Examination of Witnesses (Questions 980-999)
4 DECEMBER 2003
MR RICHARD
ALI, MR
DAVID CROFT,
MRS SUSAN
BROMLEY, MS
PENNY COATES
AND MR
DAVID NORTH
Q980 Mr Burstow: Just on that point,
some of the evidence we have seen would suggest that your Metro
stores struggle on this as well in terms of having a confectionary
offer at the till. Is that something you are also looking to move
away from?
Mr North: It is
something that we will always look at. It is generally more difficult
in smaller stores to have that sort of segregation. I think the
other issue also is to look at the customer profile of stores.
Metro stores are more generally, although not exclusively, for
convenience shoppers in town centres, generally adults, during
the day, where the checkout issue in terms of confectionary is
less important but it is something that we always look at.
Q981 Mr Burstow: I was going to come
on to this point about pester power a little bit later on, but
I think maybe it is appropriate, given we are no that thread now,
to pick it up. This is a question really to all the retailers.
What is your practice in terms of positioning on shelves of confectionary
within the store? Do you put them at the height at which children
are able to reach them easily and then pass them into the shopping
basket, either unnoticed or whatever, or do you place them in
such a way as to give the parent some control over the choice
of the type of confectionary that they might wish to purchase?
Perhaps I could start with Tesco.
Mr North: We certainly
do not have a policy of putting them at a height that is designed
for children to pick up and put into their parent's trolley, no.
Space is always at a premium in any store and therefore if you
were to look at our confectionary aisles you would have products
at all levels.
Ms Coates: I would add to that,
that in the way you would tend to plan stores obviously you are
first limited by the temperature regime of products that you put
in—so the frozen, the chilled and the ambient—and,
within that, the way that we merchandise tends to be blocks or
modules of products—so that you will have confectionary
at all levels, as you will actually with all of the other products
in the store. So it is essentially blocks right from top to bottom.
We do not actually put products out of reach for children; we
apply the same logic as for the rest of the store.
Mr Croft: We do not have a specific
policy of positioning confectionary on the high or low shelves.
We are very limited by space in smaller stores as you can imagine,
even more so than our colleagues here, and it is very difficult
to have certain shelves that are given over just to confectionary
as opposed to one in three or whatever. We have taken a number
of other steps besides the policy on confectionary at checkouts
that has been mentioned. Certainly, within the Co-op brand we
do not encourage the purchase of high fat or sugar or salty foods
through things like free gifts in Co-op brand products or using
cartoon characters associated with the product and so on, to try
as far as practicable to reduce that pester power that might be
associated with our products.
Q982 Mr Burstow: Just picking up on a
question that Richard asked just now regarding this issue of taking
payments for shelf space, Ms Coates you indicated that you are
in a transition between taking them and now not taking them. To
what sort of time scale are you working? Do you have an end date
by which you will not be taking payments?
Ms Coates: We do.
Obviously there are some sensitivities with competitors around
this question so I would probably rather send that to you in writing.
Q983 Mr Burstow: I will ask the same
question of Tesco: Do you have a plan to phase out such payments?
Mr North: I think,
again, I would need to—
Ms Coates: We will be fighting
if you are not careful.
Q984 Mr Burstow: Perhaps you could talk
to each other outside and then release this commercial information
to us. Finally, the point Ms Coates made about single portion
fruit prompted me on this. There was a reference made earlier
by Mr Croft about portion sizes on their own-brand products. What
is the policy of each of the retailers in terms of their own-brand
products in respect of providing portion size information? Tesco.
Mr North: We do
provide portion size information. It is generally in line with
guidance, I think, from the Food Standards Agency. If you look
across our ranges—so, for example, if you look at our healthy
eating range, our value range and our standard range—the
portion sizes are pretty much equivalent.
Q985 Mr Burstow: Do you use your market
leverage with other suppliers of products to try to secure similar
labelling on non own-brands?
Mr North: I think
the question of market leverage, to use your words, is an incredibly
difficult and complicated one. Again, the important thing here
is to respond to what customers want. Our customers tell us that
it is important to have an indication. They find the indications
of portion size helpful and that is what we provide.
