Examination of Witnesses (Questions 520-539)
MS KATHARINE
WALTERS, MR
SIMON HUGHES
AND MR
KEVIN HAWKINS
WEDNESDAY 27 FEBRUARY 2002
520. Mr Hughes, as a fresh meat buyer you must
have a background absolutely slap, bang in the middle of that.
(Mr Hughes) If we found we could buy
cheaper then we would do so. It is as simple as that. We do not
have a policy to buy British meat, although in actual fact most
of it is. We as a pan-European company would buy whatever is cheapest
provided it meets the specifications that we agreed with our suppliers.
(Mr Hawkins) I do not think it would
make very much difference to our procurement policy, certainly
not in the short term because when we go abroad it is basically
for three reasons, either it is not grown or reared in the United
Kingdom at all, or because seasonally it is not available, or
because there is some short-term or structural supply constraint
in the UK, as for example we have with beef at the present time
due to the foot and mouth cull which obviously has impacted very
largely on the beef herd. I do not think in the short term or
medium term there is much impact. You asked a question about what
commodities were price sensitive and I think wheat would probably
be one of them. We do not buy wheat direct, that is done by the
bakery industry and so on, but it is not long ago that the EU
opened its border to a large consignment of Black Sea wheat. It
went into Spain and Portugal but the fact that it was in the EU
market at all (at a much lower cost than the locals could produce)
affected the market price quite considerably. That impacted of
course on the UK. That was a decision that we did not take obviously.
Mr Martlew
521. You say your company is a pan-European
company, so how is it different trading in the UK compared to,
say, Denmark or Germany?
(Mr Hughes) Because we have stores in
Denmark, Germany, the United Kingdom, Sweden and Poland we will
do a lot of joint buying if we can with our colleagues, say in
Denmark, so we will put our volumes together and purchase something
cheaper than we can buy by ourselves. You have to remember we
are a very small company in the UK.
522. Does your company deal differently with
farmers or suppliers in the UK than it does in Denmark or Sweden?
Are they more difficult to deal with in Denmark or Sweden? Are
your suppliers not very good at getting a good deal in the UK?
(Mr Hughes) I do not think the mechanism
of buying is any different between ourselves and our colleagues
elsewhere in Europe but, as I say, I think the only reason we
would look at joint buying is really to have some benefit on volume.
That is the top and bottom of it really. But the way they treat
their suppliers or our suppliers or joint suppliers is actually
not very different.
523. Can I come to you all now. What trends
have you seen over the last few years in supermarkets and how
do you expect that to change? What do you expect supermarkets
five or ten years in the future to be like and how can the British
farmer plug into that? Are you telling them what you are going
to do in the future?
(Mr Hughes) I think as far as we are
concerned we are going to see probably more fresh food sales in
stores, less of the canned and jarred varieties. We will see more
value added, the same as every other retailer in the UK. In terms
of how we tell the farmers, then I guess that is really down through
our customers who tell us and then we tell our suppliers.
(Mr Hawkins) You probably covered this
with the three previous witnesses in some detail but one very
clear trend is the decline of consumption through supermarkets
of primary products like milk and meat and various other traditional
products on the fruit and veg side like potatoes. That is a long-term
trend which in most cases has been going on since the late 1960s
and has continued in the past ten years. And, correspondingly,
there is the well-known growth of convenience-type foods. The
sale of cereal-based convenience products like pizza and pasta
is up 90 per cent over the last ten years and because these convenience-driven
changes are basically the lifestyles and all the other things
we are familiar with, we do not see any change in those, certainly
not the foreseeable future, and the difficulty therefore is for
us to translate that through to the farmer in terms which mean
something to him. If you have got somebody who has been producing
potatoes or rearing sheep for generations, if you like, how do
you make the convenience market and its growth meaningful to them?
What does it mean? What kind of products should they be producing?
Should they be in sheep or potatoes at all? Should they be getting
out of it into something where there is more margin? Big issues.
(Ms Walters) We would certainly echo
various trends. 20 per cent of UK shopping is now done, as is
known in the trade, as top-up shopping. So it is very much convenience
shopping. It is not people going and buying just the pint of milk
or the loaf of bread; it is people picking up what they did not
buy in their main monthly or weekly shop and also impulse buying
for eating tonight. That is added value ready-meal type food products.
