Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Examination of Witnesses (Questions 460-479)



  460. Do you think the decline in market share is linked to lack of credibility?

  (Mr Merton) We are not declining in market share.

  461. Relative to your colleagues on either side?

  (Mr Merton) No. Our market share is growing again. You are right from history our market share has declined but certainly it is not the case now.

  462. The follow up question, Chairman, following up Keith's earlier point on food safety, what responsibilities do you think you have to improve consumer understanding of the animal welfare conditions that are associated with the products which you are selling, particularly in the areas of white meat? Do you have any responsibility at all or is it shrug and walk away?

  (Mr Merton) Of course, we do. I think we all take food safety very seriously.

  463. I asked about animal welfare specifically.

  (Mr Merton) Okay. Animal welfare is a similar issue. We do all have our own scheme. We have our own scheme that has got standards for animal welfare. If we do import a product we apply those similar standards to imports on the products in question. That is within the realms of practicalities but obviously on animal welfare we have a key issue in keeping customer concerns met of these sorts of issues.

Mrs Shephard

  464. We have covered quite a lot of issues with regard to local food already but I would like to ask each of you by what means you know there is increasing customer demand for local food? I assume this is surveys. What proportion or what percentage of your total customer base contacts you through your surveys?

  (Ms Coates) I think the way we have put an increased emphasis on local food over the last six to 12 months. We have always had local lines in stores but we have put a real increased emphasis in the resource that we have put behind local food for the last six to 12 months. The reason for that is that we survey customers on a regular basis, both en masse and also in local customer Listening Groups and we have a collection point in store where any line that consumers cannot get hold of and would like to, they put that into a box and let us know that is a local line that they are keen on us stocking. We listen to all of that. We will contact local suppliers and assess it. Local suppliers are often very small so enabling them to deliver to us and use systems and communicate with us by fax etc is obviously a lot more complicated than the large suppliers which historically we have dealt with. We are in the process of putting in place systems, processes and communication mechanisms to deliver for the local supplier what they need to be able to work with us more easily and that is taking probably longer than a lot of us would like. The fact is it is quite complicated and we have to make it work for everybody.

  465. The second part of my question was what percentage of your total customer base do you estimate communicates with you about their demand for local food through the surveys you have just described?

  (Ms Coates) I think the answer to that is everybody has the opportunity to in the store ?

  466. That is not what I asked. I merely want to know whether you think it is three per cent of your customer base or 30 per cent or 70 per cent, that is what I would like to know? I would like to know it from each representative.

  (Ms Coates) Right, I do not know the answer to that, I will have to get back to you.

  467. Okay. Can we go to Sainsbury's?

  (Mr Merton) Okay. We have a number of different ways of collecting customer input in terms of what they are looking for. Obviously it is the same through surveys and customer panels. We have obviously people who write both locally to the local store and also into our business centre asking us for certain products. Obviously we have our care line where our customers can ring up and request or raise any issues that they wish us to consider and of course through our normal reward card that we have, we have customers who can communicate through that. In terms of giving you an explicit answer, I do not think I will be able to give you an exact percentage but clearly anything we do has got to be representative of the customer base. It can vary on the different types of issues from five per cent to 15 or 20 per cent maybe of our customers depending on the issue in question. If you wish to have some answers specifically to particular areas we can try and give you an answer on that. I have not got the figures.

  468. What I am trying to get at is this. This is the most recent mantra, demand for local food. It is the panacea. It is what ministers trot out, it is all in the Curry Report. I must say anecdotally I do not perceive huge demands for local food. What I am really trying to find out is if I am wrong, because obviously you are all paid to know the answer to that and whether it is really a demand or whether it is yet another form of political correctness one expresses when one is trying to put an elastoplast on the state of the British economy? I would love to think I was wrong. Now as neither of you have yet been able to persuade me that I am wrong perhaps Lucy can?

  (Ms Neville-Rolfe) I think I am going to give a slightly different answer because I do not think I have had a chance on local food. We regard that as an important part of the mix and we are doing a lot. However, I have to say that I think there is some substance in the point that you raise because we have done probably as much research as anybody using various different techniques, including the loyalty card which of course Sainsbury's have as well. We do both the "what people say" research and "what people do". The focus groups, customer surveys, people ringing in to the call centre and we use that information in our questions. We ask our staff a lot actually which we find very valuable. Then we do a "what they do" which is what the sales line looks like and what the club card loyalty data looks like. We did a big piece of work last year, because the Curry Commission was set up, and this was obviously very important, and I have put the conclusions of that in our submission, which you probably have not had a chance to look at.