Q986 Mr Burstow: Do you try to use your
position as the nation's favourite retailer, as you told us earlier,
to try to secure that for your customers from everyone else from
whom you purchase foodstuffs?
Mr North: I do
not think, with respect, that approach generally works very effectively
because we generally or very often deal with very large suppliers
who are supplying a broad range of companies and who provide a
standard product across a range of retailers.
Q987 Mr Burstow: Quickly, to Mr Ali on
that, is that not something on which the Consortium ought to have
a view? Does it have a view on that? If it were to have a view,
would that not be a way in which the concern Mr North has just
described about trying to do it as an individual company would
be overcome?
Mr Ali: Do you
mean in terms of in branded manufacturers placing portion size
on their packets? We would be delighted, quite frankly, if manufacturers
adopted the same high standard of labelling that retailers adopt.
The mechanism to achieve that generally is through a number of
working groups which retailers and manufacturers sit on, which
is through an organisation called the Institute of Grocery Distribution
which farmers, manufacturers and retailers belong to. I know the
issue of portion size and labelling in general is something which
IDG is looking at. But we certainly would encourage that.
Q988 Mr Burstow: I could see that Ms
Coates was nodding when Tesco was answering about portion size.
I do not know if there is anything you want to add on portion
size.
Ms Coates: No.
Very much the same approach. For own label we do clearly label
portion sizes and I would very much support the approach of we
would need to work together if we were going to do something with
branded suppliers.
John Austin: May I follow up something
that Dr Taylor raised about the positioning and how that may be
misleading in itself. If I may take the issue of Sunny Delight,
which has had a very successful marketing campaign by Saatchi
& Saatchi, such that people actually think that it is something
that it is not. I know their next brief is the Conservative Party!
Mr Amess: They cannot
resist these digs, can they? Oh, dear.
Q989 John Austin: But Sunny Delight comes
across as a healthy fruit drink when really it is a load of sugar
with colouring, thickening and flavouring. Do you position it
among the fruit juices or along with the sugar fizzy drinks in
your stores?
Ms Coates: Because
it is a chilled product, it does sit with the other drinks in
the chillers, which are fruit juices. We do not tend to have any
other fizzy drinks in there. We may have an individual chiller
that is close to the door which has some fizzy drinks for a sort
of convenience purchase, but that is really the only place that
we could put them.
Q990 John Austin: Would you agree that
the positioning of Sunny Delight in with the fruit juices would
give the impression to the consumer that it was a healthy—
Ms Coates: It certainly
does not help, yes
Dr Naysmith: Why does it have to be a
chilled drink, given we know what it is in it? There is nothing
in it to encourage bacterial—
Q991 John Austin: It has 5% fruit juice.
Ms Coates: I think, in fairness,
Proctor & Gamble have made some inroads to slightly improve
the composition of the product since its initial launch. I think
it is more nutritious now but I am afraid I do not now the detail
on that.
Mr Croft: We have retailed Sunny
Delight, both selling it as a chilled product at the time for
consumption and also at ambient. We discussed the positioning
of it with Proctor & Gamble, who did advise that there was
an issue that related to shelf life and that chilled storage supported
that. Our perspective has long been, though, that labels should
make it very clear about the nature of what those products contain.
On the front of pack, for example, if a Co-op Brand soft drink
is made with sweeteners or with preservatives, it has to be stated
with the name of the product. I guess as long ago as 1997, when
we started to talk openly about the content of labels and the
clarity of information that was necessary on front of pack for
consumers to appreciate the differences between products, we raised
issues about this. The legislation allows detailed comment about
the sugars and sweeteners to be associated with the marketing
name of the product, which may actually be tucked away on the
back, as opposed to the brand name of the product, which is very
much on the front label. Co-op brand products are very clear and
put sugars and sweeteners in type that is no smaller than 30%
of the main product name on the front label. We advocated a code
of conduct in terms of labelling some five years ago that would
support that sort of information for consumers.
