Examination of Witnesses (Questions 173-179)
MR DAVID
JOLL, MR
ANDREW LEWINS
AND MR
PETER BRADNOCK
17 JUNE 2003
Q173 Chairman: Good morning, gentlemen.
We are very pleased to see you for our inquiry into the state
of poultry farming. You are aware that we are looking carefully
at the impact of new regulations on the industry and its competitiveness
and on animal welfare standards and we are very pleased to see
you here this afternoon. Can we begin by looking at poultry meat
marketing and I leave it to you to decide which of the three of
you answers the question. You report that, in the 18 years since
1985, production of poultry meat has gone up by 80% to about 1.5
million tonnes and that consumption has outstripped that, increasing
by 91% to 1.7 million tonnes. You are aware that, fairly recently,
concerns have been raised in the press yet again regarding the
use of antibiotics as growth stimulators. How on earth have you
managed to increase the production of poultry meat so quickly
and in such a relatively short period?
Mr Bradnock: I was wondering if
we might just be able to make a very brief introductory statement
before we launch into the questions. First of all, I would like
to introduce Mr David Joll and Andrew Lewins who are representing
the turkey and the chicken sectors. Mr Joll, if that is okay,
would like to make a very brief introductory statement.
Mr Joll: Chairman, I just thought
that an overview might be useful to the Committee. We are obviously
here today to represent the poultry meat industry and it is an
industry that we are actually very proud of. First of all, we
believe that we have been consumer driven, which we think is essential
today. We have listened to the consumer; we have researched what
the consumer wants to buy; and we have pumped millions over the
years into product development to create a wide range of products
that have demonstrated their success in the rapid increase in
poultry meat consumption in all its forms. I would honestly say
that we are a world beater in that respect. A number of British
poultry companies have sold their technology around the world
to other countries. We are recognised as having the widest range
of poultry products in the world. So, it has been a very innovative
industry, it has been an industry that has been prepared to pump
money not only into product development but consumer marketing
and generating consumer demand. The problem which the industry
is facing is that a lot of the primary meat that is needed to
produce those value-added products is flooding in from abroad
and I think this is one of the major points that we would like
to make today. An industry that has been self-sufficient, has
not sought nor wished for any financial help and has been self-sufficient
over so many years is very seriously today under threat. It is
not that it has been trickling in in our industry, it has been
quite dramatic and quite sudden. If we take Brazil, for example,
who we certainly regard as a world super-agri business super power,
their exports this year again are up 40 per cent.
Q174 Chairman: We are going to look
at world trade later on. I am just looking at this area for the
moment of the way in which you have been able to increase production
of meat so quickly relatively in the last 18 years. You mentioned
investment, research and so on.
Mr Joll: Indeed and there has
been rapid investment and obviously huge investment in the agricultural
side of our businesses. Britain is somewhat different from the
rest of the world in that there are major organisations that we
call vertically integrated, so we not only are processors and
marketeers, but we are farmers as well on some considerable scale.
So, by keeping the production in house, we have been able to produce
that which is required and it has given us control and it has
given us a lot of discipline over our farming methods. We have
been able to farm in the best way with the best practices and
we have been able to control that because they are in the main
in Britain company owned rather than, for example, Thailand with
tens of thousands of smaller farmer producer growers who clearly
do not have the efficiencies of scale that the British industry
in particular has. So, a huge amount of investment coupled with
a great deal of technology and a high degree of control.
Q175 Chairman: Efficiencies of scale
can sometimes tip over into other companies and the meat production
is 80% produced by just five companies, is it not, of which you
are no doubt one. Yet, in your evidence, you express concerns
about the adverse effects of the retail industry which similarly
has about 80% of sales concentrated in five companies. Why should
it be good for you and not for them?
Mr Joll: Because, in the case
of the retailer, obviously the retailer is there to sell what
the consumer wants to buy and, as far as the retailers are concerned,
they are not just dealing with that number of chicken broiler
or poultry companies. They are dealing with a huge number of food
producers because poultry's value-added products, using our jargon,
are produced by a huge number of food companies in Britain, not
just poultry companies, and of course it is a very competitive
industry and therefore those food companies will buy chicken meat
and turkey meat from the lowest cost source. So, the major reason
why these imports are flooding in is that they have been bought
by food producers to produce a wide range of value-added poultry
products. It is not just the poultry industry by any means.
Q176 Chairman: Would your colleagues
like to add to that? Bernard Matthews is at the very large end
of the spectrum and other firms may not see it in that light.
Mr Lewins: The consolidation we
have tended to rationalise as an industry partly because of our
poor financial performance. Companies have got into trouble and
therefore been bought and have consolidated to try and get the
synergies and economies of scale within the United Kingdom. We
are actually in the food market in that global village, as David
said, for recipe dish, value-added meals, stuffed chicken that
can come in at the frozen end of the market. That is a global
supply issue and the fact that we have 80% of the UK within five
companies in no way leverages our selling power like that.
Q177 Chairman: In your evidence also,
you say that your members have not noticed any reduction in the
demands made on them by various supermarkets as a result of the
cop on to market dealings with suppliers and you say that demands
have intensified but that you are reluctant to give specific examples
for fear of retaliatory action. Without giving the examples that
you are reluctant to give, what practices contrary to that code
of practice have the supermarkets used over the last 12 months
to which you take such a strong objection?
Mr Bradnock: I should say that
in the consultation that came from the Office of Fair Trading,
looking at the first year of operation of this code of practice,
we did discuss this in our management committee with all our members,
both large and small, supplying retailers and this was the unanimous
view of our membership—not one particular company or two
particular companies, it was the unanimous view. One of the major
areas of concern, I think, is demanding funds from suppliers to
continue to be able to supply that particular supermarket in subsequent
years. In other words you are buying business ahead on the basis
of contributing to their bottom line in the current year on the
promise of future business. There are a number of other areas
that I am sure we could possibly write to you about, if that were
possible.
Q178 Chairman: What would be a couple
of key steps, if I can put this to you, Mr Lewins, that could
be taken which would improve what appear to be unsatisfactory
relationships between the supermarkets and their suppliers in
this area? Any of you?
Mr Bradnock: I think we would
like to see the code of practice have a bit more teeth, so that
it is not a voluntary code and that it applies to all retailers
in their dealings with their suppliers, and that there is also
some person there who can actually impose some kind of quasi-regulatory
requirements on supermarkets in the event of the code being breached
or the spirit of the code being breached. At the moment it is
pretty much a kind of list of things that if you had not thought
of this maybe you could try this approach, which really lists
a list of practices, which is more an invitation, it seems, than
a deterrent.
Q179 Chairman: What enforcement powers
or agencies would you envisage would be necessary or acceptable
if there was this quasi-regulatory framework?
Mr Bradnock: It is difficult to
put it in detail. I think we would like to see the Office of Fair
Trading, perhaps, as the obvious area for this to reside. We would
like to go into that in a bit more detail, perhaps.
Chairman: Can we move into the welfare
area.
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