Memorandum submitted by Covent Garden Market Authority (SFS 23)

 

 

 

Summary of response from Covent Garden Market Authority

 

· Covent Garden Market Authority (CGMA) is the statutory corporation responsible to Defra for the ownership and operation of New Covent Garden Market (NCGM) in Nine Elms, Vauxhall, London.

 

· NCGM is a wholesale market and the largest fresh produce market in the UK.

 

· CGMA welcomes the opportunity to respond to this inquiry and asks that the committee considers the important role that markets play in food security in the UK.

 

· Wholesale markets provide the alternative food supply chain alongside the better understood food manufacture or multiple retailer routes. Nationally there are 27 wholesale markets with a joint turnover of around £4 billion. Within this NCGM plays a significant role acting as the crucial link between producers, wholesalers, processors and the catering outlets.

 

· Consumer demands for food are changing and greater interest is being shown in the quality and provenance of food. As a result the means by which consumers' access food is diversifying which in turn has added benefits to local communities in terms of economic, environmental, social and regeneration gains. Markets are in a central position to benefit from these changes and in turn help producers increase food production in the UK. 

 

· Recommendation 1: Markets provide a great number of benefits to producers, consumers and the community in which they operate and awareness of this needs to be increased. For producers markets mean another outlet for their quality produce (not just their seconds) and by acting as existing food hubs they can increase producers' access to a wide range of customers. These and other benefits also need to be recognised by Government and Local Authorities who should be encouraged to provide more consistent support to markets.

 

· Recommendation 2: This enquiry should build upon and extend the work being carried out by the National Association of British Market Authorities (NABMA) to understand the economic benefits of all markets so that future policy makers both national and local can take this fully into account.

 

· Recommendation 3: The length of payment period required by the food service sector and its impact on the small and medium sized businesses within the supply chain should be looked into further. By encouraging the Public Sector to set the standard by ensuring their suppliers pay within reasonable terms it should provide additional support to food producers.

 

· CGMA requests the opportunity to present oral evidence (from the perspective of a wholesale market) to the Committee on the points and recommendations set out in this response.

1. Covent Garden Market Authority welcomes the opportunity to contribute to the Environment, Food and Rural Affairs Committee inquiry into securing food supplies up to 2050: the challenges for the UK.

 

2. The response addresses both parts of the Committees inquiry, the challenges the UK faces in increasing food production and the actions that should be taken to meet the challenges.

 

Background

 

3. Covent Garden Market Authority (CGMA) is the statutory corporation responsible to Defra for the ownership and operation of New Covent Garden Market (NCGM) in Nine Elms, Vauxhall, London.

 

4. NCGM is a wholesale market and the largest fresh produce market in the UK, supplying quality fresh produce, both food and flowers, to restaurants and hotels, cafes and bars, schools, hospitals and work places as well as independent retailers and a wide variety of retail markets in London and the South East.

 

5. Wholesale markets provide the alternative food supply chain alongside the better understood food manufacture or multiple retailer routes. Nationally there are 27 wholesale markets with a joint turnover in excess of £4 billion. Together they directly employ over 10,000 people.

 

6. As a wholesale market NCGM plays a significant role acting as the important link between wholesalers, processors, catering outlets from which the end users consume their food and the producers. As a result of this wholesale markets are in a unique position to measure changes in both producer trends and those of the consumer.

 

 

Changing trends in food consumption

 

7. Consumer interest in food has increased, particularly around the quality and provenance of the food. This has led to a rapid rise in the outlets from which consumers purchase their food, from more local convenience stores to farm shops.

 

8. Farmers Markets are one such example which has seen a rapid rise in custom and there are now over 800 farmers markets throughout the UK specialising in locally grown produce. Another outlet for producers is the increase in food box delivery schemes which offer sustainably sourced and grown produce delivered to customer doors each week.

 

9. This increased interest in local, regional or seasonal produce is not just based on environmental or ethical concerns but also a greater awareness of supporting local economies combined with increased interest in health and convenience.

 

10. A recent report by the Institute of Grocery Distribution has shown that consumers are more likely to support local purchasers than organic or fair trade in the current economic climate. This desire to buy local is feeding through to supporting local shops and street markets where consumers are looking not only for better value but a more human retail experience. It is this sector that is dependent on wholesale markets for their supply.

 

 

Recommendation 1 - Increasing awareness of the benefits of the alternative supply chain of markets among producers and policy makers

 

11. Wholesale markets play a critical role in the food supply chain and with their strong links to independent retailers, retail markets and food service outlets can help producers and the overarching objective of increasing food production.

 

Benefits to producers

 

12. Today Wholesale markets are undergoing a resurgence after a period of decline, evolving to meet their customers' needs. It is no longer the case that they are an outlet for poor quality / rejected from national multiples produce. Serving independent and street markets as well as the food service industry, the quality expected by these customers means that the standard of produce sold in wholesale markets is at least as high as that in the national retailers, if not higher due to the shorter supply chains.

 

13. As a result they provide a valuable additional or alternative outlet for producers. The volume and the price may not always be guaranteed (they are not always with supermarkets) but it is possible to make reasonable margins and sometimes even better margins across a whole season through the wholesale market system. 

 

14. This means that producers can send quality produce to the wholesale market and receive good returns (and increase the volume of food available) rather than it go to waste. 

 

15. Using wholesale markets as an outlet for their produce can aid producers by playing an important role in smoothing fluctuations in supply caused by changes in demand (sometimes driven by poor promotional management in a retailer) or supply (the natural variation in outputs).

