Examination Of Witnesses (Question Numbers
140-159)
MR DAVID
NORTH
12 DECEMBER 2007
Q140 Chairman: Just finally from
me now, we heard from a previous witness for Marks & Spencer
about the proliferation of different environmental labels and
I am just wondering whether or not Tesco is currently working
with independent labelling bodies either in terms of your own
brand products or generally supporting other brands in your store
and what kind of current debate is going on with them?
Mr North: I think there are two
parts to that question, if I may. First of all, is proliferation
a danger? I think it probably is, although I think the route towards
helping people lead greener lifestyles lies in choice rather than
the restriction of choice, and therefore I think you will inevitably
have some proliferation. On the second part of your question,
are we working with other organisations on this issue, including
on the issue of labelling, the answer is, yes. We have had a long
relationship with the Fairtrade foundation, the Marine Stewardship
Council, the Forestry Sustainability Commission, the Soil Association,
the Energy Saving Trust, more recently the Carbon Trust, the Woodland
Trust, et cetera, so with a number of bodies to differing degrees.
Chairman: Thank you.
Q141 Mark Pritchard: I was going
to ask you a Christmas question and digress. We have been bombarded
with emails this week. Is it true that Tesco staff have been banned
from singing Christmas carols in Tesco's stores because Tesco
are too mean to pay the £80 radio licence which accompanied
the singers in your stores, because several stores apparently
have said they cannot have Christmas carol singers? Is that the
position of Tesco?
Mr North: I was not aware of that
claim, so I suspect it is not true, but I would need to check
the details.
Mark Pritchard: Okay, that is fine. Thanks,
Mr North. You were not expecting that one, but we have had some
emails in the last couple of days.
Q142 Chairman: From now on Mr Pritchard
will not stray off the remit!
Mr North: If I may, I think there
do tend to be these stories and they tend not to be true, or where
they have a grain of truth it is usually some way removed from
how that claim eventually appears.
Q143 Mark Pritchard: But if it were
to be true, would that be something that would concern you?
Mr North: If it were to be true,
it would soon not be true, I think it is fair to say!
Mark Pritchard: Wonderful.
Chairman: Thank you very much.
Q144 Mark Pritchard: Okay. Great.
I sound like the Prime Minister! Thank you. I have completely
lost my way now. On cooperation between supermarkets—and
I do not think Tesco necessarily were involved in the latest cooperation
between supermarkets on milk prices for example, but given that
supermarkets do cooperate on a wide range of issues do you think
a more constructive type of cooperation would be working together
on some sort of labelling system, because the choice, as you know,
Mr North, will be that if business does not step up to the mark
then Government may well impose it at a later date?
Mr North: I do agree with that.
Having said that, there is a high degree of cooperation, for example
on the issue on which you closed with Dr Knight, which is the
question of whether there should be a carbon label on products
and what that label should look like. I think that is a very good
example of cooperation across the sector. Even if we disagree
on what the final approach might be, we are talking about it,
whether that is under the auspices of Defra or BSI, or the Carbon
Trust, or indeed we have organised our own seminars. We had a
two day seminar in Oxford with some of our competitors and NGOs
over the summer. Another example would be recycling labelling,
or labelling of whether a packaging product can be recycled, cannot
be recycled because it is simply the wrong material, or somewhere
in the middle where you need to check with your local authority.
That is something I am pleased that retailers have got together
on under the auspices of the British Retail Consortium. In this
case we then went along to WRAP and said, "Can you help us
on this?" and they have helped us, and we went to Defra and
said, "We think this is the right approach. It is a responsible
approach on the part of retailers and we would like you to help
us with it."
Q145 Mark Pritchard: You mentioned
the proliferation of labelling. Perhaps what was a concern is
evident. Would you support a single sustainable labelling scheme
for, for example, food retail products?
Mr North: I think the short answer
to that is probably not, although it would depend on what it looked
like. I think I would see more dangers than I would see benefits.
Q146 Mark Pritchard: Can I probe
a little more? Given that you think there is a danger of proliferation,
which concerns you, but you also do not want a single label, where
do you fit in between that? How many?
Mr North: Why do I believe there
is a danger of proliferation? Because the purpose of a label in
an environmental area, or in any other area, is to inform the
customer such that they are empowered to make a choice. If there
are too many, then what "too many" means is that they
are no longer informing and therefore empowering the customer.
As I think I said to the Chairman, there will always be a risk
of proliferation where you have choice driving change in the marketplace,
which I believe is the right approach. In the end, customers will
decide and you will have some labels which are effective and some
which are not. The difficulty, I think, with a single label is
a different one, which is the question of what it would seek to
communicate to the customer and I think to try and envelope a
whole series of different issues into one single claim would give
rise to confusion.
Q147 Mark Pritchard: You understand
the point I am making with proliferation. Is it three labels,
four labels? Where do you stop? Do you agree with Dr Knight that
the fish label, for example, sustainable fishing, et cetera, has
actually worked well? You perhaps suggest that it has not, I do
not know?
