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).
— 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).
— 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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