Memorandum submitted by the British Retail
Consortium (SFS 44)
1.0 EXECUTIVE
SUMMARY
1.1 The UK has a robust supply chain based
primarily on UK production, supplemented by imports.
1.2 Changing global demand and supply challenges
will increase the volatility of food prices and will challenge
retailers in the UK.
1.3 As the majority of our food is produced
in the UK and Europe, European policy as much as global policy
is key.
1.4 Although long term changes are those
usually identified, short term problems such as animal disease
and interruption in the supply chain pose an immediate threat
to the supply of food in the UK.
1.5 The Government needs to better appreciate
the importance and operation of food production and the supply
chain.
1.6 Government intervention can have a major
impact on the supply chain.
1.7 Defra needs to improve its practical
understanding and support for food retailers.
1.8 Government needs to improve co-ordination
and prioritisation of food policy.
2.0 INTRODUCTION
2.1 The British Retail Consortium (BRC)
is the main trade association for retailers, and our members are
responsible for approximately 80% of all grocery sales in the
UK.
2.2 Retailers take a keen interest in the
long term issues affecting food production. The UK food market
is extremely demanding, where consumers expect affordable food
and take an interest in its production and impact on the environment.
It is key, therefore, that all retailers plan for the changes
in global demand and production that affect our supply chain.
2.3 Retailers recognise that a highly efficient
just in time supply chain can also be a vulnerable one and have
invested heavily to ensure its robustness. This has been tested
by a number of incidents in recent years, including GM contamination
of the primary source of rice and several animal disease outbreaks.
It is also clear from work with the Cabinet Office that the large
food retailers are amongst the most advanced businesses in terms
of planning for emergency incidents, such as a pandemic flu outbreak.
2.4 The BRC evidence deals primarily with
the issues that we consider are relevant to the continuing robustness
of the supply chain from a retailer perspective.
3.0 How robust is the current UK food system?
What are its main strengths and weaknesses?
3.1 The current food system is extremely
robust for a number of reasons. Firstly, we should remember that
the majority of food sold in UK stores is produced here. The BRC
collated figures for the now defunct Organic Action Plan which
showed the high proportion of home produced food sold in the major
UK supermarkets. For example, in the year ending 2006, 100% of
eggs, 100% of milk, 90% of fresh chicken, 89% of beef, 70% of
lamb and 96% of carrots sold in major supermarkets were all produced
here. Further, as shown in the Defra report (Ensuring the UK's
security in a changing world, July 2008) 68% of our food imports
come from within the EU. We believe this demonstrates our supply
chain is founded on production in "safer" countries
in terms of their robustness. It also demonstrates how influential
EU policy is on our supply chain.
3.2 Secondly, retailers have improved the
robustness of their chains through investment and working closely
with their suppliers. Sophisticated traceability systems and co-operation
with suppliers means problems such as contamination are minimised
and the chain can react quickly to issues such as animal disease.
The supermarkets have long term relationships with the majority
of their suppliers, which means they have grown their businesses
together forming a strong partnership. The UK has faced a number
of problems in the last few years but the impact on the supply
chain and consumers, due to supply chain relationships, has been
minimal.
3.3 Thirdly, through excellent contingency
planning the supply chain is flexible enough to react to interruptions
in supply. For example, when the primary source of long grain
rice, the USA, experienced problems with GM contamination, retailers
had to quickly switch to alternative suppliers but all were able
to do this without affecting availability. One point to remember
is that UK customers expect high levels of production, which means
retailers have to substitute with similar products, it is not
simply a case of buying the cheapest alternative on the open market.
3.4 The weaknesses in the chain are generally
due to two factors. The first is where the interruption is outside
the retailers' control, for example, industrial action such as
fuel strikes, where despite planning there will be problems if
the Government doesn't intervene. The second is the implementation
of Government policy and legislation. The current slow progress
in approval of GM varieties of maize and soy in the EU will have
a major impact on the availability of animal feed and threatens
the future production of livestock in the UK. During animal disease
outbreaks and recent contamination cases we have also seen how
Government decisions on withdrawal of products and controls on
imports and exports can have a major impact on our supply chains.
4.0 How well placed is the UK to make the
most of its opportunities in responding to the challenge of increasing
global food production by 50% by 2030 and doubling it by
2050, while ensuring that such production is sustainable?
4.1 Retailers are committed to securing
sustainable products, as demonstrated by their commitments to
the BRC initiative "A Better Retailing Climate" to reduce
the environmental impact and vulnerability of the supply chain.
We are committed to ensuring that increased production is sustainable.