That does have a very direct bearing on farmers because you are
not asking purely and solely for primary produce to put into the
market-place. What you are asking them for is good quality primary
produce which then becomes the ingredients in the value added
food. Also what we are finding is a big rise in demand for fresh
fruit and vegetables. The UK farmer is never going to be able
to grow oranges and bananas but broccoli, that type of thing.
Also the use of potatoes, which our farmers are growing, is changing.
It is not potatoes people boil any more, it is potatoes which
will form part of a final food product which is then sold on our
shelves. I think farmers are being encouraged to respond to those
consumer trends but there is clearly progress to be made.
524. In reality more and more we will not be
getting food coming from the farm to supermarkets but from the
farm to the food processor?
(Mr Hawkins) As indeed a lot of it does
now. The primary products go to processors and packers as well
as dairies and abattoirs.
525. It is really food processors who will be
demanding from farmers these particular different types of product,
not yourselves. We have almost done to death the issue of local
produce in your supermarkets. In reality what has happened over
the years, whether people like it or not, is you have decimated
the local markets by decimating local shops, which they used to
buy from local farmers. That is the reality, although there are
some still very good butchers in my area that compete on quality,
if not price. What recompense are you trying to make? We have
heard from some of the other supermarkets. Is there a positive
policy of stocking local products and what is your definition
of "local"?
(Mr Hughes) That is very difficult to
answer. What is local produce? What is local to London with eight
and a half million people?
526. We are asking the questions here.
(Mr Hughes) I am trying to get round
it to say really that for us, with very small stores across the
country, it is not practical to have a separate procurement policy
effectively for each of those stores.
527. You are perhaps being more honest than
the other supermarkets.
(Mr Hughes) I would not say we would
not have anything to do with it. If the opportunity arises, it
is a different thing. I am clear we do not have a buy local policy.
(Mr Hawkins) Let's define our terms because
"local" food is used very flexibly. We are not interested,
frankly, in stocking our stores up with a very large number of
low volume items that have a very limited local following. What
we are interested in is dealing with small suppliers, you can
call them local if you like, who have something different to offer,
it may be a premium product, it may be a gap in the market, it
may extend our range, it may have certain local or regional attributes,
but it has got the potential to grow into a more regional product,
developing with the supplier and the supplier can grow and develop
his sales through our stores. We have had a number of examples
over the years of products, particularly in Wales and the West
Country and in Scotland, where we have started on a very local
basis and gradually we have been able to grow that product and
now they are sold nationally. Welsh mountain lamb is a classic
example. Three years ago Welsh mountain sheep farmers were highly
dependent on export markets and going nowhere. They sold all their
product through livestock markets. They are very dependent on
fluctuations. Now they supply us direct. We started from scratch
with 15 stores selling this product in Wales and we now sell it
in all our stores in England and Wales. That is an example of
how you can make a local or regional product into a real commercial
success. That is what we are interested in.
(Ms Walters) Can I share an anecdote
with you about our experience of local sourcing which will reveal
some of the difficulties in terms of it. Up until a few years
ago—and we have 1,000 stores UK-wide—our store managers
would source sandwiches directly with local suppliers so it would
happen at a store manager or area level. In more recent years
in order to comply with ever more strict and more rigorous food
safety legislation we had to look at the introduction of HACCP
systems—hazard analysis and critical control points. We
needed to introduce those HACCP systems in stores and also with
our suppliers in order to claim due diligence defences in the
court of law and also assure customers of the integrity of the
produce that we were selling. With 1,000 stores, with potentially
1,000 relationships with local sandwich suppliers, it became impossible
to maintain quite that volume of relationships and so it probably
was a very good relationship, it was helping the local rural economy
and probably was a good product (although I certainly did not
eat the sandwiches that we sold in our Isle of Skye shop). However,
we had to move out of that particular relationship because of
the regulatory burden. So there are lots of reasons behind the
decimation.
