Examination of Witnesses (Questions 460-479)
WEDNESDAY 27 FEBRUARY 2002
460. Do you think the decline in market share
is linked to lack of credibility?
(Mr Merton) We are not declining in market
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
(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.
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
(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
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 supermarketsbecause
they trust them quite a lot in this respectto 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.
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
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,
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
(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 thinkyou
would have to ask themwould 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
(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.