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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 153,000 employees Around 18million 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 some thing 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 |