(Mr Hawkins) The other thing we must
not forget is of course the fact that a product which is produced
by a small local or regional supplier does not mean it is exempted
from all the due diligence and quality control procedures that
all our products have to go through. The fact that it has a local
label on it means it has to conform to those standards. Sometimes
we have to spend a lot of time with local suppliers getting them
up to the standard in order that they can supply us with what
we need.
Chairman: Regional products are products which
have a regional identity, which is the French model, but products
which have a regional sale are entirely different. If I want my
local cheese I go to a cheese shop or for meat I go to my local
butcher. I do not expect to find it in the supermarket. Michael?
Mr Jack
528. One of the factors that may be inhibiting
the prospects for UK-produced food is the recent discussions about
food safety. We have the paradox that everybody who has come before
us has talked about increasing the level of sales against a background
where media stories talk about people losing confidence in British
food. How do you see that argument? Are your customers not confident
of the British food you are selling and therefore does that not
present a barrier to greater consumption of UK-produced food?
(Mr Hawkins) I will not quote our research
because you will say, "You would say that, wouldn't you?"
I will use IGD research instead, which is regarded as rather more
objective, and all the work they have done with consumer groups
and quantitatively as well suggests that the alleged loss of confidence
in British food, like William Pitt's death, is "much overdone".
The IGD calls the consumers "investigators" to distinguish
them from spectators and abdicators. They are the small minority
of people who are very interested in food issues and have some
understanding of them. Those are the people who are broadly ABC1s,
they have relatively high incomes and are relatively well-educated.
That is a bit of stereotype for the sake of convenience, but those
are the people who have certainly lost some confidence in red
meat. When we talk about British food having a confidence problem
it very often boils down to a red meat problem because of the
scares we have had over the last few years. It is perfectly understandably
when you look at some of the headlines and visual images we have
had. BSE has had a particularly powerful influence on those people.
If we can crack the problem of one standard of assurance throughout
the red meat supply chain and reassure people that hygiene standards,
again at every stage of that supply chain, are the highest we
could possibly achieve, then we will begin to win back those customers
whom we have lost from the red meat market. In terms of whether
the issue goes wider in terms of public confidence, I do not think
it does. I think most people still have a lot of confidence in
food produced in the UK.
529. Do Simon and Katharine agree with that?
(Mr Hughes) Our red meat sales are doing
better actually, which is quite gratifying. It is down to what
Kevin was saying in terms of some of the social and economic definitions.
Yes, As, Bs and Cs probably do spend more time looking at the
food they are buying and I think our customers do not really have
that choice. By definition, most of them are on a budget. Having
said that, I think in general terms they expect and are quite
assured by the quality of product and the safety of the product
that the supermarkets as a total sell. I do not think that there
is a problem with people's confidence at the moment.
(Ms Walters) I definitely echo these
sentiments. If you are talking about food safety you have to consider
it in the round, and if you look at most food safety incidents
they are caused in the domestic setting. You can have very rigorous
hygiene standards throughout the food chain until you get the
food leaving the shop and going home. In terms of incidents most
of them are caused by people eating food which is past its sell-by
date, etcetera. The Food Standards Agency certainly does a lot
in raising consumer awareness on those types of issues.
530. You mentioned a moment ago the element
of traceability, due diligence and food legislation which we have
to comply with here. That in its own way should send out a message
of reassurance. On the other hand, there is quite a lot of propaganda
to suggest that food coming from outside the UK is less safe.
Is it possible to turn the story of exacting analysis of the supply
chain here to an advantage, an advantage that people are prepared
to pay for in terms of something which will benefit British farmers?
Put the other way, do people think that our food is any safer
than imported food?
(Mr Hawkins) Difficult question. On the
basis again of research rather than personal opinion, quite a
lot of people do not pay too much attention to whether it is foreign
or British because they buy on other reasons, price relative to
perceived quality. We may be in danger of confusing a number of
different issues here. One is the problem of illegal imports where
there are certainly some doubts about the quality of what is coming
in. Also of course, there is the food service sector, which nobody
has mentioned yet and which is certainly, first of all, a major
location for a lot of food poisoning cases, according to the Food
Standards Agency and, secondly, it is almost impossible for trading
standards officers to have any surveillance over it at all because
of sheer number and size of catering establishments. We have a
major problem there in terms of traceability and control. Of course,
when you go into a restaurant you have no idea where the food
you are eating has come from, the conditions under which it has
been prepared in the kitchen, or indeed anything else.
