Memorandum submitted by Covent Garden
Market Authority (SFS 23)
SUMMARY OF
RESPONSE FROM
COVENT GARDEN
MARKET AUTHORITY
— Covent Garden Market Authority (CGMA)
is the statutory corporation responsible to Defra for the ownership
and operation of New Covent Garden Market (NCGM) in Nine Elms,
Vauxhall, London.
— NCGM is a wholesale market and the
largest fresh produce market in the UK.
— CGMA welcomes the opportunity to
respond to this inquiry and asks that the committee considers
the important role that markets play in food security in the UK.
— Wholesale markets provide the alternative
food supply chain alongside the better understood food manufacture
or multiple retailer routes. Nationally there are 27 wholesale
markets with a joint turnover of around £4 billion.
Within this NCGM plays a significant role acting as the crucial
link between producers, wholesalers, processors and the catering
outlets.
— Consumer demands for food are changing
and greater interest is being shown in the quality and provenance
of food. As a result the means by which consumers' access food
is diversifying which in turn has added benefits to local communities
in terms of economic, environmental, social and regeneration gains.
Markets are in a central position to benefit from these changes
and in turn help producers increase food production in the UK.
— Recommendation 1: Markets
provide a great number of benefits to producers, consumers and
the community in which they operate and awareness of this needs
to be increased. For producers markets mean another outlet for
their quality produce (not just their seconds) and by acting as
existing food hubs they can increase producers' access to a wide
range of customers. These and other benefits also need to be recognised
by Government and Local Authorities who should be encouraged to
provide more consistent support to markets.
— Recommendation 2: This enquiry
should build upon and extend the work being carried out by the
National Association of British Market Authorities (NABMA) to
understand the economic benefits of all markets so that future
policy makers both national and local can take this fully into
account.
— Recommendation 3: The length
of payment period required by the food service sector and its
impact on the small and medium sized businesses within the supply
chain should be looked into further. By encouraging the Public
Sector to set the standard by ensuring their suppliers pay within
reasonable terms it should provide additional support to food
producers.
— CGMA requests the opportunity to
present oral evidence (from the perspective of a wholesale market)
to the Committee on the points and recommendations set out in
this response.
1. Covent Garden Market Authority welcomes
the opportunity to contribute to the Environment, Food and Rural
Affairs Committee inquiry into securing food supplies up to 2050:
the challenges for the UK.
2. The response addresses both parts of
the Committees inquiry, the challenges the UK faces in increasing
food production and the actions that should be taken to meet the
challenges.
BACKGROUND
3. Covent Garden Market Authority (CGMA)
is the statutory corporation responsible to Defra for the ownership
and operation of New Covent Garden Market (NCGM) in Nine Elms,
Vauxhall, London.
4. NCGM is a wholesale market and the largest
fresh produce market in the UK, supplying quality fresh produce,
both food and flowers, to restaurants and hotels, cafes and bars,
schools, hospitals and work places as well as independent retailers
and a wide variety of retail markets in London and the South East.
5. Wholesale markets provide the alternative
food supply chain alongside the better understood food manufacture
or multiple retailer routes. Nationally there are 27 wholesale
markets with a joint turnover in excess of £4 billion.
Together they directly employ over 10,000 people.
6. As a wholesale market NCGM plays a significant
role acting as the important link between wholesalers, processors,
catering outlets from which the end users consume their food and
the producers. As a result of this wholesale markets are in a
unique position to measure changes in both producer trends and
those of the consumer.
CHANGING TRENDS
IN FOOD
CONSUMPTION
7. Consumer interest in food has increased,
particularly around the quality and provenance of the food. This
has led to a rapid rise in the outlets from which consumers purchase
their food, from more local convenience stores to farm shops.
8. Farmers Markets are one such example
which has seen a rapid rise in custom and there are now over 800 farmers
markets throughout the UK specialising in locally grown produce.
Another outlet for producers is the increase in food box delivery
schemes which offer sustainably sourced and grown produce delivered
to customer doors each week.
9. This increased interest in local, regional
or seasonal produce is not just based on environmental or ethical
concerns but also a greater awareness of supporting local economies
combined with increased interest in health and convenience.
10. A recent report by the Institute of
Grocery Distribution has shown that consumers are more likely
to support local purchasers than organic or fair trade in the
current economic climate. This desire to buy local is feeding
through to supporting local shops and street markets where consumers
are looking not only for better value but a more human retail
experience. It is this sector that is dependent on wholesale markets
for their supply.
Recommendation 1—Increasing awareness of
the benefits of the alternative supply chain of markets among
producers and policy makers
11. Wholesale markets play a critical role
in the food supply chain and with their strong links to independent
retailers, retail markets and food service outlets can help producers
and the overarching objective of increasing food production.
BENEFITS TO
PRODUCERS
12. Today Wholesale markets are undergoing
a resurgence after a period of decline, evolving to meet their
customers' needs. It is no longer the case that they are an outlet
for poor quality/rejected from national multiples produce. Serving
independent and street markets as well as the food service industry,
the quality expected by these customers means that the standard
of produce sold in wholesale markets is at least as high as that
in the national retailers, if not higher due to the shorter supply
chains.
13. As a result they provide a valuable
additional or alternative outlet for producers. The volume and
the price may not always be guaranteed (they are not always with
supermarkets) but it is possible to make reasonable margins and
sometimes even better margins across a whole season through the
wholesale market system.
14. This means that producers can send quality
produce to the wholesale market and receive good returns (and
increase the volume of food available) rather than it go to waste.
15. Using wholesale markets as an outlet
for their produce can aid producers by playing an important role
in smoothing fluctuations in supply caused by changes in demand
(sometimes driven by poor promotional management in a retailer)
or supply (the natural variation in outputs).
