The Welfare of Laying Hens Directive - Implications for the egg industry - Environment, Food and Rural Affairs Committee Contents

Examination of Witnesses (Questions 88-117)

Q88 Chair: Mr Opie and Mr Jorêt, thank you both very much for being with us. Perhaps you would like to introduce yourselves for the record.

Andrew Opie: I am Andrew Opie, director of food and sustainability at the British Retail Consortium.

  Andrew Jorêt: I am Andrew Jorêt, technical director of Noble Foods, which is the largest egg marketing company in the UK and is also involved in egg processing. I am also deputy chairman of the British Egg Industry Council, from whom you heard earlier through my colleagues.

Q89 Chair: At the outset you might just like to describe the interests of Noble Foods and where most of your production takes place.

  Andrew Jorêt: We market about 40% of the eggs produced in the UK. We are producing on farms that are both owned by the company and are on contract to us. Just under 20% of the eggs are from farms that we own; 80% come from farms that are on contract to us. We are right across Great Britain but are not involved in Northern Ireland, so we are in England, Wales and Scotland.

Q90 Chair: Perhaps I may ask at the outset about the labelling provisions generally, how the animal welfare provisions affect you and how they are being implemented currently.

  Andrew Jorêt: We have always had a very clear policy in the UK of clear labelling, as my colleague Mark Williams indicated. We think that is important. I think it is important that we are transparent on these issues. It then becomes very much a consumer choice as to what type of egg that person wants to buy when they have clearly in front of them the production types available to them. I am not exactly sure when labelling came in compulsorily, but certainly I was involved in the industry when labelling was not compulsory. Our feedback was that when it did come in, it did not really affect sales at all. While labelling is important and it is important to be transparent, personally I do not believe that it holds that much sway in terms of what consumers will do.

Andrew Opie: Obviously, we have always supported clear labelling and gone above and beyond what is legislatively required, although these terms are well defined. I would agree with that to a certain extent, in that labelling is really only an indicator and helps consumers make a quick choice; it does not necessarily sell them itself. But the trend for shell eggs and increasingly for processed eggs is the demand for free range, particularly from retailers in the UK. Some retailers have gone completely for free range shell eggs; some retain some caged sales but also have large numbers of free range sales. But looking at the trends in terms of consumers, over the last decade there has been a definite push towards the free range end for eggs, and increasingly into processed products as well.

Q91 Chair: Mr Jorêt, I think you said in your memorandum that your company produced over 60 million eggs for consumers. Presumably, that is per year.

  Andrew Jorêt: Yes.[2]

Q92 Chair: Would you say that 50% of those are already free range?

  Andrew Jorêt: That is right, yes.

Q93 Chair: That is helpful. Do you have any concerns about how the directive will impact on you?

Andrew Opie: Not necessarily. The challenge for us is traceability. We heard earlier about some of the concerns quite rightly raised by UK producers that they are not hampered. I think retailers have an excellent record in both traceability and also ensuring that standards are equally applied across agricultural sectors. I think pigs were mentioned in the earlier discussion. Obviously, retailers are quite happy to be judged by their standards on imports as much as they are on products produced in the UK, but certainly in this case, while traceability is quite challenging—think of the number of products in a supermarket that contain egg or use egg in their production—all the major retailers have been actively involved to ensure that the eggs that come into their supply chain meet the regulations before they are introduced in 2012.

  Andrew Jorêt: Our concern is really the same as has already been expressed by BEIC. We estimate that about 30% of the eggs in Europe will be non-compliant. We want very strongly this intra-EU trade ban on illegal eggs, but even if the political ban is in place you then have to ask: what sort of policing mechanisms exist? In practice what does it really mean?

Our big concern is that there will be some seepage and leakage. None of us minds competition but it should be fair competition. Clearly, those people have not had to make the investments that the UK industry has made. Those investments, which are the biggest ones I have seen in my career in the industry, mean it costs us more to produce out of those systems. You can very easily be undercut by somebody who has not made that investment. Our big concern in particular, as has already been expressed by previous witnesses, is in the products area where eggs are an ingredient. That might be eggs coming over to be used in manufacture in the UK. Equally, it could be an egg product manufactured somewhere on the continent with locally produced egg that then comes over here. That is the bit we fear most.

Chair: That is very helpful.

Q94 Thomas Docherty: What evidence is there that customer awareness of egg or hen welfare is reflected in their decision about not only shell purchases but the other 50% of the market?

