Examination of witnesses (Questions 80
- 99)
WEDNESDAY 3 MAY 2000
MR GORDON
SUMMERFIELD and MR
DAVID MCNAIR
80. I would urge you to make rapid contact with
them to see what steps can be taken to build a coherent and sensible
relationship.
(Mr McNair) It has not necessarily passed us by. Clearly
the main lines of contact we have had historically have been either
within the regional taste groups, in terms of these small specialist
companies, or it has been dealing directly with individual companies
who may well also be involved with the RDAs.
81. The East Midlands is the hub, probably the
largest food sector as a proportion of industrial base in the
UK, with some very strong brands, Melton Mowbray, Lincolnshire
and parts of Derbyshire as well. I am startled if this has missed
you.
(Mr McNair) It has not missed us, it is in terms of
the way we have looked at it. If we went through the list of all
of the members of our Food from Britain services there clearly
will be quite a high proportion of food and drink companies who
come from the Midlands. It was one of the particular reasons that
we worked very closely with the organisers of the recent major
food exhibition in Birmingham, because we recognised that that
was a centre of excellence and we have had many Midland companies
exhibiting at that fair, both to British buyers but also to overseas
buyers in terms of developing the opportunities.
(Mr Summerfield) Your point is very well made. We
do need to understand. The project I was referring to is a very
large project of something in excess of £40 million, of which
we have been, I would not say sceptical but we have some concern
that it may not get off the ground because people may not want
to fund to that level. One has to say, I would want a lot more
evidence that it was going to work too.
(Mr McNair) I think it raises a slightly different
point in terms of the accountabilities of us as an organisation.
Clearly with devolution now we are accountable not just to the
Westminster but to Edinburgh, Cardiff and to Belfast. Clearly
with the devolved regional organisations as well that would require
more resource in terms of us managing that. What we have tried
to do within London is run with a very small office, essentially
structured around the services that we offer, and therefore what
we do not have is a large group of people within London to actually
be talking to all of the appropriate bodies. That is one of the
areas that my Chairman and I are very conscious of. It is an important
area because we need to make sure that we are co-ordinating and
bringing together various organisations as best we can. As the
RDAs develop more clearly in terms of their remits and structure
that will be something that we will need to think about in terms
of our strategy and also any realignment of our resources. What
I would be concerned about is trying to make sure that as much
of our resources as possible are focused-in on helping British
speciality food companies and exporters rather than a lot of our
resources getting taken up with internal discussions with a range
of like-minded bodies, even though they may be important to our
cause. I would rather that we work through the regional taste
groups and the taste groups make use of those services and the
individual companies within the regions recognise the services
that Food from Britain can make use of as well.
82. The Efficiency and Effectiveness Review
highlighted at that time—I recognise it is not precisely
up-to-date—a concern about the effectiveness of the service
of your organisation to smaller companies. This really continues
from the previous line of questioning. The MAFF evidence instead
says that you have a first rate track record, that may be a very
nice thing to say but it runs counter to the review that took
place. Has something changed dramatically or was the wrong impression
gained in the review? Can you explain the difference between those
two statements?
(Mr McNair) I cannot comment on it in detail because
clearly it is part of the history which I have not acquired as
fully yet, as I no doubt will, by following discussions and debates
such as this. All that I can comment on at this stage is what
we were sensitive to in terms of the historic measures. Because
there was such a wide range of them they could move into passes
or failures over one very small piece of activity. What is critical
now in terms of the focus that has been brought by focusing-in
on a few key measures is that that should ensure that the business
delivers against the key targets. We may miss on some of the detail
but we will make sure that strategically we are moving in the
right direction and we are delivering against the key targets,
both for the funding that we get from MAFF and other levy bodies
and also from our commercial partners.
83. How are you going to fit with the services
provided by the small business service?
(Mr McNair) Again, that is an area that we will need
to discuss in more detail with the likes of the DTI and with regional
development agencies. What we would welcome is that if there is
more support at the local and regional level it will mean that
we can focus more of our activities in providing umbrella ones
which will be to the benefit of the whole of the British food
and drink experts.
84. I gather from that you have not started
those conversations yet?
(Mr McNair) We have not. There are examples in terms
of exhibitions and events, for example at a major confectionary
fair in Cologne in February there was a group of six food and
drink companies from the North Lanark region who were there, supported
and sponsored by that local regional group. Our services are there
and part of our role is to make sure that those regional developments
and small business units are aware of the services that we can
offer for those companies who are either wanting to export or
are wanting easier access to big national players.
85. You rightly identify that the first step
for a small business is to get a grip on its domestic market place
and establish its product before it moves out into the export
sector. Do you provide that advice as well to farmers who have
started to move up the value chain?
(Mr Summerfield) Very often there is a step before
that of getting into the market, it is being able to make the
product and get it to the market in an acceptable quality standard.
