Memorandum submitted by Sainsbury's (SFS
65)
1. INTRODUCTION
1.1 We welcome the opportunity to respond
to the Committee's inquiry into "securing food supplies up
to 2050: the challenges for the UK".
1.2 For context, key statistics on Sainsbury's:
785 stores, of which 276 are convenience
Around 18 million customers a week
26,000 food/drink products (15,000 of
which are own-brand)
1.3 We have been committed to supporting
British suppliers and British farmers for over 130 years.
We are committed to open, honest relationships with our suppliers
and to offering sustainable British, regional, organic and Fairtrade
products in our stores. We are also recognising that our suppliers
at home and abroad often need a helping hand.
1.4 We have a clear and longstanding commitment
to sourcing from the UK—we have a disproportionate market
share in key areas such as UK fruit and vegetables, milk and meat.
2. EXECUTIVE
SUMMARY
2.1 The UK has some of the strongest food
standards—quality, freshness, taste, hygiene, "clean"
ingredients and nutritional standards and animal welfare—in
the world.
2.2 It is important to recognise that securing
our future food supplies does not mean sourcing only from the
UK, or at the detriment to the rest of the world. However, the
Government needs to look at how we can increase our ability as
a country to eat British "in season" products and how
we can improve our capability in this area.
2.3 We have robust supply chains in the
UK and around the world, but this has only been possible because
of building relationships with suppliers and farmers. Working
with them to understand customer trends, and future long-term
planning requirements helps to ensure a continuous supply and
a mutually advantageous relationship.
2.4 While we play our part in being able
to predict and plan for customer tastes and habits in the immediate
and medium term (up to five years), and make our supply chains
as sustainable as possible, there is a strong unmet need for DEFRA
to offer a clearer future long-term sustainable food policy.
2.5 DEFRA must continue to advocate the
advantages of free trade over protectionist policies around the
world as a way to secure global supply chains.
2.6 DEFRA needs to show greater leadership
on food and centralise policy within Government. Additionally,
they need to promote the wider aspects of food (not just environmental)
across Government and act as an advocate of the whole supply chain,
particularly supermarkets.
2.7 There is a need for less regulatory
burden on the supermarket sector. Increased regulation will add
extra complexity and cost to the whole supply chain, not just
to retailers. Continuing to keep our high standards does not correlate
that we continue to need more regulation—in fact the opposite.
A less regulatory regime will allow innovation and investment
in the supply chain and enable retailers to continue to strive
for better standards and food experiences for our customers.
3. How robust is the current UK Food System?
What are its main Strengths and Weaknesses
3.1 As a major supermarket chain we apply
stringent standards to our products ensuring they are of a high
quality, fresh and sourced with integrity. In addition, we ensure
that our suppliers, wherever they are located in the world, conform
to the Ethical Trading Initiative principles around fair pay and
treatment of workers.
3.2 We also believe that the overall UK
food industry is a mature and sophisticated one, and has some
of the highest standards in the world. This has been driven by
the competitive-nature of the sector. The British Retail Consortium
(BRC) has established a standard Audit, which is used pro-actively
across the world by suppliers to BRC members, of which Sainsbury's
is one.
3.3 Overall the UK's supply chain is secure
and resilient, based on good national and global trading relationships.
We have strongly invested in these relationships and furthermore,
helped our suppliers grow their businesses. For example, we have
been trading with the same own-brand tea supplier, Finley's, for
105 years. The introduction of Fairtrade (for example 100%
of our bananas and tea are Fairtrade certified) has ensured we
have longstanding relationships with producers in the developing
world. This helps protect against global price fluctuations and
allows suppliers to invest in the development of their local communities.
Through that resilience we are in a strong position to respond
quickly to interruptions in the supply chain and to problems caused
by contamination. As an example, we were able to respond quickly
and positively, and continue normal trading in the outbreak of
the Sudan 1 contamination. Similarly, we were able to flex
our supply chains to take into account the public concerns around
the recent pork dioxins contamination scare. There may however,
be unavoidable and continuing interruptions to the supply chain
due to extreme circumstances such as the weather or the need to
move where we source from. A lack of Government coordination or
intervention can worsen the situation.
