House of Commons - Environment, Food and Rural Affairs

Select Committee on Environment, Food and Rural Affairs Ninth Report

CHAPTER 5 - THE MARKET FOR FOOD

177. So far we have concentrated on the supply side. But the main source of revenue for agricultural producers is the sale of food and feed: although there are other outputs from agriculture, including wool, flowers, industrial oils and so on, by far the majority of farmers' production is of food and feed.[324] Any analysis of the changing fortunes of agriculture must therefore focus on changes in the market for food both in the United Kingdom and around the world. As well as looking at changing patterns of demand we also consider how that demand is met, which leads to consideration of the relationship between the farmer and the marketplace.

OVERALL TRENDS

178. The long data series from the National Food Survey charts since the middle of the Second World War the changing levels of consumption in United Kingdom homes of a huge range of foodstuffs. Figure 9 illustrates such changes in the consumption of a selection of products: in broad terms consumption of basic, unprocessed foods in the home has declined.

Figure 9: Household Consumption of Agricultural Commodities[325]

(a) Beef and veal (grammes per person per week)

(b) Milk (millilitres per person per week)

(d) Fresh fruit (grammes per person per week)

The detail which lies behind such broad trends is also informative. Asda highlighted a decline in the consumption of the most basic ingredients, and pointed out the contrast with the 43 per cent increase in the market for convenience foods since 1990. The company also noted that "one in seven meals is eaten outside of the home",[326] a statistic which may explain the decline in food consumption at home. Such detailed trends have implications for farmers, in part due to the fact that food is becoming more highly processed and, in part due to differences in the specification of products demanded by the catering and retail sectors.[327]

179. The Tenant Farmers Association acknowledged that, as economies grew and consumer incomes increased, "it is an economic fact of life that they will spend a reducing proportion of their income on food and food products [although] they may spend more on quality or processing".[328] As a result, total agricultural incomes can be expected to fall relative to gross domestic product.[329] Farm incomes in recent years have even declined in absolute as well as relative terms. Moreover, relatively strong growth in other parts of the economy has knock-on effects for agriculture, as the costs of inputs which other parts of the economy require, such as labour and land, increase at rates which the agricultural sector struggles to afford. Conversely there are concerns about 'food poverty': the poorest families spend the largest proportion of their incomes on food, but much of what they consume is of poor quality, especially in nutritional terms.

DETAILED TRENDS IN THE MARKETPLACE

180. Asda told us that "any understanding of consumer trends has to be underpinned by a clear understanding of who your customers are and how they choose to live".[330] The company highlighted the changing structure of the population, pointing out demographic trends towards 1.4 million fewer people aged 30 to 44, and 1.4 million more people aged over 60, in 2011 compared with 2000, and the changing nature of households, particularly an increase in the number of one-person households. It also drew attention to still-increasing levels of economic activity among women.[331]

Convenience

181. We were told that there has been "an erosion of the 'meal occasion'". There is now an increasing emphasis on convenience, particularly in terms of the purchase of 'convenience foods'.[332] Representatives from all the supermarkets we took evidence from concurred that the drive for convenience was a huge force for change in the way they conducted their business.[333] Asda suggested that the trend towards increased convenience was best illustrated by research suggesting that "the average time taken to prepare a meal in 1980 was two hours, this has now been reduced to 20 minutes".[334] Safeway cited figures which showed that sales of cereal-based convenience products such as pizza and pasta were up 90 per cent over the last ten years.[335]

182. The representatives of the supermarkets agreed that these convenience-driven changes would continue for the "foreseeable future".[336] Professor Hughes agreed, and said that by 2010 he expected to see a range of convenience foods that would "astonish us by current standards". He also expected a change in the way that "we procure food", concluding that "I cannot believe that we will shopping in supermarkets in 2010 as we do now".[337]

183. Changes in food customer behaviour are more far-reaching than simply changes made in food purchases within supermarkets. The balance between the amount spent eating at home, and the amount spent eating out is also changing. Whitbread told us that at present the 'eating out market' is valued at £25.2 billion.[338] It contrasted the 'share of stomach' between supermarkets and food service in the United Kingdom, where supermarkets have a 70 per cent share, with that in the United States where "it is broadly 50:50". Whitbread expected the share captured by the food service sector in the United Kingdom to increase to 40 per cent within the next five years.[339]

184. Changes are also occurring within the catering market: Professor Hughes told us that the fast food share of the market was increasing at the expense of more formal dining.[340] He suggested that supermarkets were aware of the threat posed to them from the catering industry in the "overall food market", and that "if they do not watch it, [they] will lose shares per stomach". He believed that the "restaurant-quality chilled meals that you see" in supermarkets reflected their response to the growing threat from certain parts of the food service sector and, unlike Whitbread, he believed that supermarkets were beginning to regain market share.[341]