  Andrew Jorêt: Free range started in this country in the early 1980s and has grown rapidly since then. At the moment that rate of growth is increasing. When you look at consumers' motivation for purchase, it would be wrong to assume that all people buy free range eggs just because of animal welfare considerations. Certainly, a lot of them do but, as we find from our own market research, there is also a significant body of people who have a perception that a free range egg is a better quality egg in some way, shape or form. If you do blind testing that is not the case; the eggs are of equivalent quality.

What it also throws up is that there are people out there who do not buy only free range eggs or cage eggs; some consumers buy both. They might buy free range eggs if they are doing a family breakfast at the weekend; they might buy a lot of cheaper value cage eggs if they are doing a big family bake, so it is not always animal welfare considerations. The talk today has all been about animal welfare, but that is not always the reason for the choice.

Q95 Thomas Docherty: In speaking to quite a few colleagues ahead of this inquiry, they were not aware of the range of products that contain eggs. I suspect that is true for the wider consumer. After all, MPs are supposed to be much more knowledgeable than the general public! Do you think those consumers who do express a concern about animal welfare and form the category of purchaser you mentioned are aware that the products they buy that contain eggs are not necessarily free range?

  Andrew Jorêt: Again, unless it is a very obvious product that contains eggs, such as a quiche, there is probably value in saying there is free range or cage egg in that quiche, but where you are talking about really hidden ingredients in rather obscure uses, most people will not realise that there is an egg product there, so how can they be concerned about the type of egg that is in there?

Q96 Thomas Docherty: I suppose that is true; yes.

Andrew Opie: I guess that is true, but I think we have seen growth in the use of free range eggs right across. It started very much at the premium end and it has moved on. For example, we have seen some retailers go to completely free range now for their processed products. Remember that egg is also an allergen, so it is labelled on all products. Therefore, if you wanted to look for egg or see whether it was in a product, you would be able to see that. I think that the growth will continue in processed areas. We have seen it a lot in pasta and areas like that; now we have seen it in quiches and more well-known products where you would expect to see eggs, but the growth definitely continues.

There is a demand for free range. Interestingly, the demand for free range has held up extremely well even in the recession. Looking at the IGD's[3] current figures on shopper trends, it is quite clear that consumer expectation to buy free range products will continue even into next year, which is interesting.

  Andrew Jorêt: I would concur with what Andrew Opie said about demand. If you look at either TNS or Nielsen data for the free range market, it is still growing at about 12% per annum, which is quite substantial in the face of the recession. The only egg that has suffered in the recession is organic, which has probably halved in the last two years. The response to that has been that a lot of producers have had to switch off organic farms and convert them back to standard free range farms rather than organic free range farms.

Q97 Thomas Docherty: I go to Tesco on my way home, but I have to confess I am not aware whether, for example, a Tesco quiche is labelled as free range. It may be. Do you think that consumers are putting pressure on retailers in particular, and that when they go into Sainsbury or Tesco they apply pressure for them to switch to free range in their quiches or other products?

Andrew Opie: Yes. There is definitely a growing demand, and because it is a premium product it will cost more to produce, because free range eggs will cost more. The retailer will want to make that easy for the consumer to find, and they will identify that in the product, so "pasta made with free range eggs" or something like that will be in the label so people can find it. It is not in their interests to sell a product that costs them more to produce for a lower price, when there might be an alternative product on the shelves that is made with caged hens' eggs. So they will try to make it as easy as possible for you as a consumer to find it, because it is costing them more to produce and it is generally a premium product.

Q98 Thomas Docherty: Obviously, companies like Mr Kipling in a more high-profile way made that move across. Could you comment on the impact on the consumer of companies like Mr Kipling making that high-visibility switchover?

Andrew Opie: I think it just continues that trend. We heard earlier that free range is something that consumers seem to grasp and want; they believe that if they spend extra on a product they will be rewarded by a value product. I think high-profile brands help. You will have seen some of the statements retailers have made in terms of their determination to sell either only free range or to move to free range products. That is because it helps them sell their whole brand. It is enhancing their brand in terms of their consumers and what they are offering overall on animal welfare. There is definitely an incentive for brands to follow that kind of lead and make it clear that they are selling free range and are supporting the free range process.

Q99 Amber Rudd: Do customers get most of their information about the products from packaging or from other sources such as advertising, magazine articles and so on?

  Andrew Jorêt: There is limited information available on the egg pack; there is standard nutritional information and usually some description. You will also find there is access to websites by trade associations, such as our Lion website, which would be advertised. If you go on to that there is a lot of information about all kinds of production methods and anything you want—or even company websites if it is a specific brand. I think people would get their information from that rather than the limited amount on the pack itself, but that pack can give you access, if you want it, to greater sources of information through the web.