Q992 John Austin: Could I read something
to Ms Coates that was written by the editor of the Marketing
magazine and an article in the Guardian. "Sunny Delight
has succeeded by marketing itself as a healthier alternative to
colas and other fizzy drinks which makes parents feel better about
buying it for their kids. It has carried the association with
vitamins and freshness through to its packaging, advertising and
even the positioning in stores, where it is in the chillers next
to fruit juices—even though it doesn't need to be cold to
keep it fresh." In the light of that, would all of the stores
reconsider the positioning of Sunny Delight in their stores?
Ms Coates: My role at Asda is
looking at own label, but I will take that one back and come back
to you on it.
Q993 John Austin: Thank you. Could I
then come on to profit margins. There is quite a lot of anecdotal
evidence we have received that profit margins on fresh fruit and
vegetables are far higher than on the highly processed foods high
in fats and sugars. Would you like to say something about that
and whether that is true in your experience?
Mr North: The overall answer is
that I do not believe that is true. What is interesting about
this point is that it is quite often put the other way as well
actually, that somehow the margin is higher on what the advocates
of this argument argue are less healthy foods and therefore that
is why we are promoting less healthy foods. I think the truth
is that you will find that margin in retail is going to vary product
by product and not really sector by sector, as it were.
Ms Coates: Exactly the same.
Q994 John Austin: The Grocer magazine
carried out a survey of retailers and they said, "92% said
that a well-managed fruit and vegetables department was a big
moneyspinner" and went on to say, ". . . there is no
doubt that produce (ie, fresh fruit and vegetables gives us the
highest cash profit per square foot in our stores."
Mr North: With respect, that opens
up a wider set of points really. The one thing we certainly know
from our experience is that if the fruit and vegetables and salad
sector of the store, the produce section, has good products in
it, looks attractive and has good availability, then it will help
to increase sales across the store as a whole. Certainly that
point could be being made there. Secondly, there is also a point
about volume. The turnover in the store, as Mr Amess was pointing
out earlier, of fresh fruit, vegetables and salads is incredibly
high. That is why, unfortunately customers sometimes have the
experience of finding they are not on the shelves
Mr Amess: Oh, no way. I do not think
they were there in the first place! Nice try, but that was not
the case.
Q995 John Austin: From the written evidence
you have submitted, it seems that all your companies, as you have
said, are keen to promote the consumption of fruit and vegetables.
Asda, I think you said you wanted to help move fruits and vegetables
from the "might have" to the "must have" category.
All the evidence we have also seen shows that the key drivers
of food choice are price and value for money. If we look at the
Tesco website, we find that standard items of fruit such as apples,
bananas and oranges cost between 14 and 22 pence each, compared
with a small chocolate bar at 11 pence to 16 pence and crisps,
even cheaper, at less than eight pence. Somebody said to us at
a previous hearing: "Well, it's all down to parental choice.
They don't have to put a packet of crisps in their kid's lunch,
they could put in an apple for half price." The prices that
I have just quoted would seem to suggest that the apple is twice
the price on your website.
Mr North: Again,
with respect, I am not sure that is a meaningful comparison. When
our customers come into our stores, I think the figure is that
somewhere around 90% will buy something from our fruit and vegetable
and salad department. That is 90% of every trip into the store.
It may be that they will also buy products from other sections,
including from confectionary. I am sure that must be the case.
I would take issue with the underlying point in that comparison,
which is somehow that the vast majority of our customers would
trade off purchases of fruit and vegetables against purchases
of other items.
Q996 Mr Jones: If I may just intervene.
It seems to me that we have discussed fruit and vegetables at
some length, but we have been discussing fresh fruit and vegetables.
In terms of obesity and balanced diet, tinned fruit and vegetables
and frozen fruit and vegetables are just as important. What has
happened to the sales of those?
Ms Coates: From my perspective,
they have increased but not at the same rate as fresh.
Q997 Mr Jones: Tinned vegetables have
increased?
Ms Coates: Yes.
