Examination of Witnesses (Questions 114-119)
MR ANDREW
JORET AND
MR MARK
WILLIAMS
17 JUNE 2003
Q114 Chairman: Welcome to the members
of the British Egg Industry Council. We have Mr Andrew Joret,
and Mr Mark Williams whom I have met before at a breakfast across
the square some months ago, and Mr Andrew Parker, the Chairman.
Did I understand correctly that you had in mind the possibility
of making a very brief initial statement? There is no necessity
for that but, if you want to do that, it is up to you.
Mr Williams: It was really to
set the scene; it will be very brief, about one minute's duration.
Q115 Chairman: Then, without hesitation,
deviation or repetition, you have a minute to summarise what you
may already have told us in eight elegantly crafted pages as your
written submissions.
Mr Williams: I would like to stress
just two points. The British Egg Industry Council has a political
arm where it represents the whole of the UK egg industry right
through all stages. We also have what we call our commercial arm
which is the Lion Quality Scheme and that accounts now for 80%
of all eggs produced here in the United Kingdom. We believe that
we should be used as a model for all other sectors of agriculture.
We believe that we have done everything that has been asked of
us by successive governments. We have become more efficient by
reducing costs; we have become innovative in all the products
we produce; and we respond to consumer demands. In other words,
we are an unsubsidised industry, so we have to stand on our own
two feet and are subject to market forces. We have the Lion Scheme.
We believe we are a very responsible industry. We have effectively
eliminated salmonella from UK-produced eggs. We also have issues
which are affecting our success and these issues at the present
moment in time are based on the amount of legislation which we
face as an industry and, by far and away, the overriding one is
new animal welfare legislation which is going to add significantly
to our costs, not only capital costs which are in excess of £400
million but also our running costs are going to increase and this
at the same time as we are faced with a round of world trade negotiations
which are set to lower import tariffs. So, we see our competitiveness
being very, very seriously undermined.
Q116 Chairman: Thank you for that
summary of your executive summary. If I can pick up that same
theme. At paragraphs 5 and 6 of your executive summary, Mr Williams,
you make it clear when you talk about competitiveness that, in
your view, and I quote,". . . the greatest threat" to
the future competitiveness of the industry "is from implementing
new animal welfare legislation at the same time as world trade
is further liberalised.." Is that really the case? New welfare
legislation is trickled in over a very long period and trade liberalisation
likewise happens very slowly. Why can your industry not look forward
over the decade during which some of this liberalisation and some
of these welfare standards are being introduced and get one to
reconcile and live with the other?
Mr Williams: If I can make two
points and then ask my colleague, Andrew Joret, to come in. The
first point to note is that the egg industry is already subject
to a European directive and that increased the cost of production
back in 1995 by some three-and-a-half pence per dozen. Industry
took that on board and took it forward—
Q117 Chairman: Three-and-a-half pence
per dozen on a cost base of what previously?
Mr Williams: Forty pence.
Q118 Chairman: So, we are talking
about 8% or something like that.
Mr Williams: But what has happened
this time round of course is that, in 1999, a new European-wide
directive was agreed. This is going to make fundamental structural
changes to the European egg industry of which we are an integral
part, being the sixth largest producer. That is going to ban what
is in effect the conventional cage to be replaced by so-called
enriched cages which provide birds with more space and more height,
as you heard from Peter Stevenson last week but perhaps we can
come back and touch on that in a few minutes' time. I think I
noted in our introduction that our greatest problem of course
is that we are an unsupported industry, so we are subjected to
the vagaries of the marketplace which each day becomes progressively
more competitive. It has been said to us on more than one occasion
by colleagues of yours and others, "Well, you have ten years
to implement this" but of course the investment decisions
are made—cage designs will last 20 years quite easily now
with modern equipment and modern materials etc—but all the
time we have other European countries and third countries knocking
on our doors here in the UK and knocking at our customers' doors
offering cheaper eggs and egg products and the problem is of course
that, whilst we take a responsible attitude and build in consumer
concerns on food safety and animal welfare, these so-called third
countries do not incorporate the same charges and that is really
the fundamental difference.
Mr Joret: The industry's costings
have really taken into account the long timescale, the lead into
2012, and what we have actually done is to look at what we think
the position will be in 2012. The costings side of it is of course
very easy to do accurately. What is not quite so easy to do is
secondguess where the market will have moved to in 2012. Our view
is that, if you take the egg market now, we are about 70% caged/30%
non-caged and, by 2012, our best estimates are somewhere around
about the 50/50 mark, so that is going to be a substantial growth
in the non-caged sector but we believe that the caged sector will
still be a significant feature of the market in 2012.
Q119 Chairman: Is that growth in
the non-caged sector driven entirely by market consideration/by
consumer demand?
Mr Joret: Driven by market, not
by legislation.
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