3.4 The UK has a unique and diverse climate
which helps spread the risk of a UK wide interruption to the supply
chain and helps contain problems, while ensuring all round seasonal
continuity. For example, our mixture of hill upland and lowland
helps to ensure a regular rich variety of home grown produce and
meat.
3.5 Consumers' perception of the current
food supply system is strong, with recent research by the Institute
of Grocery Distribution (IGD) finding high support for British
farming, recognition of the high hygiene standards in the system
and a desire for strong animal welfare standards.
3.6 However, there are constant and on-going
weaknesses in the system. Food inflation is a constant concern.
For example, while we continue to support the British pig industry
through increasing the price we pay our suppliers and through
working in partnership, global economic conditions have led to
increases in feed prices which have hit the pig sector hard. Currency
fluctuations add to the pressures on our ability to trade and
ensure a constant supply.
3.7 While, to some extent these pressures
are outside the control of the UK Government, the degree to which
the food industry is heavily regulated in this country, adds complexity
and cost to the supply chain. This is something we believe the
Government can do something about.
4. 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 It is imperative that DEFRA and the
rest of the food supply chain have a long term strategy based
on consumer insights and behavioural trends to ensure a food system
that is sustainable. There is a need as well, to educate people
about the advantages of eating British "in season" products.
This will help to shape consumer buying behaviour and habits,
and help to maximise the advantages we have in the UK of high
quality in season fruit, vegetables and meat.
4.2 However, to meet this challenge we must
recognise the value of both UK food and global trade, supporting
both British and overseas suppliers and farmers. This involves
working with suppliers and farmers to raise their capability and
skills to ensure they develop sustainable businesses. We work
with our processors and producers to plan forward requirements,
such as sharing sales patterns and future estimates, customer
trends and customer insights/demands. This helps suppliers plan
for future demand and react to how the market is working, which
in turn, ensures a continuity of supply.
4.3 While we work with suppliers to plan
for the immediate and medium term demand—up to five years—there
is currently a lack of a wider Government engagement on this issue.
We need clarity on policy, not further analysis, from DEFRA on
long-term sustainable demand and how the whole of the supply chain
can better plan and work towards it.
4.4 A UK farming example: In 2006 we
established the Sainsbury's Dairy Development Group (SDDG). 325 farmers
are involved and supply our processors, Dairy Crest and Robert
Wiseman. The group was set up to help those farmers achieve higher
levels of profitability through innovation and efficiency projects,
such as Herd Health and Husbandry, Environment and Energy, Collaborative
working and Business improvement. In return for this commitment,
members receive price premium above the processors standard price.
In June last year we announced that SDDG would be linked up with
Anglo Beef Processors to supply them with dairy herd cull cows.
This initiative provides an extra revenue stream for dairy farmers,
with an extra 20p per kilo and quarterly bonuses being paid.
4.5 A UK supplier example: We started
working with Grahams Dairies of Stirling three years ago when
they were supplying a limited range of milk and butter products
through a third party. We now work directly with them, providing
an opportunity to supply a much larger range of our own brand
milk and butter. We supported them with developing the skill and
contact base. They are now one of our fastest growing UK businesses.
4.6 Overseas suppliers/farmers example:
In 2007, together with Comic Relief and the Fairtrade Foundation,
we established the Fair Development Fund to help more farmers
and growers in the developing world to sell their produce as Fairtrade.
The Fund supports farmers' groups to meet Fairtrade standards
and improve the quality of their crops. Last year, it specifically
helped farmers in rural Uganda to supply dried fruits to an export
market and small-scale peanut farmers in Malawi to buy seeds or
machinery.
4.7 Food fraud is something that could potentially
threaten the UK's ability to respond to the challenge of increasing
food production, and is something that the Government need to
continue to be vigilant about. However, as a country, we equally
have some of the highest food standards in the world and this
should help protect the supply chain against any food fraud threat.
It needs to be an issue that is taken seriously at an EU level.
5. In particular, what are the challenges
the UK faces in relation to the following aspects of the supply
side of the food system
Soil quality:
5.1 Given the recent European Parliament
ban on some pesticides, DEFRA faces the challenge of advocating
the merits of natural soil health through reducing pesticide use,
while continuing to ensure high crop yields.
