most successful and so on, and
that helped my previous company make a decision on an acquisition.
That is one part of the service. Trying to answer the other question
about who leads whom; we, in the last few months, have decided
that there are a number of target companies in this country who
actually do not export very much, quite large companies, and we
believe that we could help them deliver exports into Europe and
further afield. We have targeted, as a starting point, 10 companies
to whom we will go and meet—a number of us know them quite
well—and talk to them about exports, taking one of our country
directors who has the most interest in that particular product
range and getting them to get on to the export ladder. There are
quite a number of companies that actually do not do that work.
We are being proactive in that way, but there are other companies
that would call us and say, "We need some help. What help
could you deliver for us to get into the Japanese market or the
USA?"
33. Your predecessor said in his introduction
that the two outstanding characteristics of the UK food and drink
industry are innovation and an added value approach. What evidence
can you give us to back up this statement that the United Kingdom
industry is in a position to innovate and to add value?
(Mr Summerfield) I do not think there is any doubt
that the evidence is really there for all to see if you go and
look at supermarkets across Europe. If we were to sample them
alongside the British supermarkets, our fresh food cabinet is
way ahead of Europe. For example, you can find a very small ethnic
group sector in fresh foods, ready meals and things like that
in Germany, France and the rest of Europe, whereas we have a very
diverse business and a very exciting range of products, and they
are high added value products. The innovation is there and I think
that two of our members, Noon Foods and Pataks, who are in ethnic
foods, are leading the field and we would expect to see them continue
to grow in their export business.
34. Does that apply to small businesses that
are suffering more and more from extra regulation?
(Mr McNair) I think it is fair to say that you can
see innovation at all levels, it does not come just with scale.
I would encourage you to visit your local taste groups if you
have not done so. Coming new into the business, what was a pleasant
surprise to me was the range of innovation, enthusiasm and commitment
of those small companies, for some of whom the majority of the
sales are already in exports. You can look at small fruit juice
suppliers in terms of apple juices out of East Anglia, where over
60 per cent of their business is already in export. You can find
fine chocolate companies who have got major supply contracts with
the likes of British Airways. There is a whole range. Innovation
is not just the prerogative of the large companies. There are
many smaller companies who, with enthusiasm and imagination, and
with our help, can take their developments and make sure they
are put in front of the appropriate customers wherever in the
world.
35. One brief question. Turning to the back
page, we have only got one office in Asia, that is Japan, presumably
for servicing the Scotch whisky exports there?
(Mr McNair) We do not service the Scotch whisky exports
in that market. The Scotch whisky exporters have their own relationships
with the major distributors. We are there really to help the food
companies in the main processed foods area.
36. My main question is: do you plan to open
any other offices in Asia?
(Mr McNair) That is one of the issues we will be looking
at strategically. The reality is when you take Scotch whisky out
of the picture and look at food and drink exports, we have offices
in markets which account for 85 per cent of United Kingdom food
and drink exports, and we clearly continue to review on a regular
basis the opportunity to move into new markets. What I would advise
you is that going into new markets, in terms of setting up offices,
does not come cheap and we need to balance our resources between
those markets that we have invested in and continue to grow them,
and new markets. Most recently we have gone into Portugal and
Poland, while Japan is quite a new market for us, and we are continuing
to have to support them quite heavily as they build business in
those markets. We are not in a position at the moment where there
are enough companies coming to us and saying, "Open a market
in that market", we are having to go with a few companies
and build the business to then pull in other businesses over time.
Mr Mitchell
37. The suggestion is that we as individuals
make contact with the taste organisations. What is a taste of
Yorkshire and Humberside?
(Mr McNair) For Yorkshire it is in fact Yorkshire
Pantry. We had our British Food Exhibition in Birmingham the other
month. There was a large Food From Britain stand, but within that
stand we had a group of nine companies from Yorkshire who were
therefore exposed to a whole range of buyers, not just from the
United Kingdom, but from overseas. In fact a number of our country
directors brought in buyers from overseas.
38. What were they selling?
(Mr McNair) They were selling a range of products
in terms of meat products, dairy products, pies, cakes and sauces:
a whole range, which appeals in terms of United Kingdom companies
and also have potential for exports as well.
Chairman
39. It is a great Yorkshire show, Austin, you
probably find that.
(Mr McNair) Wensleydale was strongly represented.
Some people would be horrified to see what the Wensleydale cheese
organisation is doing in terms of introducing cranberries and
apricots, but these are actually added value products which have
a particular appeal within the market place. It is innovation.
(Mr Summerfield) Just to give you another example,
Singleton Dairies, a small cheese manufacturer in the north of
England, are exporting British cheese to France every week of
the year and the business continues to grow. One has to say that
if people are keen to export then they can find the route to that
export. As a result of their efforts they have just recently won
a Queen's Award for Exports.
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