Examination of Witnesses (Questions 200-219)
MR ANDREW
OPIE AND
MR DUNCAN
SINCLAIR
27 OCTOBER 2008
Q200 Chairman: Mr Opie, you take
a very correct retail point of view and I do not blame you for
defending your members with vigour. I appreciate that it is dangerous
to generalise from one specific example. The fact is that there
is a problem and that is that, technically, if you process certain
items in the way that this product is processed, you can describe
it as "Produce of Britain". When you come to the bottom
bit, this is where the consumer is not understanding the nuance
of what you can call for whatever reasons British. They then look
to find that there is this collection. They will be confused because
they are not as expert as you are in what is and what is not permitted
in terms of labelling.
Mr Opie: Absolutely. Retailers
have moved a long, long way in terms of their labelling of product.
Q201 Chairman: Since 17 August?
Mr Opie: This is a very unique
product that you have here and it is not representative of the
marketing and advertising of product that goes on in stores. I
was in two or three of my local supermarkets coming here today.
I just wanted to have a browse around to see what they are doing.
You are faced with a mass of Union Jacks, BPEX stickers, AFS,
little red tractor stickers, in a store. I could not see one like
this example but, if you look at the mass of UK advertising and
British produced pork from farms as a British product, you cannot
miss it when you go into a supermarket.
Q202 David Taylor: Is it your view
then that British consumers, if there is not too substantial a
price differential, would prefer British meat and higher standards
of welfare?
Mr Opie: I think they will. I
am not sure whether UK consumers would necessarily understand
some of the animal welfare issues. I think they understand country
of origin better than they would necessarily understand the nuances
of animal welfare, for example, if you were to look at those.
Q203 David Taylor: Who do you think
should be responsible for alerting consumers to the differences
that exist in terms of the welfare of husbandry in different countries?
Mr Opie: I think retailers try
to do that in terms of some of the differentiation of the product
that we have seen. We have seen outdoor reared and outdoor bred.
We have organic products. If you go into poultry or other areas,
we have free range. They have all been grown with consumers and
consumer demand to take them forward. Retailers continue to label
those clearly so that people can make the choice when they go
into a supermarket. That is what we are faced with when we go
in every day.
Q204 David Taylor: Who in general
do you feel is responsible for clear labelling? Is it the processors
from whom your members buy or the person that effectively puts
it into the chiller cabinet?
Mr Opie: The supermarkets themselves
you mean?
Q205 David Taylor: Yes.
Mr Opie: I think the supermarkets
have a responsibility.
Q206 David Taylor: A responsibility
or the responsibility?
Mr Opie: They have a responsibility
because obviously they need to check things like their sourcing
policy et cetera with the company that is producing the
product.
Q207 David Taylor: How often do they
do compliance audits and checks of accuracy of labelling by someone
else further up the supply chain?
Mr Opie: They will do that regularly
themselves and also they are challenged regularly. Today we would
be regularly challenged by consumer groups, the FSA, Trading Standards,
people like BPEX and various other groups to say, "Hang on.
You are not labelling correctly here." That is the way it
should be. Supermarkets are quite happy to argue their case when
they are challenged.
Q208 David Taylor: More and more
produce is bought over the internet. That would be true for all
your members, I guess. Has any particular examination been undertaken
about the labelling in the internet sense of what consumers can
find about the origin and standards of upbringing of meat on an
internet website?
Mr Opie: I am not aware of any.
Are you talking about an FSA survey?
Q209 David Taylor: Are there any
different expectations where meat has been bought over the internet
as opposed to being picked out from a cabinet so that it can be
examined with all of the labelling thereon?
Mr Opie: No, not at all. The supermarket
will try and make every effort to make it clear. It is a different
environment because obviously when you are in a supermarket you
are picking it up and looking at the pack but they do find ways
to demonstrate on the internet clear labelling, again to help
people make the choice. That is what labelling is all about.