 

16. The requirements of the food service sector and independent retail are different to those of supermarkets. For example, caterers prefer larger heads of brassicas as these offer better value once prepared for service. At community level, independent retailers are best placed to meet their customers' demands for specialist food, whether that be ethnic, organic or local, Wholesale markets have the flexibility to meet these varied needs and provide an essential outlet to producers growing 'non-standard' produce.

 

17. However it is important that producers establish good relationships with wholesale markets to ensure they are able to use them when they need it as wholesalers will not secure good customer bases and good prices for product that only turns up in extremis.

 

18. In addition some growers may be wary of the national retailers, may not have the volumes to meet their demands or may only be starting up with a particular range or variety and are looking for alternative routes to market. Wholesale markets provide that alternative route as both small volumes and small producers can be catered for through the wholesale markets.  This is particularly important for smaller producers and those looking to develop niche products.

 

Benefits as a Food Hub

 

19. Food hubs are often mentioned as needed to assist small or local producers to access customer/markets. These do not need to be new facilities as hubs exist already in the wholesale markets.

 

20. Wholesale markets serve as local hubs, providing a central location for producers to deliver their product to and from where that product is distributed to independent retail or food service outlets. As a result the wholesale markets become the door to the customers.

 

21. As the largest fresh produce market in the UK, NCGM is best placed to help local producers access the large number of customers within London and the south east. Rather than approaching individual end users - a time consuming and resource intensive approach - by delivering to the Market which acts as a local food network they are able to access numerous customers in one delivery and also possibly open new business leads.

 

Benefits to Local Authorities and central Government

 

22. Local Authorities should be encouraged to recognise the benefits markets bring to the local and rural economy and support the redevelopment of the wholesale markets and the huge potential markets have to deliver Government social and economic policy.

 

23. Supporting such local businesses and food outlets provides added benefits to local communities in terms of economic, environmental, social and regeneration gains.

 

24. Many of these benefits were included in 'A Guide to London Wholesale Markets' published as part of the inaugural London Markets Month in October 2008 and can be applied to Markets across the UK.

 

25. For markets to function efficiently, and therefore be easy and effective for producers to use, infrastructure issues on wholesale markets need to be addressed. Many wholesale markets are now facing redevelopment programmes to replace and improve the infrastructure meeting modern food handling requirements.  

 

26. Government responsibility for markets and the food supply chain also needs to be simplified. At present too many different government departments have an impact upon markets and their operation, making it extremely difficult for market operators to have a consistent approach to running markets.  This should also be reflected at local government level.

 

27. The businesses that make up the markets and work with the producers also need assistance in terms of training provision and encouraging new businesses and individuals to the market. However, there is no specific sector skills council responsible for wholesale market which makes it harder to raise skill levels and attract new people into the trade.

 

28. Producers also need to develop awareness of communication and marketing within this supply chain. Some of the good operators have their own brand just for wholesale markets, produce is properly packed and labeled - it becomes recognised within the trade and establishes its own demand profile.  Some other British produce unfortunately comes to market in plain boxes, or other products' boxes (English apples in New Zealand apple boxes) with little or no indication of where it has come from or what it is.  British produce therefore does not maximise the potential demand for local produce through this alternative food supply chain.

 

Recommendation 2 - Undertaking research into the importance of Markets

The importance of markets to the food supply chain is currently underestimated and overlooked and more needs to be done to understand and promote the critical role they play in the UK's food system.

 

29. To harness the potential of retail markets the benefits they provide (some of which are set out above) need to be better understood. Support for the Knowledge Database work being carried out by the National Association of British Market Authorities (Nabma) would significantly help in better understanding the true level of markets' impact on local trade and employment.

 

30. The work done by the Food Chain Centre has done much to expose areas of inefficiencies and promote best practice within the retail supply chain. This work needs to be replicated within the independent or alternative supply chains, whether that be into street markets and small shops or food service.

 

31. This inquiry should build on and extend the work being carried out by the National Association of British Market Authorities (NABMA) to understand the benefits of retail markets so that future policy makers both national and local can take this fully into account.

 

 

Recommendation 3 - Addressing payment periods in the food service sector

 

32. Specifically understanding the economics of markets and addressing payment periods payments within the food service sector would also assist food businesses and therefore food production.

 

33. A key risk amongst wholesalers is business failure due to cash flow problems. Many producers have history of not being paid by businesses which have gone under at short notice. Part of the solution is providing proper business advice and support to the SME's that make up wholesale markets, but these SME's are often exposed to harsh payment terms by their customers.

 

34. It is usual in the food service sector for payment by hotels, restaurants and contract caterers to be much longer than 30 day. 45 days, 60 days and even 90 days are not unheard of. This is on a product with a short shelf life. This burden on the cash flow of SMEs therefore flows all the way down through the chain to producers.

 

35. Public bodies, who already are committed to best practice such as that laid out in the CBI Code of Practice for payments to creditors, could ensure that all their suppliers do the same. Pressure could be put to bear on the hospitality industry not to fund its cash flow by delaying payments to their suppliers.

 

36. This enquiry should therefore look at the length of payment period required by the food service sector and its impact on the small and medium sized businesses within the supply chain. The Public Sector should set the standard by ensuring their suppliers pay within reasonable terms.

 

37. CGMA requests the opportunity to present oral evidence (from the perspective of a wholesale market) to the Committee on the points and recommendations set out in this response.

 

January 2009