  469. Not yet.

  (Ms Neville-Rolfe) I think the three or four headlines are that customers are most concerned about safe and healthy food, which I think somebody has alluded to already. They want a common sense approach, they are actually lacking in knowledge which ties in with some of the things you have been saying this morning as to how food is produced. They do not really have an understanding. They tend to look at supermarkets—because they trust them quite a lot in this respect—to tell them about that. They have become more sensitised to food because of food scares and foot and mouth and all of this sort of stuff. They are more concerned about health, safety, animal welfare than they are about local. If you do the research right across the board, local does not come through as a top headline. I have not got detailed research, I am afraid, on local but I remember when we did work in Northern Ireland it came about ninth. There we have about 1,500 local lines partly because we are helping the agricultural base to have their say in stores. There is an issue here around what the customers are saying about local and I would be very interested to see how it develops. I think that is the answer roughly speaking. I do not think I can give you an absolutely specific figure. All I can say is that we have tried in various ways to consult all our customers and unlike any other supermarket I think we reflect the population because of our broad base.

  (Mr Merton) May I add one further point which adds some value to your comments. One of the things that we have found also is that certain local foods, if it is in an agricultural area, become very popular so the demand is higher in those areas and quite often we have put products into one store and they have sold very well, when we have scaled them to another lot of stores in a similar location, same county, they have not, whereas in other instances they may have gone on to become a nationwide, a national product. It does depend on the product and it does depend on the location which the supermarket is in which does give you a flavour. It is not a straight forward simple rule, it does depend on the store and on the customers and their location.

  470. Yes, well I would agree with that which is why I strongly object to the use of "local" foods as some sort of panacea when in fact it is far more complex than that. It is to do with access to retail and what happens to take and what does not happen to take. My observations in supermarkets are generally speaking either people shop from habit, that is what they always get every week, or they are shopping on price but they will stop and look at promotions. Again you are the experts, we are not on this. It seems to me, as you have indicated, there are opportunities perhaps on a local basis with local promotions that then might develop. Now the question from that is how do farmers get in on the act? If there is, for example, a cheese maker in a given area, does she contact one of your stores and say, "I would like to try this, will you promote it?" What does she do?

  (Ms Coates) That is exactly what some local suppliers do do. They contact stores and there are a number of successful examples of suppliers who have grown significantly through contacting a store with a great product which has then been shared with a number of other stores in the locality and they have built their businesses that way. There are some examples in the evidence.

  471. My advice to such a constituent would be go and knock on the door?

  (Mr Merton) That is one way, I think. What we have tried to do as well is through "Business in the Community" we have tried to reach out and pair up some local producers to some of the more major people so they can coach and help local producers in how to go about helping market their product or making the contacts to market their product. Also we have regional managers who make contact with the local farmers and suppliers to try and make sure they know we are there and they can come to us with ideas so we do try and reach out.

  472. How do you communicate with these people?

  (Mr Merton) We have various regional meetings. We go and see suppliers.

  473. How do you invite people?

  (Mr Merton) For example, we have just done a number of them around the country, we have done Scotland, Wales and Northern Ireland as an example where we have gone and worked with the local industry base and the local industry bodies to encompass suppliers who are interested in serving us and providing their products in our stores locally. We have invited them into that environment to discuss potential opportunities.

  474. Do any of you use the local media?

  (Mr Merton) Yes, we all use the local media, where it is appropriate.

  David Taylor: Elaborate.

  Chairman: Do not elaborate.

Mrs Shephard

  475. I have got to ask you this question because it is on the list. The Policy Commission suggested that "retailers who give over a portion of their store as an outlet for local producers to sell direct to the public should receive business rate relief on that part of their premises". Well, you know, frankly, let us define it, and let us do a percentage, the bureaucracy is ludicrous but I will still ask you this, what is your answer to that in theory?

  (Mr Merton) I think we would always look at any constructive ways to find a correct way forward. If it created a new opportunity we would look at it. There are issues attached to those sort of things which I am sure you are aware of.

