Memorandum submitted by Kraft Foods UK & Ireland (SFS 45)

 

Comments from Kraft Foods

 

1) Kraft welcomes the opportunity to participate in the EFRA Select Committee Inquiry and is keen to remain engaged in the debate about food security in the UK. In accordance with our involvement in the debate, this response focuses on three of aspects of the Committee's inquiry: upcoming consumer trends and their impact, governmental co-ordination on food policy and the criteria DEFRA should use to monitor its activity on food security.

 

About Kraft Foods

Kraft Foods is one of the world's largest food and beverage companies, producing chocolate, coffee, cheese and biscuit products for the UK market.

We have about 1500 employees in the UK and Ireland, including Cheltenham (headquarters) and Banbury (coffee processing factory and R&D).

Our major UK brands include Philadelphia, Dairylea, Kenco, Carte Noire, Terry's Chocolate Orange, Toblerone, Oreo and Ritz.

At Kraft, our challenge is to make sustainability a part of every business decision we make. To help prioritize our sustainability activities, we are focusing on six areas where we can have the greatest impact and that have the greatest impact on our business: agricultural commodities, packaging, energy, water, transportation & distribution, and waste. Further information on Kraft's sustainability initiatives is included at the end of this submission.

 

Consumer trends and their impact on sustainability

 

2) As the Committee would expect, Kraft regularly reviews market data covering a range of factors, including consumer tastes and habits. The Committee has rightly identified that these factors are important for their impact on sustainability challenges. Evidence on what specifically this impact will be is inconclusive, but we have noted below for the Committee's information some relevant findings:

 

3) In the short to medium term, the worsening economic climate is having a real impact on consumer confidence. Due to this, the price of goods will remain a high agenda point. Many customers are changing their spending habits, looking carefully at what they buy, as well as when and where they buy it[1].

 

4) Value is a key priority - consumers are keenly looking for offers and deals that represent stronger value for money. Overall, there is evidence documenting the importance of value to consumers generally and how the importance of obtaining value increases during times of an economic downturn[2].

 

5) For many shoppers, they will increasingly have to re-evaluate their quality-price priorities[3]. Consumers continually make trade-offs when deciding what products they buy, depending on their individual circumstances and the type of products that they are buying. However, consumers' purchase interest and value perceptions for new products do not change significantly with changes in the economic climate. Products must still satisfy consumers' needs[4] and products that manage to tick a number of different attributes e.g. health, premium, convenience will be more successful in a declining economy.

 

6) In light of the recessionary environment, there is speculation about whether ethically sourced products which have been popular in recent years e.g. organic, or certified products such as Rainforest Alliance and Fairtrade, may suffer. However consumers concerned with sustainability show greater commitment to their purchases than their more neutral peers and consumers often buy these products because of perceived performance benefits. Evidence is not conclusive but research indicates that ethically sourced products should remain relatively resistant (at least in the short term) but attracting new users to these products will be a more difficult challenge[5]. In addition, a number of brands such as Kenco/ Rainforest Alliance are offering ethical sourcing at no extra cost to the consumer.

 

7) The economic climate can highlight sustainability issues, such as food waste, as saving money and environmental concerns can work hand in hand as people try new ways to waste less food.[6]

 

8) There is a possibility that there will be renewed demand for basic ingredients as consumers try and find ways to save money by cooking from scratch - opting for ingredients rather than potentially more expensive pre-prepared options is a potential consumer strategy during a downturn.[7]

 

9) Consumer may look at innovative and different ways to purchase food e.g. increased access and ability to use internet shopping, and changing fuel costs may make this option more financially and environmentally attractive. People may also complement their regular grocery shopping with top-up shopping from local facilities, providing potential opportunities for local food networks[8].

 

DEFRA's work with other departments and inter-governmental bodies

 

10) We welcome DEFRA's participation in the recent PMSU "Food Matters Towards a Strategy for the 21st Century" report and believe that it was an important step to create an integrated cross-government approach to food policy, which is needed to avoid setting contradictory objectives.

 

11) It is appreciated that DEFRA has close links with European bodies and the UK actively works with the Commission and Parliament. It is very important that DEFRA coordinate with development agencies. Many of the goods that consumers buy in the UK rely on commodity production in the developing world e.g. Kraft products use agricultural inputs grown in the developing world such as cocoa, coffee and cashew nuts.

