Memorandum submitted by the British Retail Consortium (SFS 44)


1.0 Executive Summary


1.1 The UK has a robust supply chain based primarily on UK production, supplemented by imports.

1.2 Changing global demand and supply challenges will increase the volatility of food prices and will challenge retailers in the UK.

1.3 As the majority of our food is produced in the UK and Europe, European policy as much as global policy is key.

1.4 Although long term changes are those usually identified, short term problems such as animal disease and interruption in the supply chain pose an immediate threat to the supply of food in the UK.

1.5 The Government needs to better appreciate the importance and operation of food production and the supply chain.

1.6 Government intervention can have a major impact on the supply chain.

1.7 Defra needs to improve its practical understanding and support for food retailers.

1.8 Government needs to improve co-ordination and prioritisation of food policy.


2.0 Introduction


2.1 The British Retail Consortium (BRC) is the main trade association for retailers, and our members are responsible for approximately 80% of all grocery sales in the UK.

2.2 Retailers take a keen interest in the long term issues affecting food production. The UK food market is extremely demanding, where consumers expect affordable food and take an interest in its production and impact on the environment. It is key, therefore, that all retailers plan for the changes in global demand and production that affect our supply chain.

2.3 Retailers recognise that a highly efficient just in time supply chain can also be a vulnerable one and have invested heavily to ensure its robustness. This has been tested by a number of incidents in recent years, including GM contamination of the primary source of rice and several animal disease outbreaks. It is also clear from work with the Cabinet Office that the large food retailers are amongst the most advanced businesses in terms of planning for emergency incidents, such as a pandemic flu outbreak.

2.4 The BRC evidence deals primarily with the issues that we consider are relevant to the continuing robustness of the supply chain from a retailer perspective.


3.0 How robust is the current UK food system? What are its main strengths and weaknesses?


3.1 The current food system is extremely robust for a number of reasons. Firstly, we should remember that the majority of food sold in UK stores is produced here. The BRC collated figures for the now defunct Organic Action Plan which showed the high proportion of home produced food sold in the major UK supermarkets. For example, in the year ending 2006, 100% of eggs, 100% of milk, 90 % of fresh chicken, 89% of beef, 70% of lamb and 96% of carrots sold in major supermarkets were all produced here. Further, as shown in the Defra report (Ensuring the UK's security in a changing world, July 2008) 68% of our food imports come from within the EU. We believe this demonstrates our supply chain is founded on production in 'safer' countries in terms of their robustness. It also demonstrates how influential EU policy is on our supply chain.

3.2 Secondly, retailers have improved the robustness of their chains through investment and working closely with their suppliers. Sophisticated traceability systems and co-operation with suppliers means problems such as contamination are minimised and the chain can react quickly to issues such as animal disease. The supermarkets have long term relationships with the majority of their suppliers, which means they have grown their businesses together forming a strong partnership. The UK has faced a number of problems in the last few years but the impact on the supply chain and consumers, due to supply chain relationships, has been minimal.

3.3 Thirdly, through excellent contingency planning the supply chain is flexible enough to react to interruptions in supply. For example, when the primary source of long grain rice, the USA, experienced problems with GM contamination, retailers had to quickly switch to alternative suppliers but all were able to do this without affecting availability. One point to remember is that UK customers expect high levels of production, which means retailers have to substitute with similar products, it is not simply a case of buying the cheapest alternative on the open market.

3.4 The weaknesses in the chain are generally due to two factors. The first is where the interruption is outside the retailers' control, for example, industrial action such as fuel strikes, where despite planning there will be problems if the Government doesn't intervene. The second is the implementation of Government policy and legislation. The current slow progress in approval of GM varieties of maize and soy in the EU will have a major impact on the availability of animal feed and threatens the future production of livestock in the UK. During animal disease outbreaks and recent contamination cases we have also seen how Government decisions on withdrawal of products and controls on imports and exports can have a major impact on our supply chains.


4.0 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 Retailers are committed to securing sustainable products, as demonstrated by their commitments to the BRC initiative 'A Better Retailing Climate' to reduce the environmental impact and vulnerability of the supply chain. We are committed to ensuring that increased production is sustainable.