Q210 Mr Gray: How would you react
to the thesis that it would be in the supermarkets' interests
to label clearly where they are seeking to persuade the consumer
to pay a higher price for a particular product? Whether it is
organic or free range, there are big signs saying, "Please
pay a little more because we are delivering something you want."
The contrary equally would apply. Where they are seeking to sell
the product as cheaply as possible, like this Tesco product that
we saw here, there will be an incentive on a supermarket to be
not intentionally misleading in a wicked way or an illegal way
but they might be incentivised to seek to sell something to a
consumer not realising what it was they were buying. In other
words, when you say there are Union flags and free range and so
on, there would be, would there not, because they are trying to
flog that? Where they are trying to persuade someone to buy something
cheaply and still say it is equally good, that is where you end
up with unclear labelling.
Mr Opie: No, I do not agree. I
do not think you need to compromise on labelling. You can compromise
maybe on the packaging for example. You can maybe make differences
in terms of the way you might promote it in store compared to
other products but I do not think labelling would be compromised
necessarily. If you look at the basics ranges for example, which
I am sure you would in the supermarkets, you will see that there
is still a lot of labelling on those products.
Q211 David Taylor: It is in the economic
interests of your members, is it not, to give the impression of
national loyalty without adding a single link of sausage to the
UK supply chain in terms of value?
Mr Opie: No, I do not agree with
that. If you look at how much is sold, how much is paid into UK
farming by supermarkets, who are clearly their biggest customer
in pork, the amount that they pay, the number of farmers who work
with supermarkets who have built their businesses with supermarkets,
I do not agree at all. They are commercial businesses. They are
in business to make money. That is absolutely true, as are farmers.
The key people are looking to build long term, sustainable relationships
with their farmer suppliers so they can all move forward together.
I do not agree with that at all. We all need to be able to make
enough from the supply chain to look forward to a long term relationship.
Q212 David Taylor: I am grateful
for the comment you made earlier that your members try hard—I
may be paraphrasing now a little—to educate consumers to
distinguish between that which is reared in the UK or in accordance
with UK welfare standards and that which is not. You think enough
is being done, do you?
Mr Opie: In terms of welfare standards,
I think the key thing is the issue of comparable standards. Do
not compromise on standards if you are taking it from outside
the UK compared to that which is produced in the UK. Consumers
may not know that much about animal welfare standards when they
go into a particular supermarket. Therefore they do not need to
worry about that decision because it is already being looked after
by the retailer who has put the product on the shelf.
Q213 David Taylor: Do you think it
should be the responsibility of hard pressed welfare groups to
promote to consumers the importance of having higher welfare standards
for the meat which they are about to buy?
Mr Opie: If you look at freedom
foods, organic products, those sorts of things, the promotion
is done with the supermarket. The supermarket is the promoter
with the RSPCA for freedom food, with the organic groups, to grow
those markets together. We have seen a major change in our animal
welfare standards in this country.
Q214 David Taylor: I would hazard
a guess that the ethical groups like the Co-op and possibly also
Waitrose spend a higher proportion of their marketing budget on
trying to encourage their consumers to distinguish between high
environmental and welfare standards for the products they are
buying. I would guess they would spend a higher proportion than
Tesco and the Asdas of this world.
Mr Opie: I simply do not agree
with that assertion. There are different consumers for different
issues and there will be different shoppers who go into a shop
with a different set of criteria in their minds in terms of the
products that they buy. I would definitely agree with that. Any
smart retailer is going to fit their sales to that particular
consumer to make sure they spend the most when they come into
their shop. If you look at what all supermarkets are doing across
the board, in animal welfare or in other areas, they are all moving
forward. The volume retailers are the ones who can also make the
biggest difference.
Q215 Chairman: From Waitrose's standpoint,
they seem to have a very good relationship in terms of their supply
chain. Mr Sinclair, you were talking about that earlier on. It
seems to me in contrast to the messages that the Committee has
been getting from other leading supermarkets which say that, in
the light of the OFT's ruling following the milk case, they are
now exceedingly worried about what kind of relationships they
may have in the context of their supply chains. I heard of one
meeting which took place where representatives, officials, retailers
and others were present and the retailers only turned up in the
company of a competition lawyer who effectively said, "You
can and you cannot talk about this or that aspect of the supply
chain relationship." That obviously makes life difficult
in building the kind of harmonious relationship which you seem
to enjoy. How is it that Waitrose have done it? Mr Opie, what
is it that troubles the rest about doing the same?