  Mrs Shephard: Yes, after all you are promoting one cheese, the business rate relief on the amount of space it would take up in your store would not be great on the whole so that is a very silly idea but you would say you did not say that, I did.

Mr Jack

  476. I want to talk about the supply chain. I am getting some slightly confusing messages. In Tesco's evidence they say "market signals are not getting through to some farmers partly because much of the industry is too fragmented and messages do not filter up the supply chain". You just had an exchange about smaller scale supply which tends towards fragmentation. On the other hand, you talked to us earlier about clubs and relationships which you have all developed to ensure that you are getting messages up and down. In other words, you seem to be saying, "Well, we have managed to identify, select and draw on board people who adopt the right message" so I have to assume the ones who are not involved in some way have not got the message. Given that we are looking at incomes to farms, help me to unpack these conflicting messages between the local fragmentation, the need to have a chain that works and with all these good ideas going up and down, how much extra could farmers say, over the next five years of improvements, in this year look to develop additional income? I know you cannot give a percentage or a number but can you give us some feel. Let us start with Asda, you have a track record of localisation and supply chain development, help me with these questions.

  (Ms Coates) Okay. In some of the recent initiatives in supply chain development as I mentioned earlier we have worked with groups of livestock farmers to try and improve their profitability so we have processors, farmers and ourselves together. We are looking at opportunities both in saving costs and actually breeding the right size and varieties of animals so that processing is more efficient. That is one example. I think as we say in the evidence we are looking to extend that out further. I think if you take any of us there will be examples of very good practice in areas of the business but is there room to improve? Yes, there is. Are we trying to do that? Absolutely.

  477. What makes your company scream about the attitude of farmers? Yesterday I was talking to the Vice President of a major food manufacturing company and he said he had never heard a group of people, namely farmers, complain so much about their customers. So what happens in the reverse situation? What about your buyers? You are doing all this hard developing work but what makes them upset that they are not being listened to?

  (Ms Coates) I think there is a big cultural difference between farmers and processors and the large supermarket cultures. I think we are all trying to break that down. I do not think there is a lack of understanding of that, I think the buyers do understand that. I think they understand that farmers have very different lifestyles and very different values and try to work with it.

  478. What I am looking at is what are the barriers within this communications chain which are stopping farmers getting more income? What have they got to do to take advantage of your message to enhance their income? Lucy, what would you say about that?

  (Ms Neville-Rolfe) In the memorandum we are making a general point, as you have picked up, rather than a specific point. I think with our supply base we very much try to have a win/win, to grow the market together, to work out how to cut costs together. A lot of our suppliers, I think—you would have to ask them—would be reasonably happy with Tesco. I suspect that would be the same with my colleagues here. I think the difficulty is that there are other farmers out there in an industry which is in difficulties for all the reasons we know, like the weak euro and the world commodity situation and the extra costs. It is difficult for them all to serve us or to serve other people who pursue this good practice, which is why I mentioned the extensive work we try to do through IGD and other groups to try and spread it across and through the NFU and through website development. We have encouraged the Curry people to publicise good practice so that others can share it and other farmers can learn from it. It may be that you can help us in that process.

  479. Let me ask Ian, if I had to ask you for one really good example from the Sainsbury's stable of something where messages have moved up and down in an ideal way along the supply chain and farmers have said, "That was really good. We got more income out of it. Brilliant idea.", what would it be?

  (Mr Merton) I can quote a number of examples. "Taste the Difference" beef, where we communicated with the farming groups and they are now able to consistently produce high quality products that customers can relate to. We have done it in some of the areas in produce, for example apples. We did a survey with our customers on what sort of apple would they like as a next development. We introduced Adams Pomagne, an old traditional variety and our farmers have started growing it because it was based on consumer demand or consumer request to meet their taste of an apple. They are examples of how we turned something which was an idea, communicated through the chain and then got something commercially running which our farmers are playing a role in. That is really why I keep coming back to the partnership route. We have a big role to play in trying to get the message up and down. The headlines that I brought along with me here, which I will leave for you I think, are testament to some of the work we do. I will leave you copies of this. That is the real evidence that we are trying to do it. We are only part of the industry. We need to make sure that all parties get the message. I have been in the food industry for a long time, the best way I have found to try and get the change we are all looking for is to lead by best example and hope that others will follow and hopefully meet the demands.

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