4.2 We believe it is more appropriate for those in the primary sector to comment on increasing production, but we do believe that the production of food has not been given sufficient priority in recent years in the UK. In particular, we need to increase support for research and development of increased production that is sustainable.

4.3 Retailers have demonstrated, working with their suppliers that it is possible to meet the challenges of production to meet UK demand whilst considering issues of sustainability. Retailers have led the way to tackle issues such as responsible use of palm oil and responsible production of soya outside the Amazon biome through protocols they have agreed with suppliers.

4.4 Through initiatives such as these the UK has developed an expertise in sustainable development that could be promoted globally.

4.5 As well as increasing production, there is also considerable scope to improve our use of existing production. Food waste remains a major challenge. In the UK recent reports have demonstrated the volume of waste, particularly by consumers. Food waste is a major problem in supply chains in developing countries. This could be an area where the UK, through DfiD and FAO could use its expertise in supply chain management to reduce waste through improvements in transport, packaging and storage.


5.0 In particular, what are the challenges the UK faces in relation to the supply side of the food system


5.1 Water Availability. This will be a challenge as the demand for water increases, coupled with the impact of climate change. Action has already been taken in the supply chain to reduce water consumption, but this has primarily been in the processing and retail sectors. More focus will be needed at the primary level, in improved use of water, both in general production and irrigation. We do not believe some of the focus on embedded water in dairy products and meat is entirely relevant as the systems of production are often appropriate to their climate and geography. We also believe that consumers are some way off an understanding of the importance of water use and the impact of various agricultural systems on water consumption. It is difficult, currently, to see how consumer demand could influence production to improve water availability which means improvements will rely on the supply chain working together, without a clear added value to the producers. It is more likely that the economic cost of water will have an impact on demand through higher prices.

5.2 Marine environment. It is clear there will be increasing pressure on fish stocks in the future. There are several challenges for the UK. Firstly, can we increase alternatives to current favourites that are under pressure, such as promoting less fashionable species? Secondly, can we increase farmed species, which can be successful but can bring their own problems such as disease and impact on the environment? Finally, can we manage our existing stocks in a more sustainable fashion to ensure their long term future? In all of these areas, the UK has made progress and we will see further activity by retailers to promote alternative species and support schemes such as the MSC but it is difficult to see what difference these will make in global terms, unless others also act.

5.3 Science base. In terms of increased production and sales based on new technology such as animal cloning or GM food this is unlikely to be driven, in the medium term at least, by consumer demand. Consumers in the UK are not demanding these products as they see no benefits for them and have accepted negative comments made about them. We believe, however, it is important that the UK continues to invest in our science base to ensure we are able to improve our supply chain, in areas such as food waste management, animal disease control and sustainable farming. These are major challenges for the food industry, bearing in mind its substantial impact on the environment, and requires investment from Government, agreement on priorities and collaborative work with the supply chain.

5.4 Trade Barriers. There are three areas where we believe short and longer term trade barriers will be a challenge for the supply chain. Firstly, countries reacting to volatile price changes by imposing export conditions on commodities. Although this has not yet lead to major problems, kneejerk reactions such as these may become more common in the future. Secondly, the EU approach to GM approval will cause a major problem on the import of animal feed in future years as the rest of the world grows new varieties of soya and maize. We believe this barrier, imposed due to delays in legislative approval, will have a major impact on the availability of animal feed and the production of livestock in the EU. This could result in livestock production being transferred to non EU countries where animal feed is available. Thirdly, short term trade bans on the movement of meat and meat products during animal disease outbreaks cause significant problems to retailers, particularly as Northern Ireland is seen as an export destination. Our supply chains operate 24/7 and disruption to trade, brought in at short notice, can have a significant impact on food availability. We are likely to see an increase in exotic disease and must find a pragmatic way to control animal disease spread, recognising the need for trade.

5.5 Farmed land. We will see challenges from the environmental impact of land management, including issues such as water and soil management. We believe policy makers need to put sufficient weight on food production compared to environment issues. We have an example of that in the current discussions in Europe on pesticides regulation. We asked for decisions to be postponed until an accurate regulatory impact assessment was prepared to examine the affect on production and prices but decision makers have continued to discuss the proposal ignoring this.