Q100 Amber Rudd: Do you think it is good for business when companies advertise that they buy or sell only certain types of high-quality egg?

  Andrew Jorêt: As business men, we think it is good anyway when people are promoting eggs in whatever shape or form, full stop. It is right that the words "free range" have almost become a brand. Therefore, as Andrew rightly said, if someone is using free range eggs they will want to advertise the fact that they are doing that because they would see marketing value in doing that.

Q101 Neil Parish: I think it shows that over the years you have been able to market free range compared with battery hen eggs and people are beginning to differentiate, and you see a much bigger take-up of free range eggs. Do you think the consumer would be ready to differentiate between a cage egg and an enriched cage egg? That will not be the point here, hopefully, if we can stop them coming in, but it will be in some Member States very difficult to market. What is your view? What is the difference from the consumer's point of view?

Andrew Opie: I would agree with your assessment. I think the issue is free range or caged. As we have seen with some of the other animal welfare issues, in the case of pigs there were some issues about tail-docking and some minor issues about welfare. It is much harder to sell to consumers than stalls and tethers, for example. It is a very visible thing; it is very tangible for a consumer to get to grips with. I would think it would be extremely difficult. I am not sure many people would want to advertise that fact. It would be difficult to get that as a premium when you are in the market against free range, for example.

Q102 Neil Parish: Further to Mr Docherty's question, how much pressure are retailers putting on food manufacturers to use higher animal welfare standards for eggs?

Andrew Opie: It is definitely a process that they are all going through now. I have seen a couple of recent statements by retailers to confirm that is the case and I have spoken to them myself, so it is a case of going through the specifications with their suppliers and making sure that they source from the right places, but this is what they do day to day anyway. This is traceability and food safety, so it is something that can be done and will be done. It is quite a complex process, because we spoke about the number of egg products that are used, but it is something they are going through at the moment. It is possible to do it. If it is possible for retailers to do it, it is possible for other manufacturers to do it.

Q103 Neil Parish: Especially when it comes to using powdered or liquid egg, surely that must be the most difficult thing to trace.

Andrew Opie: It is more difficult to trace, but we have seen cases. Unfortunately, recently we saw a case in this country involving dioxins. There had to be a very small withdrawal. Eggs had come from Germany via Holland. It is possible to trace those and withdraw the product. It takes a little time and work with your supply base, but it is absolutely possible to do.

Neil Parish: The European Commission does not seem to want to add an additional code for the egg that does not comply with the legislation on enriched cages and is produced now in standard cages. Provided it does not come into the country, that is fine. I agree that if it does not have any mark on it at all, it would not be identifiable because you would not be able to trade it, but surely there must be temptation in some Member States, especially if they have a mixed poultry farm with some enriched cages and some existing battery cages, just to put the same mark on it.

Q104 Chair: If I may broaden that question, is the issue not one that was put by Roy Kerr, an egg producer: it is not so much the eggs that are produced in the EU Member State; it is eggs that are exported into another EU Member State and are then in free circulation? As he put it, "these are production units outside the European Union whose main intended market is inside the European Union to take advantage of the lack of border controls and traceability of egg in liquid or product form". [4] Do you believe that after the EU directive comes into effect, that will be compounded, Mr Jorêt?

  Andrew Jorêt: At the moment there are not many third countries that can import shell eggs into the European Union because of our salmonella rules. There must be equivalence there, even though there does not have to be equivalence on animal welfare. So to a certain degree we are protected.

Q105 Chair: That is in shell?

  Andrew Jorêt: That is in shell, yes. It is not true of eggs in product; it could be dried product and so on. That is the problem area.

Q106 Chair: I think the original question was specifically about liquid or product form. Is this an issue now, and do you believe that it might be a greater issue if the EU directive comes into effect?

  Andrew Jorêt: It is not a big issue today, but it will increasingly become an issue because on the one hand costs are going up in the EU because of the directive, and at the same time the protection that exists by means of tariff barriers for imports from third countries at some stage will reduce whenever there is a final conclusion on the Doha agreement. Therefore, that would leave the whole EU potentially more exposed to competition from certain countries. The countries we would fear would be those like Ukraine, China, Mexico and the United States, who are very big producers of very low-cost powdered egg.

Andrew Opie: It comes back to the point I made earlier. Responsible companies will think very carefully about their own supply chains. Would you want to take from countries where you put yourself at risk? Ultimately, aside from the food safety risk, there is reputational damage if you had not audited something in your supply chain and had not traced it properly and found it was a problem. I do not believe that would be so for the major retailers because they would not want to put their reputation at risk; they will make sure that their supply chains are robust, safe and can supply the kind of quality that they and their consumers demand.