As I mentioned earlier, micro businesses, businesses who employ
not less than ten people but probably less than five people or
less than even one. There are important steps for people to take,
particularly from an agricultural base, where a farmer may decide
or a farmer's wife may decide—and if we look at our client
base there are a number of them that started with the farmer's
wife making hams or bacon that have now become quite significant
players in the domestic market and export market. All of the steps
along the way we would either help by advising or helping on business
planning. Certainly business plans are jolly important before
people launch into making a product that might not go anywhere,
might not sell.
86. Are you satisfied that farmers who are taking
that first step have sufficient information from you as to the
services you may be able to supply to them?
(Mr Summerfield) I am not sure they always know those
services are available. We do have to raise the profile of our
services to all manufacturers, whether they are small or large?
87. How are you going to do that?
(Mr Summerfield) We have to set off on a programme
of marketing the brand above the door, Food from Britain. We have
to make sure that people do not believe they have to emblazon
that brand on to their product in order for it to sell in a foreign
market, because that is not the case.
88. Farmers receive plenty of visits from officialdom
at the moment, have you considered how that information channel
could be used for giving information about your services instead
of purely being one of counting the animals and checking they
have the right tags on them and measuring their fields?
(Mr Summerfield) We do not get into that, not in this
life.
89. These are people who beat the path to the
farmer's door currently with a range of tasks to do. It has always
seemed curious to me that the only thing they do is to deliver
this regulatory function when they might deliver a range of other
more positive services while they are there.
(Mr Summerfield) In looking at the make-up of our
council of Food for Britain we have a very strong representation
of British Agriculture through the National Farmers Union, through
the Meat and Livestock Commission and through the Home-grown Cereals
Authority. We have strong representation. We would hope—and
certainly in some of our regional taste groups they receive funding
and some help from the National Farmers Union or from MLC—that
we can market our services through their offices just as strongly
as we can through our own office.
Mr Hurst
90. What do you see as the main difficulty facing
British food companies in terms of selling their products to the
foreign supermarket?
(Mr McNair) The first issue is that it is dealing
with foreign supermarkets. Because the reality is that in Europe
the major initiatives in the acquisition of supermarkets have
been by foreign retailers. Secondly, clearly in the current circumstances
one of the issues is in terms of exchange rates and world prices,
particularly for primary agricultural products. Going back to
exchange rates, one of the examples there can be a company for
example like Bernard Matthews, who have developed a very successful
business in terms of value added chicken products in this country,
which can command a price premium of up to 30 per cent against
the basic product. If they then try to sell those products into
Europe at that kind of premium but then with the additional premium
which comes with the current exchange rates they are not actually
going to be in the buyers frame of reference because that buyer
is going to be able to source added value poultry products from
other parts of the world. That is one of the key issues going
forward: that unless we are developing distinctive quality products
which can justify some level of premium we are going to find it
increasingly difficult as the major European retailers look for
local sourcing. When Wal-Mart are looking at their sourcing level
for Europe they are thinking about bringing in orange juice from
Mexico and beef from Argentina. We have just come back from Spain.
An instance there is it is actually paying Spanish retailers to
charter 747 planes to bring in fish products from Africa and from
Latin America.
91. All of that sounds very bad news, what can
Food From Britain do to overcome that?
(Mr Summerfield) Ignoring for a moment the economics
of trading with the overseas supermarkets but looking at the practical
side of it. If you examine what the manufacturer in this country
has to do. He has to come to London and within six or seven offices
he can get to about 80 per cent of the retail trade. If he goes
to Europe he can go to a number of offices to get to one level
but you do not just sell at one level in Europe, you sell to the
supermarket, to the regions and then to the stores in many cases.
It is access, knowing who does what, knowing the distributors.
What we can do, and have done quite successfully through our country
managers, is to know who does what in those supermarkets for those
particular products and then access at the right level.
92. If I was expert manufacturer of sandwiches
in the East Midlands and my speciality was chicken tikka, how
would you advise me to go about selling those products in France?
(Mr McNair) Through the range of services we have.
Through our country director he would be able to identify what
the opportunities were in that market, the type of fillings that
were required, the format that was wanted and the key price points.
He may then put you in direct contact with some key buyers, either
within the retail side or the food service chain. Or what he may
highlight is that there is an exhibition coming up in Paris, which
is, in fact, the European sandwich fair, and it would be worth
him attending that in order to get exposure to a broad range of
interesting buyers who may be attending that market. You smile,
the reality is that is where a lot of contacts are made in this
business. It is often the small companies that benefit in that
area because there may be 2,000 exhibitors at an exhibition like
that. However, as a member of the Food from Britain stand, he
has a scale and a standing within that organisation which would
not be the case if he was there as an individual exhibitor in
a very small space of his own. It would fail to have the same
impact.
93. You would make that information available
to him. Would it go further in terms of practical intervention,
would you have to know the manager of a supermarket in Bordeaux?
