Examination of Witnesses (Questions 830-839)
JONATHAN PEEL, SIMON HARRIS, RUTH RAWLING, ERICA TOWN AND NEIL MAKIN
WEDNESDAY 1 MAY 2002
830. Good morning. Some of you are fairly familiar faces, what I call the usual suspects really. I am looking at Simon Harris from British Sugar, Ruth Rawling, who used to work for MAFF a million years ago I seem to recall before going off to the private sector, from Cargill. Then we have Jonathan Peel from the Food and Drink Federation, Erica Town from Nestlé and Neil Makin from Cadbury Schweppes. We are doing an inquiry into where farming goes and the scenario in which subsidies play a less important part than now, although we are not naive enough to think that in a sudden rush of blood to the head farm ministers are all going to decide that they should be swept away. However, it is going to be more competitive and we are trying to find out which way farming goes. Part of that, indeed a central part, is to look at what the marketplace is: what people want, how they live, what they buy, how they want to buy, what it has to look like, what the sociology and demography is underlying the marketplace. In other words, starting with the consumer rather than the farming industry which often looks at what it is convenient to produce and then asks why nobody wants to buy it. We are starting from the assumption that the market rules and that the only future for farming is if it actually delivers what the market wants. It is important we get the analysis of what the market wants right, which is why you are here. My first question to you is that a lot of witnesses have highlighted the increasing demand for convenience food, prepared meals, eating out. How has your industry responded to that change in habit amongst consumers in general? If you agree with each other, would you be kind enough to say you agree rather than to tell us at length why you agree?
(Mr Peel) Certainly we would agree with your analysis. It would probably be best to talk to the companies direct.
(Ms Town) What we have seen in food demand is that the consumer really is the pull and it is absolutely about response to new trends. That can be travel which affects ethnic foods. There is more fashion in food now where there will be a trend in something which becomes very fashionable, the supermarkets will promote that, but two years later that sector and category might be very different and something will have replaced it. Food as a commodity is not the same: it is more food as fashion. The problem for agriculture is to be able to respond to that, given the time frames involved.
831. Could you give me an example of one of these ephemeral fashions in food?
(Ms Town) Mexican food would possibly be one which was quite heavily promoted.
832. That one passed me by, I am afraid.
(Ms Town) A lot of advertising was done by various companies to promote that category. It is probably still quite an important category but probably things like Thai are coming up the agenda now as being the next growth. You see the number of Thai restaurants growing, those kinds of things and all the consumers want to replicate that at home.
833. How do you pass that information back down the line?
(Ms Town) We as Nestlé are obviously doing consumer research and picking up trends. There are food trends which the FDF and all big companies are taking on, lifestyles, the way people are living, the way people are cooking, the growth in out-of-home, which is a huge influence on what people will use at home as well. People will experiment out of home. That might be just that McDonald's are doing a Thai burger and people realise they quite like spicy food and think they will try it at home. It is through research and then looking to develop products which meet that need. Those products may have quite a short shelf life now in that they might only be a one-year or two-year trend; they are not looking like products which have been around for ten or 15 years as previously. That is true even in confectionary.
(Mr Makin) From the point of view of confectionary, our product design has not changed that markedly, although, back to your original question, certainly soft drinks and confectionary are not only very much part of eating out and going out, but they are very much part of availability and making sure that your products are available when people are out on a whole range of leisure activities. For instance, manufacturers like ourselves will have new designed outlets at places like Alton Towers or theme parks. We have the Cadbury Café in Bath, which may well be a trend into the high street. In terms of passing that information down the line, because we do not make Thai food or Mexican foodalthough the first chocolate actually did come from Mexico, the Incas were the earliest users of chocolate; those who ever go round Cadbury World will find out about thatwe do hold meetings with the supply chain. Milk is a good example where we will hold regular meetings with the co-operative from which we get the milk and indeed the local farmers and that sort of information will be passed round. I have to say that it has not made a marked difference in the volume of milk or indeed sugar which is coming through at the moment. If we can have those sorts of dialogues down the supply chain we believe that is all very helpful.
834. We had a meeting last week with somebody producing largely salad crops who was saying that because the Brits went abroad a lot more there was a "Mediterraneanisation" of our tastes taking over. People now wanted products commonly which could not be produced in the UK and therefore the balance of what was being imported and what was produced locally was bound to change under that consumer pressure, in the sense of a mini globalisation. Have you found with these changing tastes and fashions and the nature of the meal people want that has altered the balance between what you can procure from British farmers and what you procure externally?
