Memorandum submitted by the British Retail
Consortium (Pigs 25)
1. EXECUTIVE
SUMMARY
1.1 The pig industry in England has suffered
over a long period from competition from other countries, market
for pork products and consumer demand. These problems have been
exacerbated over the last 12 months by the problems caused by
FMD and the sharp rise in input costs.
1.2 There are some encouraging signs, in
terms of demand for English products and price increases paid
to farmers.
1.3 Retailers have promoted and supported
English pig producers and will continue to do so responding to
consumer demand.
2. INTRODUCTION
2.1 The British Retail Consortium is the
trade association for retailers. In terms of food sales, our members
account for approximately 80% of grocery sales in the UK. Our
food members are primarily the large retail chains, we don't represent
independent butchers.
2.2 Our members are firm supporters of British
farmers and have worked closely with English pig farmers over
the years to promote and sell their produce. They work closely
with their suppliers.
2.3 Retailers sell a high proportion of
pork in England, approximately 80%, but they are not the only
sellers, particularly when it comes to processed pork products,
and cannot be held solely responsible for the health of the pig
industry.
3. What is wrong with the pig industry in
England? Are present problems more than just a cyclical imbalance
between supply and demand?
3.1 There are some long standing issues
with the English pig industry, such as the problems with carcase
balancing, competition from European countries and consumer preferences.
These have been exacerbated recently by the problems last year
due to FMD, which prevented valuable exports of pork products
with no market in the UK, and the sharp rise in input prices,
particularly feed. Also as our imports come from Continental Europe
English farmers can suffer from the £/
exchange rate. This has meant a very difficult
period for pig producers and re-structuring within the industry.
3.2 In terms of sales, a problem for the
pig industry in England has been building a loyal long term consumer
base for pork and finding a market for all parts of the pig. Pork
is in competition with other meats for customers' spending and
it has in the past suffered when other meats are promoted. This
is unlikely to change in the future and could be exacerbated by
the pressure on consumer spending and the growth in popularity
of alternatives such as salmon.
3.3 During 2007 pork, for example, faced
increased competition from other meats that could not be exported
during the FMD outbreak and came onto the UK market. This at a
time, when farmers were unable to export pork.
3.4 However, the outlook for pig farmers
has improved recently, both in terms of demand for products and
the price paid for their pigs. Mariann Fischer Boel, in her speech
to the World Meat Congress this month pointed out that European
pig producer margins had improved gradually and were now getting
back to their long term average.
3.5 The market for pork has increased in
recent years, accompanied by a rise in pig prices. The consumption
of pork in the UK has been rising steadily since the end of the
90's and is now about 13% higher than in 1999. Industry data from
the MLC shows that pork sales have held up well over the last
year. The data also shows the demand for fresh cuts of pork such
as roasting joints have outperformed other cuts of meat. Even
cheaper cuts of meat, such as pork belly have performed strongly
in the last year. Increasing consumer demand for higher welfare
pork and the interest in local sourcing are positive signals for
English producers.
3.6 During the last year, the price paid
to pig farmers has increased markedly, reflecting the problems
they are facing in rises in input prices. Retailers have rewarded
farmers without passing all that cost to consumers, in an attempt
to keep pork prices competitive. ONS figures show the price of
pork increased by 19% in the year to July, whereas the price of
pigs increased by 25% (BPEX).
4. Are domestic pig welfare standards a principal
reason that English producers have problems competing with those
outside the UK? Are there other reasons?
4.1 This may well have had an impact on
the wider industry and I am sure others in the industry will comment.
In terms of the major retailers, they are very conscious of the
need to ensure consistent welfare standards across all the products
they sell. They aim to ensure comparable standards in other European
countries, particularly avoiding stall and tethers. These are
reinforced through auditing of their supply chains and working
with their foreign suppliers.
4.2 One of the other problems is the UK
is competition from a large well established pig industry in Europe.
This has led to strong price competition, especially in processed
pork products. Competing countries have well structured, efficient
industries, which have also been able to overcome the problems
of carcass balancing faced by our producers. This competition
over an extended period has meant they now have a substantial
share of parts of the UK market.
4.3 European pig producers have also been
struggling in recent times but have continued to compete on price,
accepting losses, which have underpinned the European price of
pork.
4.4 In terms of consumer acceptance of imported
products, it is important to remember two things in terms of consumer
demand. Firstly, some of the imported product has a perceived
quality amongst customers, it is certainly not seen as an inferior
product. Secondly, country of origin is not a strong factor of
choice for many customers.
4.5 Country of origin, as demonstrated by
research from IGD, is not a key factor in customer choice. Price,
however, is a key factor for consumers, particularly in the current
economic climate. This means English producers face direct competition
from European producers, particularly on generic products where
customers are focused primarily on price.
5. What could supermarkets and the hospitality
sector do to alleviate the pressure on the domestic pig industry?
5.1 Retailers have worked with the pig industry
for a long period to promote and find new opportunities for English
products. During the period of recent pressure on producers, due
to escalating input prices, retailers have rewarded farmers and
tried to minimise cost increases to consumers, to ensure long
term confidence in pork. This is demonstrated by figures which
for July showed an annual increase in the retail price of pork
joints of 19% (ONS) compared to an annual increase of 24% in pig
prices (BPEX).
5.2 Retailers are working closer with their
suppliers and this is key to a successful supply chain. Relaying
consumer information and demand to producers helps them understand
the market better, the role of promotion and matching supply to
increased demand. Retailers have worked with producers and Government
to analyse consumer demand to help plan future promotion. For
example, a number of our members sponsored an extensive piece
of research by the IGD in connecting consumers with farming and
farm produce in 2005 to examine how to promote added value on
British products.
5.3 Retailers will continue to work with
the producer levy boards to promote British pork. They have promoted
the BPEX Quality Mark and Assured Food Standards to raise consumer
awareness of the value of British quality and assured produce.
5.4 Retailers can work to promote those
cuts of pork which have been less popular historically but could
be more attractive to customers concerned about price, for example
pork belly. One retailer has told the BRC they were so successful
in a recent promotion their suppliers couldn't keep up with the
increase in demand for British belly pork.
5.5 Retailers can continue to promote new
products, developing new opportunities for English producers and
trying to address the problem of carcass balance. Retailers have
helped promote growth in higher tier products such as outdoor
reared and organic pork and processed products. They have also
expanded their range of locally sourced products such as bacon
and sausages. The vast majority of these products are UK produced
and have given farmers the opportunity to gain added value in
a growth area.
5.6 Our members take labelling of all their
products extremely seriously and pork is no exception. They voluntarily
go beyond the legal requirements by putting the country of origin
on pork joints and are clear about the provenance of their processed
products. If there is a belief that clear labelling and information
can stimulate home demand then the hospitality sector could be
encouraged to give clearer information about sourcing on menus.
5.7 Retailers will continue to promote and
support English pig producers but ultimately it is consumer demand
that is key and that is influenced by a number of factors, especially
price. Retailers offer their customers value and choice and whilst
they will promote English produce, they will also offer other
produce whilst it is demanded.
6. Can the Government do more to support the
industry either directly or through its public procurement policies?
6.1 The Government could do more to improve
procurement of locally sourced products. The introduction of the
"Healthier Food Mark" announced in Food Matters, would
encourage better sourcing and the Government could encourage early
adoption by purchasing departments and local authorities.
6.2 The Government could increase funding
of research in production and processing. This has declined in
recent years, as research focused more on environmental aspects
of production.
September 2008
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