Select Committee on Environment, Food and Rural Affairs Minutes of Evidence


Supplementary memorandum submitted by the Department for Environment, Food and Rural Affairs (L6b)

THE DAIRY SUPPLY CHAIN FORUM (Dscf)

COMPOSITION AND TERMS OF REFERENCE

  The Forum was established by Defra in 2002 to help address in the dairy sector some of the issues raised by the Curry Commission in relation to encouraging supply chain co-operation, increasing efficiency and promoting the sustainable development of industry. It provides a framework within which all links in the dairy supply chain can come together to discuss the challenges facing the industry and develop collaborative solutions. The formal Objectives of the Forum are attached at Annex 1.

  Lord Whitty currently chairs the Forum, with the secretariat functions being provided by Defra. The Forum has representatives from all parts of the dairy supply chain: the farming, processing, retail, and food industry sectors as well as the Milk Development Council (MDC) and Government. It currently meets on a quarterly basis. A list of the organisations involved is attached at Annex 2.

  The role of Government in the Forum has been to facilitate industry action to address the challenges facing the sector, and it was always the intention to pass its ownership across to the sector itself at an apposite point. It is foreseen that during the course of this year the Forum will have shown sufficient progress that participants from across the supply chain will be willing to continue the Forum under industry leadership and, to this end, we will be increasing the resources devoted to supporting the Forum and its sub-groups.

Work of the Forum

  In the first instance, simply bringing the various parties in the chain together to talk yielded useful benefits. However, an early substantive success of the Forum was to identify and achieve consensus that the increasingly seasonal nature of milk production in GB and its effect on price volatility was an issue that could be addressed collaboratively by the industry. As a result the Dairy Industry Association (DIAL) organised a seminar attended by the major milk purchasers, including co-operatives and processors, on the issue and subsequently many purchasers have altered their payment structures or taken other action to address the problem.

  Subsequently, the Forum has focussed its attention on addressing some of the issues raised by the KPMG report on Prices and Profitability in the GB Dairy Chain (which amongst other things recommended that an industry forum be used to address some of the supply chain issues) and on the implications of CAP reform for the dairy sector. However, the Forum formed the view that to make progress quickly in these areas, more focused groups were required and it therefore established a number of dedicated sub-groups, made up of appropriate experts from different parts of the supply chain, to take forward discrete areas of work.

  The main Forum now operates in many ways as a steering group for these sub-groups: identifying potential areas of work; monitoring their progress and ensuring that their work is co-ordinated with each other and with other initiatives that impact on the dairy sector, such as the Food Chain Centre's value chain analysis[16] and the implementation of the Strategy for Sustainable Farming and Food.

The dairy sector project is being part funded by a £500,000 Agriculture Development Scheme Defra grant from Defra.

The Food Chain Centre is engaged in other activities which have the potential to benefit the dairy sector. These include the promotion of benchmarking and work on information sharing. These activities are also being part funded by the Government.

More generally, through Defra's support of English Farming and Food Partnerships, we are seeking to promote and support co-operation and collaboration between farmers, and between farmer and the food chain.

The CAP Reform Sub-Group

  The Cap Reform Sub-Group is chaired by Andrew Slade, Head of Defra's Livestock Products Division, with secretariat support from his team. It has been meeting every six to eight weeks since late last summer. Its membership is drawn from the farming, co-operative, processing, retail sectors and the MDC.

  Its aims are:

    —  to consider the implications for the English dairy industry of CAP reform;

    —  review options for implementation of reform, including possible early decoupling and to ensure decision were taken on the basis of a common understanding; and

    —  assess the likely strengths and weaknesses of the national industry in meeting the challenges of reform, and advise on how the former might be maximised and the latter positively addressed.

  The desired outcome from the Sub-Group is an industry that is "ahead of the game" in Europe in successfully tackling the issues posed by CAP reform.

  The report into the Future of UK Dairy Farming by Professors David Colman and David Harvey was commissioned by the Sub-Group.

  It was initially expected that the CAP Reform Sub-Group would have a relatively short life. However, at the last meeting, it was agreed that, in pursuing its first and third objectives, the Sub-Group could usefully carry out further work on the wider implications for the dairy sector of the recently announced model of the single payments and to this end the group intends to commission further analysis from Professors Colman and Harvey. This should form the basis of a wider analysis that can feed into the work of the Industry Development Sub Group

The Industry Development Sub-Group

  The Industry Development Sub-Group is chaired by Peter Walker of Arla Foods, with the secretariat being provided by the NFU. It met for the first time in December, and has met twice since then. Its members represent at senior level all parts of the dairy supply chain, as well as including an expert from the banking sector.

  The aim of this Sub-Group is to facilitate the long term sustainable development of the dairy supply chain.

The desired outcomes are:

    —  To have identified and analysed challenges facing the dairy sector and to have identified how the it might develop to meet them.

    —  To thereby enable individual business to make informed decisions on how to address these challenges, rather than providing a prescriptive "blueprint" for the sector.

  The Sub-Group is already using some of the early outputs from the Cap Reform and Innovations Sub-Groups.

  It has agreed to begin by looking into:

    —  The international, EU and national policy frameworks within which the dairy industry will need to develop over the next 5-10 years.

    —  Efficiency (particularly strategies at farm level).

    —  Demand.

    —  Supply (also looking at the dynamic in neighbouring Member States that might impact on UK supply, such as the Republic of Ireland).

    —  Effects of CAP reform (to be taken forward by the CAP reform group).

    —  Investment (levels and barriers).

    —  Regulation (regulatory barriers).

    —  Image of milk.

    —  Skills and training (on a vertical, cross chain basis, building on work by the Sector Skills Councils).