(Mr Makin) No, is the short answer to that. We are very much aware of those changing trends and the fact that in many ways confectionary and soft drinks are becoming more functional, there is a functional end of the consumer market and a luxury indulgence area of the consumer market. These things tend to balance themselves out. You might actually find that there tends to be more input of exotic fruits perhaps because people are aware of that sort of ingredient, but that is a small sector when compared with the major purchasers of milk and sugar which come from farmers and are fresh. I really do not see much to interrupt that. It is not growing a lot but it has not gone down either.
(Ms Rawling) May I give a small example here which is also related to the previous reference to Mexican food? We import masa flour from the US, which is used to make Mexican-type snacks such as Tortilla chips, those kinds of snack foods. We have recently announced investment in a masa flour plant in Liverpool because we think this trend is sufficiently strong and growing that it would be better if we had a production facility here in the UK. There is not a lot of maize grown in the UK, but we are looking to source from the European Union rather than from the US for the supply for this. Who knows, with climate change maybe we will get some maize in the UK eventually.
Chairman: The lower slopes of the Pennines are reserved for the vineyards.
835. Farmers are constantly being told that they need to listen to consumers, they need to produce what consumers want. It is tricky, as the Chairman has just said, if you happen to be on the Pennines to produce maize. We have been constantly confronted with this problem for the individual farmer, or indeed the bodies like the NFU, that yes, there are changing fashions in food, some of them are to do with flavourings and not with the basic ingredients, some of them to do with the basic ingredient. How do we help farmers become more responsive to the demands of consumers and what is your role in that process? What do you do about it, apart from saying it?
(Mr Peel) The first point to make is that the food chain is increasingly working together as a whole. There is now a regular series of high level meetings to make sure the whole of the food chain gets together and the NFU are very much part of it. We very much welcome the recommendation in the Curry commission for a food chain centre.
836. In what commodities? You just talked about high level meetings but there is a whole range of commodities. Would you like to give examples? Presumably meetings are divided into commodities.
(Mr Peel) No, the meetings would be covering all the issues facing the food chain as a whole.
837. It is a bit different if you are producing parsnips, where you might well know your market outlets, from producing Aberdeen Angus, I would suggest. Are you really saying that these multi-purpose meetings are useful?
(Mr Peel) I think they are.
838. To whom? To the individual farmer?
(Mr Peel) You mentioned Aberdeen Angus. The Meat and Livestock Commission are looking very much to getting red meat back off the ground again. They are already involving the whole of the food chain in that. This will be something which will be worked through the food chain centre when it is set up. This is something which will obviously develop, but they are looking at the bigger issues. I do not know whether anybody here can explain how it relates down to the individual farmer.
(Mr Harris) The sugar sector is a very good example of a close relationship with the farmer, which has enabled us, for example, to drive down fertiliser usage by farmers by about 40 per cent, even while yields have doubled since EEC entry. We have been able to cut pesticide usage, particularly of very nasty things like organophosphates, down by about 95 per cent and this has all been part of working very intensively with our suppliers and farmers.
839. You make my point. You are talking about one commodity where there is a close relationship between the processor, who also sells the product, and those who produce the product. That is a single issue commodity activity. What I am questioning is the purpose of multi-commodity high level meetings and your example actually proves my point that these things need to be more specialised and more fractured. It is not your fault of course as you can only take part in the meetings that are set up for you and by definition you are a very, very multi-purpose organisation. Would you agree that it would be more useful to specialise in these kinds of food chain commodity activities?
(Mr Peel) I certainly think there is a lot in that. We look to source from the United Kingdom. We buy something like £11 billion of agricultural produce a year. We look to source from the United Kingdom what is best in the United Kingdom. There are certain geographical aspects which are obviously very well suited for dairy; we are one of the two best areas in the world for dairy. We should be extremely well positioned to deal with beef and red meat. This needs to be picked up off the ground after the series of problems following BSE and then foot and mouth and a lot of work being done on the food chain centre through the MLC lead will be dealing with that. Other areas: fruit is something Britain is probably particularly good at. It helps to source something locally because with increasing demands on traceability and food safety and food security, the shorter the lines the better. We also import a large amount of raw materials a year and semi-processes foods: seven billion pounds' worth. Then this country has done that right back since 1846 and the repeal of the Corn Laws.