4.2 We believe it is more appropriate for
those in the primary sector to comment on increasing production,
but we do believe that the production of food has not been given
sufficient priority in recent years in the UK. In particular,
we need to increase support for research and development of increased
production that is sustainable.
4.3 Retailers have demonstrated, working
with their suppliers that it is possible to meet the challenges
of production to meet UK demand whilst considering issues of sustainability.
Retailers have led the way to tackle issues such as responsible
use of palm oil and responsible production of soya outside the
Amazon biome through protocols they have agreed with suppliers.
4.4 Through initiatives such as these the
UK has developed an expertise in sustainable development that
could be promoted globally.
4.5 As well as increasing production, there
is also considerable scope to improve our use of existing production.
Food waste remains a major challenge. In the UK recent reports
have demonstrated the volume of waste, particularly by consumers.
Food waste is a major problem in supply chains in developing countries.
This could be an area where the UK, through DfiD and FAO could
use its expertise in supply chain management to reduce waste through
improvements in transport, packaging and storage.
5.0 In particular, what are the challenges
the UK faces in relation to the supply side of the food system
5.1 Water Availability. This will be a challenge
as the demand for water increases, coupled with the impact of
climate change. Action has already been taken in the supply chain
to reduce water consumption, but this has primarily been in the
processing and retail sectors. More focus will be needed at the
primary level, in improved use of water, both in general production
and irrigation. We do not believe some of the focus on embedded
water in dairy products and meat is entirely relevant as the systems
of production are often appropriate to their climate and geography.
We also believe that consumers are some way off an understanding
of the importance of water use and the impact of various agricultural
systems on water consumption. It is difficult, currently, to see
how consumer demand could influence production to improve water
availability which means improvements will rely on the supply
chain working together, without a clear added value to the producers.
It is more likely that the economic cost of water will have an
impact on demand through higher prices.
5.2 Marine environment. It is clear there
will be increasing pressure on fish stocks in the future. There
are several challenges for the UK. Firstly, can we increase alternatives
to current favourites that are under pressure, such as promoting
less fashionable species? Secondly, can we increase farmed species,
which can be successful but can bring their own problems such
as disease and impact on the environment? Finally, can we manage
our existing stocks in a more sustainable fashion to ensure their
long term future? In all of these areas, the UK has made progress
and we will see further activity by retailers to promote alternative
species and support schemes such as the MSC but it is difficult
to see what difference these will make in global terms, unless
others also act.
5.3 Science base. In terms of increased
production and sales based on new technology such as animal cloning
or GM food this is unlikely to be driven, in the medium term at
least, by consumer demand. Consumers in the UK are not demanding
these products as they see no benefits for them and have accepted
negative comments made about them. We believe, however, it is
important that the UK continues to invest in our science base
to ensure we are able to improve our supply chain, in areas such
as food waste management, animal disease control and sustainable
farming. These are major challenges for the food industry, bearing
in mind its substantial impact on the environment, and requires
investment from Government, agreement on priorities and collaborative
work with the supply chain.
5.4 Trade Barriers. There are three areas
where we believe short and longer term trade barriers will be
a challenge for the supply chain. Firstly, countries reacting
to volatile price changes by imposing export conditions on commodities.
Although this has not yet lead to major problems, kneejerk reactions
such as these may become more common in the future. Secondly,
the EU approach to GM approval will cause a major problem on the
import of animal feed in future years as the rest of the world
grows new varieties of soya and maize. We believe this barrier,
imposed due to delays in legislative approval, will have a major
impact on the availability of animal feed and the production of
livestock in the EU. This could result in livestock production
being transferred to non EU countries where animal feed is available.
Thirdly, short term trade bans on the movement of meat and meat
products during animal disease outbreaks cause significant problems
to retailers, particularly as Northern Ireland is seen as an export
destination. Our supply chains operate 24/7 and disruption
to trade, brought in at short notice, can have a significant impact
on food availability. We are likely to see an increase in exotic
disease and must find a pragmatic way to control animal disease
spread, recognising the need for trade.
5.5 Farmed land. We will see challenges
from the environmental impact of land management, including issues
such as water and soil management. We believe policy makers need
to put sufficient weight on food production compared to environment
issues. We have an example of that in the current discussions
in Europe on pesticides regulation. We asked for decisions to
be postponed until an accurate regulatory impact assessment was
prepared to examine the affect on production and prices but decision
makers have continued to discuss the proposal ignoring this.
6.0 What trends are likely to emerge on the
demand side of the food system in the UK, in terms of consumer
taste and habits, and what will be the main effect? What use could
be made of local food networks?