Mr North: No. I think if you take
an issue like fish sustainability or like carbon labelling, if
you can communicate the issue you are seeking to communicate then
I think there can be a merit in trying to bring labels together
so that customers can understand clearly what it is you are communicating
to them.
Q148 Mark Pritchard: I am still not
clear. You are not for proliferation but you are not for a single
label, which leads me on to my next point. Is there not a danger
that Government and indeed consumers might feel that not necessarily
just Tesco but that all major food retailers are deliberately
hiding behind the confusion, the helpful confusion of consumes
when they go into a supermarket? They are not quite sure, so in
fact your sustainable agenda is not being driven because Tesco
is the good corporate citizen or is altruistic or is having the
Christmas cheer, it is actually being driven by consumers but
driven very slowly because consumers are confused, so it is convenient
to have that confusion?
Mr North: I am not sure, with
respect, that I would agree that there was confusion. How would
I square the problem of proliferation with clarity of labelling?
I will take the example of organics, where in fact there are a
number of different labels but broadly speaking people understand
those to be organic. If you end up with the clarity of the organic
label what you end up with over time is the ability on the part
of a retailer like Tesco to communicate clearly to our customers.
What we have then achieved as a result of making sure that labelling
is clear, making sure that we have got the right products and
put them in the right place in the store is an increase in sales
to customers of about 40 per cent over the past year or two years,
which is a huge increase in sales, but that increase is driven
by clarity and is driven by communication. My difficulty with
a single label is not around it being the obverse of proliferation,
it is actually around what it is one would seek to communicate
through a single label. Would it be climate change, would it be
sustainable sourcing, would it be ethical sourcing, or what? If
you try and wrap those together you could end up with confusion.
Q149 Mark Pritchard: Given that you
used the word "could" there and given that you have
no objection in principle to skeleton argument single label, what
action, what discussions are you having with Government and/or
competitors to try and agree a way forward on single labelling
given the absence of any discussions might bring about single
labelling anyway but you would have had no input into it?
Mr North: I would be surprised
if the absence of discussions led to a single environmental label.
That would not be our preferred approach. If Government was to
indicate that it wanted a serious set of discussions around a
single label, of course we would take part in that.
Q150 Mark Pritchard: Right, but it
is not something where, even though you have no objection in principle,
you would want it necessarily put on the Government's agenda?
Mr North: No, because I think
it is important to understand, at least from our point of view,
that environmental labelling is not an end in itself, it is actually
a means to communicate to and to empower customers to purchase
products. Simply putting something on a label does not achieve
anything unless the customer then buys that product. That then
has got to be a very sober and serious question about whether
the label communicates to the customer.
Q151 Mark Pritchard: On that important
point of customer/consumer education, does Tesco have any plans
as part of your t.v. advertising, apart from wanting to sell more
products through celebrity endorsement, etcetera, to have celerity
endorsement or any other type of t.v. advertising to underline
and educate people on sustainable issues?
Mr North: Advertising is another
part of the armoury of educating and empowering customers and
we have used it. The reason I am hesitating is because I am remembering
our most recent advertisements. We have done two lots recently
that I can think of. First of all, we did some, I think, quite
good television adverts on what we call our "local choice"
milk brand, which is part of a package of measures whereby we
moved away from purchasing milk through the processors and into
a set of direct contracts, and included launching branded milk
on a local county or regional basis. That is something on which
we had quite a big television advertising campaign. We have also
recently had a television advertising campaign on reusing carrier
bags and getting a Clubcard point for every carrier bag you reuse
rather than taking a new one. Both of those had celebrity participation,
whether or not I would call it celebrity endorsement. Martin Clunes
was in the milk adverts and various people were in the adverts
on reusing carrier bags. So it is an important part of the armoury.
Mark Pritchard: Thank you.
Q152 Jo Swinson: We had, as you know,
evidence from Marks & Spencer at our last evidence session
and they were telling us very much about the concept which also
the Sustainable Development Commission mentioned of choice editing
across their entire range, that they are making these choices
for consumers, which as I understand it Tesco does to a certain
extent with Nature's Choice in fruit and vegetables, where everything
is presumably meeting that standard. Correct me if I have got
that wrong. Is it a problem because you do not control the supply
chain of the rest of the lines, because obviously you are not
just selling own brand products, you are not able to do that choice
editing to quite the same extent?
Mr North: I do not think it is
a problem because everything that we sell in our stores should
meet a set of criteria. In some cases that will be underpinned
by a manufacturer rather than by Tesco itself, but each of those
will have a basis. In terms of choice editing, my understanding
of the term is that it is generally used in a slightly different
way, which is whether we would deliberately decide not to sell
products on the basis of an environmental concern or on the basis
of an ethical or a sustainability concern. It is a difficult area.