16. The requirements of the food service
sector and independent retail are different to those of supermarkets.
For example, caterers prefer larger heads of brassicas as these
offer better value once prepared for service. At community level,
independent retailers are best placed to meet their customers'
demands for specialist food, whether that be ethnic, organic or
local, Wholesale markets have the flexibility to meet these varied
needs and provide an essential outlet to producers growing "non-standard"
produce.
17. However it is important that producers
establish good relationships with wholesale markets to ensure
they are able to use them when they need it as wholesalers will
not secure good customer bases and good prices for product that
only turns up in extremis.
18. In addition some growers may be wary
of the national retailers, may not have the volumes to meet their
demands or may only be starting up with a particular range or
variety and are looking for alternative routes to market. Wholesale
markets provide that alternative route as both small volumes and
small producers can be catered for through the wholesale markets.
This is particularly important for smaller producers and those
looking to develop niche products.
BENEFITS AS
A FOOD
HUB
19. Food hubs are often mentioned as needed
to assist small or local producers to access customer/markets.
These do not need to be new facilities as hubs exist already in
the wholesale markets.
20. Wholesale markets serve as local hubs,
providing a central location for producers to deliver their product
to and from where that product is distributed to independent retail
or food service outlets. As a result the wholesale markets become
the door to the customers.
21. As the largest fresh produce market
in the UK, NCGM is best placed to help local producers access
the large number of customers within London and the south east.
Rather than approaching individual end users—a time consuming
and resource intensive approach—by delivering to the Market
which acts as a local food network they are able to access numerous
customers in one delivery and also possibly open new business
leads.
BENEFITS TO
LOCAL AUTHORITIES
AND CENTRAL
GOVERNMENT
22. Local Authorities should be encouraged
to recognise the benefits markets bring to the local and rural
economy and support the redevelopment of the wholesale markets
and the huge potential markets have to deliver Government social
and economic policy.
23. Supporting such local businesses and
food outlets provides added benefits to local communities in terms
of economic, environmental, social and regeneration gains.
24. Many of these benefits were included
in "A Guide to London Wholesale Markets" published as
part of the inaugural London Markets Month in October 2008 and
can be applied to Markets across the UK.
25. For markets to function efficiently,
and therefore be easy and effective for producers to use, infrastructure
issues on wholesale markets need to be addressed. Many wholesale
markets are now facing redevelopment programmes to replace and
improve the infrastructure meeting modern food handling requirements.
26. Government responsibility for markets
and the food supply chain also needs to be simplified. At present
too many different government departments have an impact upon
markets and their operation, making it extremely difficult for
market operators to have a consistent approach to running markets.
This should also be reflected at local government level.
27. The businesses that make up the markets
and work with the producers also need assistance in terms of training
provision and encouraging new businesses and individuals to the
market. However, there is no specific sector skills council responsible
for wholesale market which makes it harder to raise skill levels
and attract new people into the trade.
28. Producers also need to develop awareness
of communication and marketing within this supply chain. Some
of the good operators have their own brand just for wholesale
markets, produce is properly packed and labeled—it becomes
recognised within the trade and establishes its own demand profile.
Some other British produce unfortunately comes to market in plain
boxes, or other products' boxes (English apples in New Zealand
apple boxes) with little or no indication of where it has come
from or what it is. British produce therefore does not maximise
the potential demand for local produce through this alternative
food supply chain.
Recommendation 2—Undertaking research into
the importance of Markets
29. The importance of markets to the food
supply chain is currently underestimated and overlooked and more
needs to be done to understand and promote the critical role they
play in the UK's food system.
30. To harness the potential of retail markets
the benefits they provide (some of which are set out above) need
to be better understood. Support for the Knowledge Database work
being carried out by the National Association of British Market
Authorities (Nabma) would significantly help in better understanding
the true level of markets' impact on local trade and employment.
31. The work done by the Food Chain Centre
has done much to expose areas of inefficiencies and promote best
practice within the retail supply chain. This work needs to be
replicated within the independent or alternative supply chains,
whether that be into street markets and small shops or food service.
32. This inquiry should build on and extend
the work being carried out by the National Association of British
Market Authorities (NABMA) to understand the benefits of retail
markets so that future policy makers both national and local can
take this fully into account.
Recommendation 3—Addressing payment periods
in the food service sector
33. Specifically understanding the economics
of markets and addressing payment periods payments within the
food service sector would also assist food businesses and therefore
food production.
34. A key risk amongst wholesalers is business
failure due to cash flow problems. Many producers have history
of not being paid by businesses which have gone under at short
notice. Part of the solution is providing proper business advice
and support to the SME's that make up wholesale markets, but these
SME's are often exposed to harsh payment terms by their customers.
35. It is usual in the food service sector
for payment by hotels, restaurants and contract caterers to be
much longer than 30 day. 45 days, 60 days and even
90 days are not unheard of. This is on a product with a short
shelf life. This burden on the cash flow of SMEs therefore flows
all the way down through the chain to producers.
36. Public bodies, who already are committed
to best practice such as that laid out in the CBI Code of Practice
for payments to creditors, could ensure that all their suppliers
do the same. Pressure could be put to bear on the hospitality
industry not to fund its cash flow by delaying payments to their
suppliers.
37. This enquiry should therefore look at
the length of payment period required by the food service sector
and its impact on the small and medium sized businesses within
the supply chain. The Public Sector should set the standard by
ensuring their suppliers pay within reasonable terms.
38. CGMA requests the opportunity to present
oral evidence (from the perspective of a wholesale market) to
the Committee on the points and recommendations set out in this
response.
January 2009
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