Examination of Witnesses (Questions 960-979)
4 DECEMBER 2003
MR RICHARD
ALI, MR
DAVID CROFT,
MRS SUSAN
BROMLEY, MS
PENNY COATES
AND MR
DAVID NORTH
Q960 Mr Jones: This question has nothing
to do with Canary Wharf. Food production in the United Kingdom
and across Europe is loosely connected to the market and the demand.
It is governed by the Common Agricultural Policy. Prices to some
extent reflect that pattern. In your experience, how are the categories
of foods in your shops affected by the Common Agricultural Policy?
Ms Coates: We try
to offer, as I said earlier, all products at the lowest possible
price that we can to consumers. If there is a particularly bad
crop at a particularly bad time for one type of product, then
inevitably there will be some reflection of that increase in cost
in the price to consumers.
Q961 Mr Jones: You have misunderstood
my question. Since the Common Agricultural Policy supports some
foods and promotes the growth of some foods but not others and
guarantees prices for some foods but not others and sets tariffs
against some foods but not others, the Common Agricultural Policy
must significantly affect the prices at which some foods appear
in your shops. If it did not exist, prices would be rather different.
It is a complicated question, I realise.
Ms Coates: The
purchase prices will be different. In terms of the answer, it
probably is actually similar. We would offer the products at the
best price that we can and it will be influenced by the price
at which we are able to purchase. So, yes, it does have an impact.
Q962 Mr Jones: Mr North?
Mr North: I think
I would agree with that. It is a very complicated issue because
obviously the Common Agricultural Policy will have an impact on
all of us as taxpayers and all of us as consumers. There have
been several—probably countless—studies into the impact
on both taxpayers and consumers, and all of those clearly lead
to the conclusion that there is an adverse impact; in other words,
it tends to push up levels of taxation and also the cost of food
for consumers. But, within that, our approach is really much as
Penny has said, which is to try to provide customers/consumers
with the best value that we can.
Q963 Mr Jones: I am trying to get at
not what your company does but, using your knowledge, that if
you were able to sell all your products at world prices, would
you have certain categories of food—and we are particularly
concerned with obesity issues—which would be relatively
cheaper than they are now and other categories of food which would
be relatively more expensive?
Mr North: I think
that is a very difficult question to answer. I think the short
answer to your question would be, undoubtedly, yes. If we were
theoretically able to move to world market prices, by and large
those prices would be lower. Whether one can do that category
by category, I think becomes more difficult. For example, would
the cost of sugar be lower than it would under the current regimes
that apply? One then enters a more complicated technical area.
What is also relevant there, of course, is the impact that would
have on UK producers, UK growers, UK farmers, both in a social
sense and in an economic sense. So it is a hugely complicated
issue. We would say as a company that we have very much supported
both successive governments' attempts to reform the Common Agricultural
Policy and, indeed, the work that the NFU and others have done
to achieve reform in the most sensible direction.
Q964 Mr Jones: The Co-op? Mr Croft?
Mr Croft: It is
patently obvious that CAP will affect farm prices and therefore
will affect retail prices as a result of it. Also, CAP has an
influence on the potential for imports into the EU which might
have an impact upon the raw ingredients coming into the EU for
processing from other countries. Certainly the tariffs set within
EU trade positioning hinder imports from other countries that
might otherwise allow relatively cheaper ingredients to come in.
From our perspective—and I have to be honest and say that
this is not an area of my expertise—we have talked at length
in the past at where CAP might be an influence in terms of developing
perhaps support for aspects such as organic farming, that could
contribute to a different style of diet. I think there is still
potential for that to take place as the CAP reforms move forward.
Mr Jones: It seems to me that the Government
has a view about the promotion of more healthy foods, yet the
Common Agricultural Policy often subsidises less healthy products.
There is a conflict there which has not yet been addressed. But
there are many questions to ask, Chairman.
Chairman: Richard.
Q965 Dr Taylor: Thank you, Chairman.
Can we go back to trends in food purchasing. We have already heard
of your fruit and salads going up 7.5%, I think. Does the same
apply to Asda?
Ms Coates: Yes.
The growth in the fresh areas generally is faster than the growth
in the ambient areas, so yes.
Q966 Dr Taylor: And yours was a rather
lower figure, I think.
Mr Croft: It was
actually 12%.
Q967 Oh, 12%. Wow! That is good. Together
you are in a remarkable position, because you probably can tell
us about purchasing habits for half the people who buy from major
food stores. So you are in a pretty strong position. We would
like to know in other categories how patterns of buying have changed
over the last 10 years. If we think of processed versus fresh
foods, is there a trend? Starting with Tesco.
Mr North: I think
that there has been a large growth in recent years in pre-prepared
meals, for example, which is another aspect of the demographic
and social move towards smaller households, people feeling they
have less time to spend on preparing food. Against that, in comparative
terms, purchases by customers of fruit, vegetables and salads
have held up well, if not increased.
Ms Coates: The growth in fresh
areas has been faster than the growth in processed areas generally.
