Supplementary memorandum submitted by
Tesco (DFoB 33a)
TESCO SUSTAINABLE
DAIRY GROUP
We have direct relationships and contracts with
over 1,100 dedicated Tesco Dairy farmers—The Tesco Sustainable
Dairy Group (TSDG). We provide TSDG members with a guaranteed
price for milk which is independently reviewed twice a year taking
into account farm input costs and market prices. The current price
is 27.37ppl. All of our own brand standard milk is supplied by
Tesco Sustainable Dairy Group farmers. This represents 76% of
our weekly liquid milk sales.
The Group is about more than just price. It is about
establishing collaborative relationships within our milk supply
chain and working together to improve quality, animal welfare
and environmental impacts. In practice this means regular communications
through regional meetings, workshops and conferences; high standards
through for example mobility scoring and milk recording; reducing
environmental impacts through our carbon footprinting and labelling
exercise and nutrient management plans and research and best-practice
through our dairy Centre of Excellence at Liverpool University.
SUPPLIER EXAMPLES
The Committee asked for examples of well-run
and well-organised co-operatives with whom we enjoy a good relationship.
Before giving a couple of examples we thought it
would be useful to set out what it is we look for in establishing
and building relationships with our suppliers. It is also worth
reiterating that we choose our suppliers based on their individual
merits, not on whether they are a co-operative or otherwise.
We are committed to providing our customers
with a wide choice of healthy, good quality and affordable products.
We therefore aim to work with the best suppliers and to source
the best products at the best prices. In addition to being competitive
on price, any potential supplier is required to meet high standards
on quality, hygiene, the environment, animal welfare and labour.
We expect our suppliers to meet these standards in every country
we source from. Our success is linked to that of our suppliers
and we therefore strive to build strong long-term relationships.
This provides them with the certainty to invest in and innovate
for the future. This ability and willingness to invest and innovate—be
it in new processes, products or packaging—is also an important
part of what we look for.
The one area where we take a slightly different
approach is in local sourcing. More information on our wider programme
follows below but here we recognise that smaller, often family-run
businesses may need additional support in meeting our standards.
In these cases we offer assistance such as the free loan of metal
detectors for use in factories which can help suppliers meet our
standards on areas such as food safety. We also help them to understand
the sales potential of their products before they make an investment
in equipment.
An example of a co-operative we work with in
the UK is Milk Link from whom we source local choice milk for
Devon and Cornwall, some branded products and some cheese. We
enjoy a positive relationship with Milk Link who comfortably meet
all of our standards and expectations. As an example of their
forward-looking approach they recently announced a collaboration
between Dairy UK, the National Skills Academy and Reaseheath College
to provide a foundation degree level qualification for dairy processing
and manufacturing personnel. Two Milk Link employees are participating
in the course at Reaseheath College in Nantwich this year. We
always welcome innovation and this recent venture demonstrates
that they share our desire to invest in the future sustainability
of the dairy industry.
A good example of an international cooperative
is Silver Fern Farms who are New Zealand's leading meat marketing
and processing company. The company is structured as a farmer
cooperative, and is owned by about 20,000 farmer suppliers. They
have recently undergone capital restructuring which has placed
them in a strong financial position. Another key aspect of the
restructuring was a change to the governance structure which now
means that three members of the main board are employed independently
on the basis of their skills and experience which provides business
acumen alongside the vital experience of farmers. Silver Fern
are also very committed to investing in new innovations and technology
which helps them to maintain their competitiveness. For example,
to improve traceability, they recently introduced radio-frequency
identification (RFID) tags for accurate tracking of carcasses.
TESCO LOCAL
SOURCING PROGRAMME
Many customers want to buy products that support
their local businesses and economy and this is still true even
in the current economic downturn.
We offer a large variety of locally grown produce
which is available during the British season. Lines will vary
across the country depending on the agricultural environment and
the climate, from cherries in Kent to garlic from Nairn.
We now have over 4,000 local lines and we work
with over 480 local and national suppliers who provide us with
celebrated and diverse local products from apples and potatoes
to confectionary.
In 2008 local products accounted for £624
million or 2.2% of UK sales, compared with 1.7% the previous year.
This is a 30% increase in sales compared to 2007. We are on track
to meet our target of £830 million sales of local lines this
year and to increase this to £1 billion by 2011 in the UK.
To ensure we understand what our customers want
to buy in their area we have a network of five regional buying
offices. Each office has a dedicated team of buying and marketing
managers who are supported by local technical and merchandising
teams. Collectively they work with local suppliers—many
of them very small family businesses—to launch their lines
and help raise awareness amongst our customers. We also offer
a great deal of technical help to our local suppliers and help
them to better understand our customers. One way we do this is
through a partnership with Kent Business School who work with
Dunnhumby to give suppliers insight into trends and customer habits.
Our local sourcing programme has led to a number
of success stories where producers started out in a few local
stores then ended up being stocked nationally. One such success
is Holland's Pies who originally supplied us in the Lancashire
area but who now supply our Tesco own brand frozen pies nationally.
Another example is Castle MacLellan Pâtés. These
were developed in a small delicatessen but the company now supplies
all the pâtés for our Scottish deli counters and
produces a range of Tesco Finest pâtés sold throughout
the UK.
To increase awareness about local products we
are soon to launch a new point of sale package which highlights
the origin of local products. This links the product to the location
where it was produced and the local people behind in the business.
We work with many community organisations and
schools to tell people about where our food comes from and to
encourage a greater understanding of the food industry. Our work
with the Royal Highland Educational Trust for example has helped
to deliver over 2000 assisted farm visits for schools as part
of the countryside initiative.
As part of our commitment to UK farming and
local producers we also organise an annual Tesco Cheese Challenge
which is dedicated to finding great new British Cheeses and giving
smaller producers the opportunity to take their cheese to a wider
audience. The overall winner will be stocked in stores nationwide
and winners of each category are stocked regionally. This year's
winner is Ashley Chase Goats Cheddar with Cranberries which is
produced in Dorset.
Tesco
November 2009
| 