12) Kraft Foods believes that addressing the global food security crisis requires engagement of governments and international organisations. Development, trade and agricultural policies should have international co-ordination, focus on removing market distortions and promoting agricultural production in developing countries and supporting supply chain efficiencies.

 

13) In particular old policy objectives that may conflict with new priorities should be reviewed e.g. in light of the food security threat, removing traditional barriers to trade would benefit developing world farmers and increase the world's ability to feed itself. Specifically with regard to development policies:

Focus needs to be on market-based agriculture in the developing world in order to break the cycle of hunger & poverty (development has always started by restructuring productivity in the agricultural sector and incomes in rural communities).

Build infrastructure (e.g. transport) as a way to promote market linkages and enhance supply chain efficiency. This should complement and support private sector investments.

Micro-finance: microcredit, credit, savings and insurance products for farmers and primary processing sector.

 

Criteria to measure the UK's response to the challenges of food security

 

14) Kraft believes that DEFRA correctly identified the challenges facing global and UK food security in its paper "Ensuring the UK's Food Security in a Changing World". Population increases and subsequent increases in the demand for food have led to even greater demands on natural resources. The ambition is to deliver enough food at prices that people can afford to pay, from environmentally, socially and economically sustainable production systems.

 

15) Our response to DEFRA's consultation on Food Security highlighted that all strategies to address long term supply and demand challenges should adequately monitor social and environmental effects as well as the traditional economic effects and associated indicators such as price and supply data. With this in mind, it is our view that DEFRA should include the following criteria in measuring the UK's response to the challenges of food security:

 

16) Economic Criteria

 

Price: Criteria should focus upon economic indicators that reflect changes in the stability of food supply and effects on price: real commodity prices, share of UK imports, stock ratios, volatility and price inflation indices.

Horizon scanning: As part of this, we would urge DEFRA to undertake regular horizon scanning exercises, looking for factors that may have a long term effect in order to anticipate trends that will affect food security in the future e.g. structural changes in commodities markets or environmental conditions.

Trade: DEFRA must maintain a global outlook in their monitoring and look at the global food supply in addition to just the UK supply. As a global company, Kraft buys raw materials from a wide variety of sources - we support this theme as a key element towards ensuring food security. The elimination of barriers to trade which can have market distorting effects is important, for example, the reform of the Common Agricultural Policy to liberalise markets and reduce/ remove production controls.

 

17) Environmental Criteria

 

Environmental and social factors can have a big impact on securing stable food supplies. DEFRA should include certain factors in their analysis of UK's performance against goals:

 

Water (Availability of Water and Impacts on Water): The food industry relies on a constant supply of clean water - it is a major ingredient and is a key element of many food production processes. Industry's highest usage of water is in agriculture which accounts for around 37% of Europe's fresh water consumption according to the Confederation of the Food and Drink Industries of the EU. Policies to increase food supply should measure the effect on the availability and quality of water as a result in changes in the farming and processing of food.

Energy and the carbon impact of increasing food supply: Carbon dioxide and other greenhouse gases can have a negative effect on the environment and climate change and should be a key measure to monitor whether the UK is increasing food production in an environmentally sustainable manner.

Biofuels: The impact of biofuels should be acknowledged at a global policy setting level. Kraft welcomes the UK Government's recent reports on the potential impact of increased biofuel production on food output. A cautious approach should be maintained on this issue, taking full account of sustainability factors and prioritising non-food sources of biofuel.

Land use (availability of arable land): In both the UK and developing countries, availability of arable land will greatly determine capacity for the food industry to supply growing demand. Measuring the impact on land, e.g. deforestation, will also provide guidance towards ensuring that increased production is sustainable.

 

18) Social Criteria

 

Social Cohesion: shortage of food and competition over natural resources (water, energy) can lead to social unrest. DEFRA should develop criteria to measure effects of food policy on community and social cohesion in both the UK and developing countries.

Labour trends/migration: the availability of labour and appeal of farming in rural communities is an important factor in ensuring we can continue to meet future demand.  With this in mind, the policy framework for farming is important.

 

Kraft Foods is fostering the advancement of sustainable agriculture to deliver social, environmental and economic benefits in areas it sources key commodities from (see Appendix).

19) Technology Indicators

 

New Technologies: At a global level, Kraft supports a science-led debate on new technologies that together with widespread adoption of good agricultural practices could stimulate increased food production, particularly in developing countries. DEFRA could benefit from monitoring societal attitudes to potential methods and impacts associated with new technologies that increase food supply.