531. Do you all require from those who supply
you from outside the United Kingdom to have precisely the same
standards?
(Mr Hughes) Yes.
532. So would I be right in saying that it is
quite difficult therefore from the point of view of our inquiry,
which is if you take subsidy out farmers lose money, to turn food
safety into something which will bring a little more cash to the
farmer?
(Mr Hughes) I do not think the idea of
having dual standards between UK sources and sources outside the
UK is applicable any more. I know from our point of view we would
expect all our suppliers to attain certain minimum standards which
apply right across the board.
533. Can I just ask you about standards, Kevin?
I think you mentioned the Red Tractor symbol. Some have suggested
that that could be a universal base for a quality assurance scheme.
There are something like 30 different forms of assurance scheme
around. Do you think that there are too many? Is it too confusing?
Is it possible to have a unified standard which is to the advantage
of British agriculture?
(Mr Hawkins) Some of the consumers I
was talking about earlier, the investigators, say that they are
confused and I think a lot of people would probably find it easier
to be reassured if there were one standard in which they had full
confidence. The problem with the Red Tractor is that it is relatively
new. A lot of people have not even noticed its existence on packets
and products and it is like building any brand, it takes a long,
long time and a lot of effort. Should there be more rationalisation
and fewer quality symbols, safety symbols? Yes, of course, but
I think the real problem, as indeed Curry suggested, would be
to tackle the interests that already exist in those established
marks, whether it is the Wales and Scotland marks or the Meat
and Livestock Commission. They have spent a lot of time and effort
building up what they consider to be customer recognition for
those marks and I do not think they will easily consent to having
them rationalised, as Curry would like it, behind something that
was only launched two years ago. On the general point you are
making, yes, I would agree with it.
534. Could I ask Katharine Walters because of
the Co-op's very strong connections with supply chain production,
one of the points that come out of the Curry Report is that it
is disappointing that some people will not adhere to high standards
whatever assurance scheme might be available. Why do you think
some people do not want to know about something which seems to
be so utterly basic not only to the individual's business but
also to the general question that the assurance message is sent
out on behalf of home-produced product.
(Ms Walters) I can only talk for our
own farmers? group as opposed to the farming industry at large.
Certainly for us as a large-scale commercial food producer, from
the outset we were involved in negotiations about the establishment
of the Red Tractor and, indeed, most of our food products grown
on our farms do adhere to those standards, so we certainly take
assurance very seriously as a food producer.
535. Is it the case, Simon Hughes, that you
require—and you mention specifications—that your suppliers
adhere to certain food assurance schemes otherwise you will not
buy from them?
(Mr Hughes) Currently on red meat we
expect a UK source to have a local farm assured scheme and on
produce we buy a produce assurance scheme.
536. What about the Safeway stance on that?
(Mr Hawkins) The same. We have our own
standards for farm assured meat. All the supplies we get from
the UK are from farm assured. When we import beef from Ireland,
which we have to do for the reasons I gave earlier in order to
promote it, because the volume is just not available in the UK,
the food suppliers and farmers we have been dealing with for a
long time certainly achieve our standards.
537. When a retailer puts his brand name on
something why on earth should he do anything to risk it?
(Mr Hawkins) He would be a lousy businessman.
538. Even it were cheaper to buy.
(Mr Hawkins) That is why I said at the
outset in response to the Chairman's question about short-term
and medium-term price fluctuations, that if that means compromising
quality then we are not interested. The more you rely on imports,
the bigger the potential problem of control and traceability and
due diligence you have because you are dealing with people who
are so much more remote. It is much easier to deal with people
a few miles down the road from their suppliers or at least in
the same broad geographical area than it is if you have to go
hopping off to the United States of America.
539. Can I conclude from this that British producers
looking to the future should not think they can hide behind a
safety message as a defence against competition to supply whatever
it is they are producing from anywhere outside the UK?
(Ms Walters) They should not hide behind
safety but boast about quality.
(Mr Hawkins) Yes, I agree.
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