6.1 Consumer demand will continue to evolve
in future years. There will continue to be more interest in the
provenance of our food, its production and sourcing, but these
will still lag behind the key drivers of consumer choice, taste
and price. The key issue, as graphically demonstrated in the current
market, is value, which doesn't preclude issues of provenance
but means they must be clearly appreciated by consumers alongside
price.
6.2 One interesting impact of the current
financial problems and temporarily higher prices has been an increase
in cooking from scratch and an appreciation of the value of food.
If this continues, supported by increased knowledge of cooking
we could see an increase in interest in the sourcing of food and
food knowledge.
6.3 Retailers already have a good record
on national and local sourcing, this will continue as will support
for groups of dedicated suppliers. Using dedicated suppliers has
a number of benefits. Not only does it allow them to work with
a group of suppliers to react to the challenges of improved environmental
management, it also has benefits for food security through continuity
of supply and improved surveillance for potential problems.
7.0 What role should Defra play both in ensuring
that the strengths of the UK food system are maintained and in
addressing the weaknesses that have been identified? What leadership
and assistance should Defra provide to the food industry?
7.1 Although the operation of the supply
chain in the UK is largely a private sector issue, the Government
can have a significant influence and impact on its operation.
It is important the Government understands the influence it has
and the impact of its decisions.
7.2 To play any role, Defra needs to improve
its understanding of how the UK supply chain operates, particularly
beyond the farmgate. This would help it appreciate how decisions
it takes on policy and the implementation of legislation affects
the supply chain.
7.3 Defra needs to recognise and support
food production in the UK which is at the core of our supply chain.
It must ensure that it balances support for research and development
across all the areas for which it is responsible, including food
production. In a similar vein, it also needs to ensure that when
taking policy decisions it accounts for the need for a productive
agricultural industry within its environmental policy.
7.4 Defra and the Food Standards Agency
should continue to take a lead in Europe to ensure we have the
policy and legislation framework appropriate to ensure food security.
We have been encouraged by the UK Government's approach to recent
issues such as resolving trade problems during animal disease
outbreaks and the problems of the current GM policy, but we need
this to continue. A key issue is understanding the eventual impact
through enforcement of what can appear to be minor points in European
legislation on the efficient operation of our chains.
7.5 To show leadership in the food industry,
Defra needs to demonstrate it both understands and wants to work
as partners with it. Currently, we do not believe that food supply
is at the heart of Defra's work and do not receive the support
we require. This is compounded by the lack of prioritisation of
policy, which means the industry is trying to cope with delivery
of a range of diverse issues at a time when it is struggling with
increased cost pressure and an extremely challenging market.
8.0 How well does Defra engage with other
relevant departments across Government, and with European and
international bodies, on food policy and the regulatory framework
for the food supply chain? Is there a coherent cross-Government
food strategy?
8.1 Defra needs to improve its engagement
with other departments and abroad in the issues that concern retailers.
Although we accept Defra is not responsible for the majority of
food regulation we would like them to sponsor our sector and challenge
other departments that have an influence over us.
8.2 Defra has set up a food information
better regulation group which involves industry and other departments
but we are yet to see tangible outcomes from the group, in terms
of prioritising UK support for lobbying in Europe.
8.3 The Government published Food Matters
in July 2008 which set out its objective of improving co-ordination
of food policy. We were most interested in the food strategy taskforce
which brings together key officials from all the departments to
discuss food policy and improve co-ordination. Although it is
still in its infancy, we are yet to see any positive outcomes
from this group. Retailers want to see improved prioritisation
of policies, understanding that the sector is under pressure and
has limited resources to cope with multiple requests from Government
and an improved recognition of the paramount influence of consumers.
8.4 There is also the Cabinet Sub-Committee
which will also consider food issues. We feel these two groups
should be capable of improving the co-ordination and prioritisation
of food policy but they would benefit from input from the sector
to identify problems and suggest how Government could lend practical
support.
9.0 What criteria should Defra use to monitor
how well the UK is doing in responding to the challenge of doubling
global food production by 2050 while ensuring that such production
is sustainable?
9.1 The BRC supports Defra's current work
to develop indicators of the UK's food security. Those indicators
are still under discussion so it is difficult to speculate on
their final content.
9.2 The indicators in the draft Defra document
cover global issues on production and factors that underpin it
such as research spending, and would appear to the be the best
way to monitor this issue. Although UK production is important
we are a relatively small, already efficient country so it is
difficult to see what part we can play in doubling global production.
January 2009
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