Water availability:
5.2 This is a key issue for global food
production. An inconsistency in rainfall is an on-going concern
and is something that will continue to affect UK and overseas
production. In addition, the demand for water will continue to
be a major factor and will dictate how sustainable some products
are in the future, both within the UK and abroad. The IGD are
looking into the issue of embedded water in products, but it is
still at an early stage and it will take some time for customers
to understand its impact.
Marine environment:
5.3 There will undoubtedly be an increase
in demand on fish stocks in the future and there is a need to
ensure continued sustainability. We have helped to improve the
sustainability of fish stocks by introducing a traffic light sustainability
rating system. By working closely with the Marine Conservation
Society, suppliers and campaigners, we feel this is a good way
to help conserve current stocks. We no longer sell any red-rated
fish (major concerns about stock levels) and we are working with
suppliers to move to any Amber-rated fish (concerns, but action
being taken) to Green status (scientifically verified to be in
plentiful supply).
5.4 We would also argue that there should
be better use of technology to help with registering landing catch.
This will make the system more efficient and ensure quotas and
bye catch regulations are adhered to, across the EU.
Science base:
5.5 We are concerned that there is a distinct
lack of a Research & Development base in the UK. There appears
to be a lack of commonly-agreed and recognised centres of excellence
for food policy research, with duplicate activity and communication.
The UK suffers from a lack of applied science and research, with
too much emphasis on academic-based research. For example, our
Dairy Development Group has pioneered carbon footprint measurement
within the dairy sector which will ultimately help dairy farmers
reduce greenhouse gases by up to 10%.
The provision of training:
5.6 There is a strong need for increased
apprenticeship training—in the traditional "craft"
industries such as bakery and butchery. In 2008, we recruited
110 apprentices with a further 200 apprenticeships planned
for this year. There is also a lack of food technologists coming
through into food manufacturing and food retail, owing in part
to a reduction in food science degree courses. This is a major
challenge as without an adequate supply of food technologists
it will be difficult to continue to progress research and development.
Trade barriers:
5.7 To support the initiatives outlined
above we need to ensure that there is more focus on trade, and
its wider benefits, rather than a protectionist approach. Through
trade we can help developing countries grow while benefiting our
own economy. The flexibility of our supply chains support free
trade and can deal with everything from changes in quality in
produce. As an example, we were able to swap trade from Spain
to Morocco when quality problems affected the standard of nectarines
we were receiving from Spanish suppliers.
5.8 However, there is a danger that in the
current times countries badly affected by the economic crisis
will retreat to a protectionist trading position. The UK Government
recognises this. We fully agree with the Secretary of State for
Environment, Food and Rural Affairs, Hilary Benn MP, when at a
Chatham House conference on "Food Security", he said
that "if protectionism is the answer, someone is asking the
wrong question". We also agree with the Secretary of State's
comments that as a country we need a trading system that is strong,
open, global and sustainable. The Government needs to continue
to advocate this approach as the best model to bring positive
food production outcomes, not only for the UK, but for other developed
and developing countries as well.
6. 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 their main effect?
6.1 Taste will always be a key driver for
customers and our research shows that "tastes amazing"
constantly outweighs other criteria in terms of food importance.
While other aspects such as price, provenance and ethical consideration
will continue to feature strongly, it is unlikely that they will
feature higher than taste.
6.2 Customers are adapting to the current
economic situation by economising on food shopping. Our economy
Basics range has seen significant sales growth, particularly
in the produce range, along with an excellent response to our
Feed Your Family For A Fiver campaign (FYFFAF).
Customers are also increasingly looking to shop on promotions
to save money and are planning ahead more. As part of the FYFFAF
campaign and more general concerns about the economy, we have
seen customers planning ahead more, and looking for "deals"
in their weekly shop. Our research has also shown that customers
are now more engaged in eating leftovers and freezing meals given
the impact on food waste and the environment.
6.3 While customer fears about the credit
crunch have resulted in a reduction in meat sales, we have also
seen customers "eating out at home" more. To coincide
with this, we have seen higher sales of better cuts of meat. However,
this does not mean customers are compromising on ethics, with
demand for higher welfare chicken exceeding supply.