  The Sub-Group has split into a number of teams to take forward each workstream. First outputs for wider consumption are expected by the summer.

The Innovations Sub-Group

  The Innovations Sub-Group is chaired by Brian Peacock, Chairman of the MDC. The MDC also provides secretariat support. The sub-group's membership is drawn from all parts of the supply chain as well as colleges, training organisations, consultancies and the food industry. Unlike the other groups it has sought to gain a wide number of participants through organising workshops to examine various themes on product and market development and innovation. To date two workshops have been organised. If issues emerge that require further analysis then smaller groups may be established to address these.

  The objective of the Innovations Sub-Group (or "Workshop") is to stimulate and co-ordinate innovation for the development of British dairy products by creating a forum for the exchange of market information and ideas that anticipate consumer needs. It's principle terms of references are:

    —  To stimulate innovation in process technology, new product development, packaging and marketing of new dairy products in Britain.

    —  To anticipate and meet market opportunities for British dairy products at home and abroad.

    —  To highlight developments in consumer preferences for dairy products and monitor market trends.

    —  To monitor, study and interpret the worldwide introduction of new and innovative dairy products.

    —  To identify barriers to innovation and to liaise with governments, funding and regulatory bodies to overcome such constraints.

  Work is presently progressing in the following areas:

    —  Consumer Preference (looking in particular at lifestyle changes, the need for differentiation and segmentation of the dairy market).

    —  Monitoring the worldwide introduction of new and innovative dairy products (looking at "health" and "wellbeing" dairy foods; health claims; the gathering and dissemination of information about worldwide dairy product innovation and new technology).

  Future work is likely to focus initially on:

    —  Barriers to market development (including studies of purchasing practices and Regulations covering the sector to gauge whether they provide unnecessary barriers to innovation).

    —  A study of health aspects of dairy products.

    —  Facilities and services for innovation.

29 March 2004


Annex 1

DAIRY SUPPLY CHAIN FORUM: OBJECTIVES

STRATEGIC OBJECTIVE

  To increase the efficiency and promote the sustainable development of the dairy supply chain.

DESIRED OUTCOME

  Improved collaboration across the dairy supply chain leading to effective and innovative approaches to the challenges facing the sector that increase the efficiency and promote the sustainable development of the chain as a whole.

OUTPUTS

  To identify challenges facing the dairy sector that can be appropriately addressed through collaboration between some or all of the participants in the dairy supply chain.

  To establish sub-groups, containing appropriate experts from different parts of the sector, to consider and agree effective approaches to the challenges identified that will increase efficiency and promote sustainable development.

  To monitor, guide and evaluate the progress of the sub-groups.

INPUTS

  Chairmanship and Secretariat for the Forum from Defra, at least until mid-2004 and thereafter a continued Defra involvement, but with Industry taking the lead. If appropriate, Defra involvement in, but not necessarily Secretariat support for, any sub-groups addressing particular issues.

  Willingness of other participants to devote time to the quarterly meetings and for organisations to devote time and resources to any sub-groups addressing particular issues.

SUCCESS CRITERIA

  That during 2004, the Forum has shown sufficient progress, in promoting through collaboration effective and innovative approaches to the challenges facing the sector that increase efficiency and promote sustainability, that participants from across the supply chain are willing to continue the Forum under industry leadership.

May 2003


Annex 2

ORGANISATIONS REPRESENTED ON THE DAIRY SUPPLY CHAIN FORUM

  Arla Foods UK

  British Retail Consortium

  Country Land and Business AssociationDairy Crest Ltd

  Dairy Farmers of Britain

  Dairy Industry Association Ltd (DIAL).

  Defra

  Federation of Milk Groups

  First Milk

  Milk Development Council

  Milk Link

  National Farmers' Union

  Provision Trade Federation

  Robert Wiseman

  Royal Association of British Dairy Farmers

  Safeway

  Tenant Farmers Association

ORGANISATIONS REPRESENTED IN THE DAIRY SUPPLY CHAIN FORUM SUB-GROUPS

CAP REFORM SUB GROUPBritish Retail Consortium

Dairy Farmers of Britain

Dairy Industry Association Limited

Defra

First Milk

Milk Development Council

Milk Link

National Farmers Union

INDUSTRY DEVELOPMENT SUB GROUPArla Foods (Chair)

Dairy Crest Ltd

Dairy Farmers of Britain

Dairy Industry Association Limited

Defra

First Milk Ltd

HSBC

Milk Development Council

Milk Link Ltd

National Farmers Union

Nestle[acute]

Robert Wiseman Dairies

Royal Association of British Dairy Farmers

Tesco

INNOVATIONS WORKSHOPAlvis Brothers Limited

Associated Creameries Co-operative

British Cheese Board

Cricketer Farms

Dairy Crest

Dairy Industry Association Limited

Defra

Dragon Brands

Express Dairies

Food From Britain

Highgrove Foods

Imperial College London

Lynher Dairies

Midlands Co-Op

Milk Development Council

Milk Link

Royal Association of British Dairy Farmers

Safeway Stores plc

J Sainsbury plc

The Fifield Organisation

The Society of Dairy Technology

Waitrose

Welsh Development Agency

29 March 2004





16   The Food Chain Centre is also looking at ways in which the efficiency of the dairy supply chain can be improved. Working in partnership with the NFU, MDC, DIAL and the British Retail Consortium it is carrying out an analysis of a number of supply chains involving various products. The aim of this project is to identify areas where efficiencies can be made. Initial results from similar work carried out in the red meat sector by the Food Chain Centre in partnership with the Red Meat Industry Forum identified potential cost savings of up to 10%. Back


 
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