I absolutely agree with Tesco, the growth in ready meals and prepared
meals is very fast, but, still, if we look at Smart Price (which
is our value range) the sale of chicken breasts outstrips the
highest sales of any prepared meals by at least 10 to one. So
fresh is still growing very fast generally.
Mr Croft: We are seeing the same
sort of trends. I do not think I would add anything different
from what Penny or David have already said.
Q968 Dr Taylor: What about trends in
alcohol sales? Are those increasing over the last 10 years or
stable?
Ms Coates: In our
experience they have grown, but not as fast as the fresh areas
of business.
Q969 Dr Taylor: Is that the same across
the market?
Mr Croft: It is
from our perspective, although possibly we see a slightly higher
trend in the sense that our smaller stores often have an off-licence
function in the areas that they work as well.
Q970 Dr Taylor: What about the real convenience
foods, the snacks like crisps and things like that? Are they going
up or is the fresh fruit and salad competing with those?
Ms Coates: It is
competing with those.
Q971 Dr Taylor: So that is quite encouraging
really. Could we move on to marketing strategies. I am not a particularly
regular shopper and it comes as news to me that you put fruit
and veg first—although I must admit that I had actually
noticed that. Shelf spaces. We believe that even on shelves there
are good shelves to be on and bad shelves to be on. Do your suppliers
actually request where their goods are put? Do they give you any
financial incentives to put these on the best shelves? Starting
with the Co-op.
Mr Croft: Certainly
when you see products on promotion they are often in a strong
position, as far as their position on aisles and at the ends of
aisles where they will attract attention. We try to balance promotions
to include an element of healthy eating products or even fruit
and veg for example. We have just mailed out our loyalty card
Christmas mailing to five million card holders. Within that, six
out of the 36 money-off offers were to do with either fresh fruit
and vegetables or a healthy eating option. That is how we try
to balance the marketing element within the ranges.
Q972 Dr Taylor: Are you promoting something
because you have a vast amount of it that you cannot sell or because
the suppliers are in a way bribing you to promote it?
Mr Croft: The ones
that we are promoting are actually own-brand products and we are
promoting them as part of a balanced meal. It is reasonable, I
think, to promote some fresh fruit and vegetables if you are also
offering perhaps meat for a roast.
Q973 Dr Taylor: So you do promote fresh
fruit and vegetables.
Mr Croft: Yes.
Q974 Dr Taylor: To Asda: Is it the same?
Ms Coates: Yes.
Are we regularly offered incentives to sell shelf space? Absolutely.
We are. But, as part of the policy of everyday low pricing, we
are trying to move away from that. We have not moved away from
it completely yet in terms of end space but we are almost there,
so moving away from selling space and letting the products actually
justify their own space by their sales. If you look at the mix
of products between the ambient areas of the store and the fresh
areas of the store, you will generally see more branded products
in the ambient areas, and that is a result of the incentives that
have been offered to put those products in key promotional space.
Q975 Dr Taylor: You do not have a hate
list of suppliers who you put on the bottom shelves?
Ms Coates: No,
we do not—but that is an idea!
Q976 Dr Taylor: To Tesco: Is it the same
sort of answer?
Mr North: I think
I would agree with my colleagues here. There is certainly a very
important place, as I was saying earlier, for fruit and vegetable
promotions. The other point I would add is that ultimately where
we put things in stores is determined by what our customers want.
That may sound platitudinous but the truth of it is that if our
customers do not like the way we lay out products in a store,
they will pretty much very quickly tell us or shop elsewhere.
It is very much driven by how customers like the layout of stores.
Dr Taylor: In one of my local stores—not
any of yours—the alcohol department is steadily moving nearer
the fruit and veg at the beginning of the store. Is that a trend?
Chairman: May I just add that Asda in
Wakefield have moved alcohol—not that I go there, of course—to
the farthest end of the store. Presumably people have to go through
the rest of the store to get to the alcohol—at the opposite
end to vegetables, actually.
Q977 Dr Taylor: May I move on to one
final thing, items at tills. I think the Co-op have a policy of
not putting the very attractive things to children at tills. I
am afraid it is Asda who have come out worst from the Food Commission
report on putting things at tills. Do you have any comments on
this? Is this because it is a marvellous place to sell these items?
Is there any way you could put lovely bits of fruit on these stands?
Ms Coates: Absolutely.
We are just about to start a trial, which probably is no surprise
to you, to include both more non food items and fruit. That will
be starting immediately in the New Year. I suppose the other point
on that is that actually items at checkout do tend to be single
portion as opposed to any very large packs or anything, so, if
there were one saving grace, I would say that is probably what
it is. But, absolutely fair, and we are doing something about
it.
Q978 Dr Taylor: But a single portion
of fruit would be very attractive, would it not?
Ms Coates: Yes.
We hope so.
Q979 Dr Taylor: Is Tesco the same?
Mr North: We do
not have in our superstores confectionary at the checkouts. It
is slightly more difficult to achieve in our very smallest stores,
in our express stores, but certainly in our superstores we have
long had that policy.
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