Mr Sinclair: For us, it is working
closely with the supplier and the agricultural team—in our
case, the BQP—who manage the day to day relationship with
the farmers. Our role is to turn up at events throughout the year,
when we are invited, to give an update in terms of some of the
Waitrose developments, how our business is going, what sales are
like, so that they feel part of that business. We also have a
magazine that we issue to all our farmer suppliers three times
a year so that everyone across the different supply chains have
a better idea of what the challenges and issues are in different
sectors. We are about to publish the next edition in the next
couple of weeks. We are going to have a pig farmer, a dairy farmer
and a salmon farmer write about the year in their supply chain.
For the next year we will use these three farmers, to share the
challenges of their supply chains across a wider range of supply
chains. They are all farmers, each with different challenges and
we are keen to get others and other supply chains to understand
what are the common issues.
Q216 Chairman: You have achieved
this relationship without contravening competition law. You are
happy bunnies. You can do that. Mr Opie, why do other supermarkets
currently feel deeply nervous about building supply chain relationships,
taking into account the findings of the milk judgment?
Mr Opie: I think we should remember
how large some of those fines were first of all that were levied
on the companies under the milk case. That has quite naturally
made companies nervous about some of the issues on competition
and the OFT. That does not stop the supply relationship discussions.
I have spoken to two or three supermarkets today who are also
continuing to have a dialogue with producer groups in particular.
Some of them have had problems where they maybe have started a
meeting about one thing and then it has moved on to price. At
that point, they may stop the meeting but, as I understand it,
although it is more difficult now, those relationships are still
carrying on. There is still discussion with producer groups. I
know there is a lot of interest in terms of working with groups
of farmers generally across agriculture and pigs are no different
to that. I think they will continue but people are naturally more
cautious post the milk case.
Q217 Chairman: On behalf of members,
are you doing any work to identify what I might call the more
sensitive areas? The idea of major retailers talking with their
suppliers is as old as the hills. It is one of the most fundamental
things that retailers do if they want to achieve the product mix
that makes sense to them. I come back to when the Scottish Pig
Group was started. If a situation like that is a collective effort
on behalf of the nation's industry it is marred by competition
lawyers saying to retailer participants, "You cannot talk
about that", there is something wrong in the state of—I
had better not use the word "Denmark" because that may
have the wrong connotation—but there is something wrong
somewhere.
Mr Opie: It is a problem. We have
a problem as an organisation at times for example because we have
most of the major retailers in membership. We have to be very
careful. We have a disclaimer every time we have a meeting at
the BRC in terms of the competition issue and members should identify
if they think there is a problem. Companies are naturally nervous
about this but you need to remember the subjects you can talk
about, have a well scripted agenda before you go in and people
should understand what they can and cannot talk about.
Q218 Chairman: You would argue in
simple terms that there is no barrier to proper supply chain relationships
being established. Taking the Waitrose model, the primary producer
understands very clearly what the retailer wants.
Mr Opie: I think they need to
understand what the parameters of the discussion can be before
retailers are going to get nervous about possible breaches which
could end up with the OFT. Therefore, as long as those issues
are understood at the start, there is no reason why there should
not be a constructive dialogue.
Q219 Chairman: It is evident that
in this area of fresh produce a number of supplier groups have
been formed, not exclusively for pig meat but for a variety of
raw material inputs. That again made me wonder why it was, if
that can be done, we still have this worry about what the OFT
might or might not approve of. Have you had any discussions as
the BRC with the OFT about what is and what is not permitted?
Mr Opie: No, but we have had discussions
with government in terms of what is and is not permitted in terms
of discussions with them.
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