Food fashions

185. The food processing sector agreed that there was a growing emphasis on convenience food but also highlighted one other new feature of the market: Nestlé UK said that "there is more fashion in food now", citing the example of Mexican food, which had been heavily promoted, and had become fashionable but had since been replaced by something else.[342]

186. An example of a change in food 'fashion' was referred to by one farmer we met during the course of our inquiry as the 'Mediterraneanisation' of the British diet. One of the implications of this change is a switch in eating habits from fruit and vegetables that can be grown in the United Kingdom to those that cannot. If this were to be the case there could be quite serious consequences for a number of farmers. We put our concerns to witnesses from the Food and Drink Federation, and received two different responses. First, Cadbury Schweppes said that "there tends to be more input of exotic fruit perhaps ... but that is a small sector when compared with the major purchases of milk and sugar".[343] Second, a witness from Cargill described her company's development of a new processing facility in the United Kingdom to mill masa flour, the basis of Mexican-type snacks. In the past, masa flour had been imported from the United States for that purpose, but in future maize grown in the European Union would be processed here.[344] Both these examples show that changing consumer tastes provide opportunities for companies in the United Kingdom, and although these specific examples might not directly benefit British farmers they illustrate the need to understand how consumer requirements are changing and to be responsive to those changes.

Healthy foods

187. Apart from the increasing demand for convenience, the supermarkets identified increasing consumer interest in healthy lifestyles and local food,[345] and organic products.[346] Tesco told us that consumers would be looking at both "non-food services and healthy foods" because personal and family health and food safety mattered.[347] Asda reported that fat was the "number one issue" for adults and that sugar was "a secondary concern but a priority for mothers with small children".[348] Asda drew a distinction between 'healthy' and 'healthier' foods but expected demand for both product groups to continue to grow. It argued that because there was no universal definition of 'healthy' foods, customers could easily be confused. However, it also reported that consumers were "demanding better information on labelling of such products".[349]

188. Some of the supermarkets also highlighted increased consumer interest in organic products. The Institute of Grocery Distribution reported that continuous tracking surveys showed year-on-year growth in the number of households buying organic products, and in total expenditure on such products.[350] Tesco allied this to the increasing demand for healthy food, noting that organic food was no safer than conventional food, but was "perceived to be better in various ways". It did not think that increased demand for organics was linked to environmental considerations.[351] Institute of Grocery Distribution research supported this view.[352] Tesco reported strong sales in all categories of organic food, and a link between increased availability and demand.[353] Sainsbury's also reported considerable interest in organic food: 80 per cent of its customers have bought organic products at least once. However, it acknowledged that 60 per cent of spending on organic products was accounted for by only seven per cent of its customers.[354] However, Tesco's research showed that the organics market would go on growing.[355]

189. Both Sainsbury's and Tesco outlined their efforts to improve the availability of British organic food.[356] They highlighted the high levels of imports in this part of the food market.[357] They also observed that land needs to spend time 'in conversion' before products from it can be certified organic, and said that "as fast as we put more land down for it the demand increases".[358] However, this evidence is not consistent with the difficulties of the organic milk sector.

Confidence in British food

190. We raised the concern of people losing confidence in British food, following food scares and the instances of animal diseases that have plagued the United Kingdom over the last few years. However, Safeway told us that research by the Institute of Grocery Distribution showed that "the alleged loss of confidence in British food ... is 'much overdone'".[359] Netto Foodstores Limited's fresh meat buyer reported that its red meat sales had in fact increased. He put this down to the public being "quite assured by the quality of the product and the safety of the product that the supermarkets as a total sell".[360] Clearly confidence is closely related to price. When meat prices fell because of food scares, consumption rose.

324 In the United Kingdom, in 2000, the total gross value of agricultural and horticultural production was £15,324 million; the value of flower-growing was £714 million (4.6 per cent) and of wool £22 million (0.1 per cent); by contrast dairy output was £2,380 million (15.5 per cent), cereals £2,350 million (15.3 per cent), and livestock £5,268 million (34.4 per cent). See Agriculture in the United Kingdom 2000, MAFF, 2001, pp. 59 and 60. (Figures are given for 2000, rather than 2001, because of foot and mouth disease: in 2001, livestock accounted for 30.8 per cent of total output.) Back

325 Source: MAFF, National Food Survey (http://www.defra.gov.uk/esg/Excel/allfood.xls). Back

326 Memorandum submitted by Asda, Ev 84. Back

327 Evidence taken on 10 April 2002, Ev 196, Q.717. Back

328 Memorandum from the Tenant Farmers Association, Ev 270. Back

329 Evidence taken on 30 January 2002, Ev 33, Q. 149. Back

330 Memorandum submitted by Asda, Ev 83. Back

331 Memorandum submitted by Asda, Ev 83. Back

332 Memorandum submitted by Asda, Ev 83. Back

333 Evidence taken on 27 February 2002, Ev 95-96, QQ.431and 433; and Ev 114-115, Q.523. Back