7. 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
should DEFRA provide to the food industry?
7.1 With regard to global food "politics"
DEFRA must continue to promote free trade over protectionist policies
and actively encourage other countries, including those within
the European Union, as well as developing countries, to see the
advantages of free trade.
7.2 Greater prominence and leadership needs
to be given to food by DEFRA. The Department is uncertain about
its role and has at times, a fundamental lack of understanding
about how UK supply chain operations work. Those tasked with formulating
policy need to have a better understanding of food culture and
the impact of regulation. This is particularly needed beyond the
farm gate and DEFRA needs to see its role as a supportive partner
focused on more than just the farming and production aspects of
food policy.
7.3 There is a need for a clearer, evidence-based
and simplified deregulatory agenda in order to strengthen the
UK food system. This needs to be directed by the UK Government
and devolved administrations. It must also, however, include a
direct lobbying strategy of the EU, where a significant amount
of our food law originates.
7.4 It needs to be understood by ministers
and officials that adding extra cost and complexity, through increased
regulation, to the supply chain will not achieve a better performing
sector. For example, the introduction of a Grocery Ombudsman (a
recommendation of the Competition Commission inquiry into the
sector) will not be practicable, would duplicate the work of the
OFT and would not be cost-effective. It does not correlate that
we have been able to obtain some of the highest food standards
in the world because we also have some of the most regulated markets.
A clearer, less contradictory and uncluttered regulatory regime
will encourage more innovation, drive higher standards through
competition and encourage companies to invest in increased expertise
and development.
7.5 While we recognise the establishment
of the Council of Food Policy Advisors, reporting directly to
the Secretary of State, given that one of our main competitors
is on the Council, we will have to evaluate how we interact with
the group. DEFRA therefore needs to work out how it can encourage
stakeholder participation in overall strategic policy, while recognising
the competitive nature of the sector.
7.6 While we welcome programmes such as
DfID's "Food Retail Industry Challenge Fund", which
is designed to challenge the private sector to increase food trade
from African farms to the UK, there is also a need for DEFRA/DfID
to actively improve their involvement in encouraging good practice
in food production in developing countries.
7.7 DEFRA has a chance to grow its role
in advising and "translating" EU legislation for farmers,
by offering practical guidance. For example, DEFRA should be proactively
engaging with farmers over the European Parliament pesticide ban
to advocate the advantages of improved soil health, while ensuring
that food prices do not escalate or crop yields reduce.
8. How well does DEFRA engage with other relevant
departments across Government and with European and international
bodies, on food policy and regulatory framework for the food supply
chain? Is there a coherent cross-Government food strategy?
8.1 We would question how well DEFRA is
able to engage and promote food policy across Government. In previous
sections we have outlined our concerns about their lack of prominence
and leadership within government in supporting and "sponsoring"
the food industry and particularly the supermarket sector.
8.2 There has been a lack of central co-ordination
across Government departments with regards to food policy, which
the Food Matters report clearly identified. While we are
encouraged by Food Matters and its recommendations for
food policy to be centralised and recognised through a cross-government
committee, there needs to be a much clearer explanation of how
this committee's decisions will influence individual department's
decision-making. The committee and its decision-making would also
benefit from input from the sector to explain the implementation
and practical aspects of policy-making.
8.3 With regards to "external relations"
with the devolved administrations there needs to be a consistent
approach to food policy. This is in order to maximise resources
and ensure a consistent approach to administering regulation.
Consistent differences in food policy will result in additional
costs and complexity, and result in a poorer product and service
for customers.
8.4 DEFRA needs to play an active role in
the development of EU food legislation, but must ensure there
are clearly defined roles between, for example, DEFRA and the
Food Standards Agency (FSA), to avoid duplication.
8.5 DEFRA needs to have a more joined-up
Research and Development strategy which encompasses other government
departments. It also needs to communicate its aims and objectives
to interested parties, such as supermarkets, much clearer.
9. 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 One clear measure might be the balance
of imports in food categories where strong UK production infrastructure
exists such as vegetables.
9.2 There is also a governance point—while
we have a strong and vibrant supermarket sector, DEFRA should
consider looking at other countries to formulate best practice
in monitoring the governance and implementation of food policy.
January 2009
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