6.0 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 the main effect? What use could be made of local food networks?


6.1 Consumer demand will continue to evolve in future years. There will continue to be more interest in the provenance of our food, its production and sourcing, but these will still lag behind the key drivers of consumer choice, taste and price. The key issue, as graphically demonstrated in the current market, is value, which doesn't preclude issues of provenance but means they must be clearly appreciated by consumers alongside price.

6.2 One interesting impact of the current financial problems and temporarily higher prices has been an increase in cooking from scratch and an appreciation of the value of food. If this continues, supported by increased knowledge of cooking we could see an increase in interest in the sourcing of food and food knowledge.

6.3 Retailers already have a good record on national and local sourcing, this will continue as will support for groups of dedicated suppliers. Using dedicated suppliers has a number of benefits. Not only does it allow them to work with a group of suppliers to react to the challenges of improved environmental management, it also has benefits for food security through continuity of supply and improved surveillance for potential problems.


7.0 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 and assistance should Defra provide to the food industry?


7.1 Although the operation of the supply chain in the UK is largely a private sector issue, the Government can have a significant influence and impact on its operation. It is important the Government understands the influence it has and the impact of its decisions.

7.2 To play any role, Defra needs to improve its understanding of how the UK supply chain operates, particularly beyond the farmgate. This would help it appreciate how decisions it takes on policy and the implementation of legislation affects the supply chain.

7.3 Defra needs to recognise and support food production in the UK which is at the core of our supply chain. It must ensure that it balances support for research and development across all the areas for which it is responsible, including food production. In a similar vein, it also needs to ensure that when taking policy decisions it accounts for the need for a productive agricultural industry within its environmental policy.

7.4 Defra and the Food Standards Agency should continue to take a lead in Europe to ensure we have the policy and legislation framework appropriate to ensure food security. We have been encouraged by the UK Government's approach to recent issues such as resolving trade problems during animal disease outbreaks and the problems of the current GM policy, but we need this to continue. A key issue is understanding the eventual impact through enforcement of what can appear to be minor points in European legislation on the efficient operation of our chains.

7.5 To show leadership in the food industry, Defra needs to demonstrate it both understands and wants to work as partners with it. Currently, we do not believe that food supply is at the heart of Defra's work and do not receive the support we require. This is compounded by the lack of prioritisation of policy, which means the industry is trying to cope with delivery of a range of diverse issues at a time when it is struggling with increased cost pressure and an extremely challenging market.


8.0 How well does Defra engage with other relevant departments across Government, and with European and international bodies, on food policy and the regulatory framework for the food supply chain? Is there a coherent cross-Government food strategy?


8.1 Defra needs to improve its engagement with other departments and abroad in the issues that concern retailers. Although we accept Defra is not responsible for the majority of food regulation we would like them to sponsor our sector and challenge other departments that have an influence over us.

8.2 Defra has set up a food information better regulation group which involves industry and other departments but we are yet to see tangible outcomes from the group, in terms of prioritising UK support for lobbying in Europe.

8.3 The Government published Food Matters in July 2008 which set out its objective of improving co-ordination of food policy. We were most interested in the food strategy taskforce which brings together key officials from all the departments to discuss food policy and improve co-ordination. Although it is still in its infancy, we are yet to see any positive outcomes from this group. Retailers want to see improved prioritisation of policies, understanding that the sector is under pressure and has limited resources to cope with multiple requests from Government and an improved recognition of the paramount influence of consumers.

8.4 There is also the Cabinet Sub-Committee which will also consider food issues. We feel these two groups should be capable of improving the co-ordination and prioritisation of food policy but they would benefit from input from the sector to identify problems and suggest how Government could lend practical support.


9.0 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 The BRC supports Defra's current work to develop indicators of the UK's food security. Those indicators are still under discussion so it is difficult to speculate on their final content.

9.2 The indicators in the draft Defra document cover global issues on production and factors that underpin it such as research spending, and would appear to the be the best way to monitor this issue. Although UK production is important we are a relatively small, already efficient country so it is difficult to see what part we can play in doubling global production.




January 2009