 

20) Summary

 

DEFRA should take a long term and global view in its approach to food security. In DEFRA's discussion paper on "Ensuring the UK's Food Security in a Changing World", the supporting indicators highlighted were predominantly short-term economic indicators. However, in order to assess food security effectively over time, analysis of medium and long-term future trends will also be important, as will a holistic approach taking account of social and environmental factors in addition to traditional economic indicators.

 

APPENDIX

 

Kraft Foods and Sustainability:

 

At Kraft we are focussing our attention on areas where we can make the biggest difference:

reducing energy use, water use and greenhouse gas emissions

reducing waste from manufacturing facilities

reducing packaging materials

increasing sustainability in agricultural sourcing e.g. coffee and cocoa

 

To find out more please visit: www.kraft.com/About/sustainability

 

Energy:

 

Kraft Foods' global target is to reduce CO2 emissions by 25% between 2005 -2011.

 

Kraft Foods UK & Ireland's coffee manufacturing facility in Banbury, UK has been investing to contribute towards this target:

 

- New equipment (energy efficient mechanical vapour recompression evaporators) has been introduced to concentrate coffee liquor for soluble coffee processing, resulting in less waste and improving energy efficiency by 27%.

- Spent coffee grounds are incinerated from soluble coffee processes to produce energy and improve efficiency.

 

Between 2000 and 2008, CO2 emissions have been reduced by 19%, and Banbury continues to invest in energy reduction projects and renewable energy sources.

 

Water:

 

Kraft's global target is to reduce the company's water consumption by 15% between 2005 and 2011. We look for opportunities to reduce our water use and minimise the impact of water.

 

Commodity Sustainability

 

At Kraft we aim to enhance the communities we source commodities from and do business in. We believe a sustainable approach to commodity sourcing - based on environmental, social and economic responsibility - has a major role to play in protecting food security.

 

We have sustainable sourcing initiatives in the key commodities of coffee and cocoa.   We are engaged in efforts to promote long-term coffee sustainability via our partnership with the Rainforest Alliance (www.ra.org) and our membership in the Common Code for the Coffee Community (www.4c-coffeeassociation.org).

 

The Rainforest Alliance is an independent, non- profit international organisation. The Rainforest Alliance Certified(tm) programme assures consumers that the products they are buying come from farms that meet demanding standards for environmental, economic and social improvements.

 

We understand that our consumers are increasingly demanding high quality, sustainably sourced products that make a tangible, positive difference to the quality of life for farming communities and environments. We also depend on coffee farmers' long-term ability to provide the quality and quantity of coffee beans that can help us meet the demands of our consumers.

 

Kraft Foods is the largest buyer of Rainforest Alliance Certified coffee in the world. Promoting coffee sustainability helps improve the environment, as well as economic conditions of local communities in which crops are grown - the Rainforest Alliance estimates that our purchases of coffee from certified farms ensured the sustainable management of 101,311 acres of farm and forestland; and benefited more than 205,000 farmers and their dependents.

 

In the UK, Kraft has set the goal of converting the entire Kenco coffee range to using Rainforest Alliance Certified (tm) coffee by 2010. We source cocoa from Rainforest Alliance Certified farms in Cote d'Ivoire and earlier this year launched Rainforest Alliance Certified Suchard hot chocolate.

 

In addition, Kraft participated in setting the Common Code for the Coffee Community, a multi-stakeholder initiative that seeks to establish baseline sustainability standards for mainstream, non-certified coffee markets.

 

FDF's Five Fold Environmental Ambition

 

Kraft UK & Ireland are also participating in the Food and Drink Federation's Five-Fold Environmental Ambition which aims to make a collective contribution for the food manufacturing sector in the UK.

 

January 2009

 

 

 



[1] State of the Nation 2008

[2] Recessionary Consumers & Product Choice - New Consumer Insight Series - June 2008

[3] State of the Nation - Category Trends 2008

[4] The role of innovation during an economic slowdown - Nielsen 2008

[5] Recessionary Consumers & Product Choice - New Consumer Insight Series - June 2008

[6] State of the Nation - External Environment 2008

[7] Recessionary Consumers & Product Choice - New Consumer Insight Series - June 2008

[8] State of the Nation 2008 - Future Trends