It is the case that I think retailers, including Tesco, do exercise
choice editing on a sparing basis. An example would be fish sustainability,
to take probably the most obvious one. As a general approach we
believe that choice properly empowered on the part of consumers
is actually a better, more rapid and more sustainable route towards
sustainability than choice editing, because choice editing, restricting
choice, risks having perverse effects, for example not communicating
with customers. Why? Because you are restricting their choice.
Q153 Jo Swinson: Would most customers
notice?
Mr North: It depends what the
product is. For example, we have supported the Government's ambition
of ending the use of incandescent light bulbs by the Government's
target date. There are those who would ask us to do that today.
The difficult choice we have got there is that I think we have
got a large body of customers who would notice, either because
notwithstanding the fact that we have halved the price of our
energy saving light bulbs there is a price differential between
an energy saving bulb and an incandescent bulb, and because also
there are fixtures and fittings in people's homes which do not
take the standard fitting of energy saving light bulbs. The problem
there is that they would notice. If you do not communicate it
to them, then they either stand confused or they will have to
seek the product which you have choice edited elsewhere.
Q154 Jo Swinson: But as regards things
meeting certain environmental standards, that is what you do with
fruit and vegetables. You cannot walk into Tesco and buy something
which does not meet this Nature's Choice standard, is that right?
Mr North: Yes.
Q155 Jo Swinson: So it is something
you already do to an extent. How do you use your influence? We
are always reading in the newspapers about how Tesco has a huge
economic influence within supply chains and has this great muscle.
How do you use that to encourage manufacturers to increase the
level of their environmental standards? Do you do that?
Mr North: We do. Those end up
being cooperative conversations not directions, by and large.
I was reading this morning that the Secretary-General of the United
Nations had defined climate change as being the single most important
challenge of the age, so I think it is no surprise that a lot
of our conversations at the moment with our suppliers, some of
them big, some of them smaller, are about how it is we can work
together to reduce our carbon footprint and to help reduce the
carbon footprints of our consumers. Those conversations within
Tesco and with our suppliers are taking place daily and there
will be several of those taking place each day, whether they are
about reducing waste, or reformulation, or whatever.
Q156 Jo Swinson: What percentage
of the products you sell are own brand, roughly?
Mr North: I think if you roughly
split it on a sort of 50:50 basis you would not be too far off.
Q157 Jo Swinson: So how much effort
do you put into those discussions with suppliers, or indeed especially
perhaps with the huge Unilever and Proctor & Gamble versus
the amount of effort which goes into improving the environmental
credentials of your own brand product?
Mr North: If I may, I just have
a point of clarification there, which is that our own brand suppliers
will be producing products that will have the Tesco label on them
but by and large they will be independent manufacturers, so the
distinction you draw is slightly less pointed than it might seem
to be.
Q158 Jo Swinson: But with your own
brand goods you are getting to decide on those standards, so how
much do you focus on raising those standards versus the standards
that you are not getting to decide on to the same extent, because
the way in which a packet of Kelloggs cornflakes is produced is
not up to Tesco, whereas the way in which a packet of your own
brand of cornflakes is up to you?
Mr North: I think in a properly
functioning competitive market you will find that those two processes
happen much closer together. Again, if I may, listening to the
end of the previous session you had on carbon labelling, it is
something that I think would happen over time, which is why we
do favour carbon labelling. We do favour the search for a carbon
label rather than thinking it is not the right approach. The best
parallel I can probably draw is on nutritional labelling, which
I know is not an environmental issue, but what we have put on
our nutritional labels is the percentage of the guideline daily
amount of the five nutrients. What that has done, apart from driving
changes in customer behaviour, is that it has driven quite a large
degree of reformulation up the supply chain. That is both in respect
of own label products and in respect of branded products, particularly
those branded manufacturers who use the same system as us, but
you will see it extending beyond that level. So in a competitive
market if you are confident, as we are, that customers want to
lead healthier lives or want to lead greener lives, then you will
see that change driven both through own brand and branded products.
Q159 Jo Swinson: Just on that point,
if there is a sort of Government recommendation of a particular
type of labelling, what guarantee is there that Tesco will pay
any blind bit of notice to that given the reaction to the FSA's
recommendation of traffic light labelling?
Mr North: In terms of nutritional
labelling we have a difference of approach with the FSA and I
characterise that difference of approach on the basis that we
have labelled our nutritional signposts onto virtually all of
our products except for those that cannot take the label because,
for example, tea bags is not an appropriate product to put a nutritional
label on, I think. I would need to check that. Our difficulty
with the FSA's system is that it only applies to I think seven
categories of product. That is the first difficulty. The second
difficulty is that we think the way they calculate their scheme
risks confusion on the part of customers because they do it on
a per 100 gram basis. We organise ours on a per portion basis.
There are arguments in either case. Thirdly, because we think
from our own research that a customer looking at a product and
seeing two reds, an amber and a green would be a bit like a person
at a traffic light seeing two reds, an amber and a green. They
will find it hard to decide whether the right approach is to stop,
to put their foot on the clutch or to press the accelerator.
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