Q998 Mr Jones: Mr North?
Mr North: I think there is a distinction
here between overall sales and purchases per consumer. I do not
know if Penny would agree with that distinction. If you go into
a store now, an average supermarket, and compare it with one,
say, 20 or 30 years ago, you will generally find that the frozen
section is smaller, quite considerably smaller in many cases,
than it was 30 years ago, and that would also be true of tinned
goods. That would also be the distinction between individual purchasers
and the extent to which individual supermarket chains have grown,
or whatever, over time. If I may say so, I think you make a very
important point, which is actually that, in terms of messages
on nutrition and on five a day, it is very important that consumers
understand that frozen vegetables, for example, or tinned vegetables
can contribute. That has been an important part of the Department
of Health's campaign on five a day, and certainly our 5-a-Day
labelling and promotion has been both on tinned products, where
they fall within the definition of 5-a-Day, and also on frozen
products as well—but I do think there is a long-term trend
away, certainly from tinned products.
Mr Croft: I think the increased
sales of fresh products reflects a lower demand generally towards
canned products. Our canned sales of fruit and vegetables have
remained stable. They have not grown and they have not particularly
declined either. Frozen vegetables, a slight growth, but not that
significant. The growth area from our perspective has been fresh.
I think that probably reflects a broader society change over the
last ten years away from longer life products to shorter life
fresh products, which, from what everybody ahs said today, seems
to be reflected in sales patterns on fresh lines. We continue
obviously to support canned fruit and vegetables within the range,
but I think it is also important, when we start to talk about
things like five a day in relation to canned products, to think
very clearly about how that can be applied and whether it is appropriate
perhaps to apply something like five a day to products, perhaps
things like baked beans, which, while they have a vegetable content
may also have quite a lot of sugar or salt within the tomato sauce
they are in per chance. I think it is important, within the compositional
delivery of the five a day, that that sort of issue is recognised,
because it might well be good to eat more beans, but, on the other
hand, if they are accompanied by high levels of salt or sugar
within the recipe that they are cooked and then prepared in the
can, that might actually be counterproductive as far as the wider
diet is concerned.
Mr Jones: We are in danger of congratulating
ourselves that we have improved the sales of fresh fruit and vegetables,
but if it is at the expense of preserved food, whether it be dried,
frozen or canned, it is no net overall gain. We need to have some
statistics to have a look at that.
Chairman: It may be that our witnesses
could come back to us with more information. If that is possible,
we would be very grateful.
Q999 John Austin: Could I go back to
the price of fresh fruit and veg now. Quite clearly, fruit and
veg is much cheaper if you buy it down at the Woolwich market
than if I go to my local Safeway or Tesco. I know the market stalls
maybe do not have the overheads, but there does seem to be an
indication, given the price disparity, that there would be a possibility
of reducing he price of fresh fruit and vegetables in your stores.
I would like to ask whether any of you are doing anything to bring
down the price of fresh fruit and veg.
Mrs Bromley: We do actually offer
fresh fruit and veg promotions in our smallest stores. We have
18 over three weeks and our smaller stores can pick a minimum
of six from them to promote. So, yes, we do bring some variety
to encourage people to try. There are opportunities actually to
buy better value on fruit and veg generally all the time.
Ms Coates: We are working hard
with the supply chain. We talked about margins earlier. If you
look at, as David said, the margins between categories, they probably
do not vary significantly. They may vary on individual items,
but the approach we are taking is working with suppliers to try
to reduce the supply chain costs of fruit and veg. The example—and
this sounds very simple but it is an example which saved quite
a lot of money recently—is that of cauliflowers. We used
to pick them, they were put into boxes and they were then repacked
into the crates that went into store. That double-handling obviously
costs money, so they are directly put into the crates at source
now, to reduce the handling, which reduces the cost, and therefore
reduces the price to customers. That is the approach that we are
taking to reduce it. It is trying genuinely to take costs out
of supply chain rather than apply pressure anywhere else on the
supply chain to take costs out that they cannot afford.
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