(Mr Summerfield) He would go with that exporter to
that store or to whoever it was. It is not just the economic and
the practical issues, then you get to the language issues. Very
often the small manufacturer, from wherever he is, will not have
the language skills. We can access to that country in their own
language and understand some of the issues, because our people
do understand those markets they are working in.
(Mr McNair) We can also arrange for a buyer to actually
come across to this market. If he has a particular area of interest
we can arrange when he comes over for him to meet seven, ten different
suppliers within that particular food sector that he is interested
in.
94. Would you supply an interpreter?
(Mr McNair) It is usually our country director.
(Mr Summerfield) A live example is next week, we have
four people coming over here from Japan who want to buy certain
specific products. They are coming with one of our Japanese managers
to this country and we have organised for a number of those companies
either to be visited by these people or those people are visiting
our office and we are putting them together to establish whether
or not business can be done. That is real, practical activity
that is going to develop new export business in the long term.
95. At the other end of scale, the sandwich
maker, with the British supermarket do you see it as part of your
role to help those supermarkets expand in Europe or the rest of
world?
(Mr Summerfield) I see it as part of our role. It
is not something that we have done very much of in the past. I
do believe that part of our role is to try and get our British
retailers to be involved with Food from Britain, to understand
our services and the things we can offer. There are a number of
them that are moving into some of the European markets or certainly
into the Eastern European markets. We would like to think that
we were able to be involved in ensuring that some of their suppliers
followed that food chain.
(Mr McNair) Do not forget what we were saying earlier:
a lot of the skills that have been formed within the supply chain
within the United Kingdom market in the terms of the logistics
of getting products from the farm gate to the consumer's plate,
through the stores and also in terms of own-label and convenience
meals these are skills that have been refined in the United Kingdom
market and they are the model that many of the European retailers
are looking to. It would be regrettable if they only looked at
the model and then turned to their own markets to meet the requirements
when, in fact, we have food and drink companies in this country
which we can draw their attention to who can actually deliver
those products and skills already.
96. You do not see it as your function to assist
supermarkets in this country to expand abroad but to assist suppliers
in this country to retain a place within the supply chain?
(Mr McNair) Part of that is where we see retailers
expanding abroad we can actually support them by being able to
identify the companies that can meet particular requirements that
they have in those overseas market.
(Mr Summerfield) There is a recent example, one of
national retailers recently reported their results telling us
about their future and where they want to expand. We have certainly
written to them to say, we have a country office, we have five
competent people working in that office in that country, are there
any areas we can help with in terms of cultural issues or getting
to know who is who in that particular country?
97. You mentioned earlier that 80 per cent of
food retailers are now controlled by a very small number of companies,
concerning regional producers within this, do you see your role
as assisting them to supply British supermarkets internally?
(Mr McNair) I would like to talk about that because
I come from both sides of the fence, having worked with a major
United Kingdom retailer until recently. The major United Kingdom
retailers have actually come to appreciate that one of the ways
they can grow their business in the United Kingdom is by getting
the balance right between strong central control, which delivers
all of the economies of scale that the retailers have been able
to achieve over the years, and the need to meet the requirements
of their customers better. Meeting some of those requirements
is by giving customers in a regional area more of their regional
products. Again, that is where we have been able to help because,
if you like, we have been a facilitator in terms of bringing together
the requirements that the retailer has discovered from their customers
with the people that can actually supply those customer and retailer
wants and needs, which are the regional specialist suppliers.
We had in Glasgow only the other month a meeting with one of the
major retailers where it was the last of a roadshow we had done
with the all of the regional food groups. There was sixty Scottish
regional food groups in one day seeing a major buyer from a major
retailer with the opportunities for them to get listed in their
stores in Scotland in the same way as those in the Taste of the
West have been successfully listed in that same retailer's West
of England stores.
Chairman
98. Of your competitor organisations, people
doing the same job for other countries, who is the best?
(Mr Summerfield) It would be very hard for me to give
you response, Chairman. I really do not know, is the answer, because
I think we all offer different types of service. I am not trying
to evade the question.
99. I will put it another way, if you could
borrow one or two practices which you see other organisations
using, I am not just talking about the amount of money the government
gives them, what do you think can be the most usefully learned?
(Mr McNair) If I can answer it first. I think the
two key areas are the level of resources, which then ties into
the services that we can deliver, which is both in terms of the
number of countries within which there is a strong commercial
representation to provide help and guidance to British food and
drink exporters. The other is in terms of the range of services.
That ties in with another area potentially for resource, which
one does see with a number of our international competitors, that
is having particular strategies with particular product sectors
and being able much more strongly to promote them as a food sector.
We have talked on areas where we have particular strengths. There
may be issues in terms of how working more closely with specific
industry bodies we could help more strongly promote them as a
group rather than on an individual basis.
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