Q107 Chair: Perhaps I may run past you something Lord Rooker told the Committee in our evidence session on animal cloning. He said that "you can technically tell whether an egg is free range or not". If I may expand that, other than whether a number is on it, how do you establish whether an egg has been produced in a conventional or enriched cage?

  Andrew Jorêt: Are you asking: is there a way to distinguish?

Q108 Chair: Can you?

  Andrew Jorêt: No. In fact that would apply not just to eggs in cages; it would apply if you had unmarked free range and cage eggs. You would not be able to tell one from the other. There are one or two technical tests that people are beginning to look at, but it is more to do with very technical issues about isotopes, which tell you the locality where it might have been produced but not necessarily whether it is free range or cage.

Q109 Chair: What is your response to Mr Parish's question about the Commission's reluctance to use production method codes?

  Andrew Jorêt: While we would like to have a differing production indicator, the likelihood anyway is that we will have farms on the continent, in those countries that do not comply, that are partially compliant. If they are to produce illegal eggs I am sure they will also mark them illegally anyway, so whether or not we have the number they will probably use it wrongly. Therefore, I think the important thing for us politically is to have the ban in place and then for us as an industry to work very hard with our Lion scheme to say that, if you want to ensure compliance, you go for Lion shell eggs or Lion egg products. That is the pressure that we will be applying as an industry towards the end of this year.

Q110 Thomas Docherty: One thing that fascinates me is that if you go into the big supermarkets these days you find world foods: Tesco has huge aisles and other specialised retailers provide imported finished products. I suppose my question is to Mr Opie, although Mr Jorêt may want to add something. What is your impression of what will happen on 1 January if, for the sake of argument, Spain, Portugal and Poland have not complied and they produce a product—a cake, biscuit or whatever else—and then expect to export it here? Has your organisation discussed with the Government, be it BIS or Defra, the legal implications and practicalities of a ban?

Andrew Opie: We have not discussed that with them. Our companies are really looking only at their own brand products, so they could not necessarily speak, for example, for the manufactured products that are on their shelves. Remember that they completely control only their own supply chain. About 50% of products in a typical supermarket would be own brand; about 50% would be branded products. They have control of their own supply chain, so they would be in control of those and they will be going through all the steps of traceability at the moment. If you wanted to speak to branded manufacturers you would have to ask them that question.

Q111 Thomas Docherty: So for argument's sake, Sainsbury or Tesco have no view on whether or not cakes or biscuits from Poland or Spain would fall foul of that. I am surprised by that.

Andrew Opie: Our members would prefer that you did not buy the branded products and bought their own brand products. That is why they are so robust about their brands. They will say that they have been through all these traceability issues and can demonstrate to consumers where their eggs are coming from and to what standards they are produced, and they would hope that that would persuade the consumer that that was the right thing to do, because then they would buy their products.

Q112 Neil Parish: You have partly answered my question. One of the things is the policing of all this. I remember from the foot and mouth inquiry that it is basically a paper trail from the country it has come from, and very few physical inspections are ever done, and with eggs it is probably even more difficult. From your point of view is there anything more we can do to make policing easier and more robust?

  Andrew Jorêt: Unless you start to look at port and border controls, not really. That was really my earlier comment: we think it is very important that politically this ban on illegal egg is in place, because then if there is leakage and it is exposed, hopefully the issue is that through embarrassment, people will stop doing it. I think it is then down to us as an industry to look after ourselves, and that is why we are very pleased we have a strong Lion scheme. We are going to use that, and we will be promoting through the Lion that if you want an assurance of compliance, look for the Lion for both shell eggs and egg products.

Andrew Opie: Similarly with the retailers, regulation is fantastic and enforcement is great, but because of due diligence issues they invest in their own supply chains; they carry out audits in their own supply chains. Andrew will know as a supplier that they will come and see him and his producers regularly to check that they are doing what they say they should be doing to the right specification. A lot of auditing goes on. For example, in food safety we have a BRC standard that is used throughout the world in terms of factories, productions and safety and the ingredients that go into those factories. There are plenty of audits available to those companies that are prepared to invest in them.

Q113 Neil Parish: Do you do that on processed products as well?

Andrew Opie: Definitely with processed products, yes.

Q114 Richard Drax: Do you have any concerns that the implementation of this directive could lead to an egg shortage? Is there any risk of that, or not?

  Andrew Jorêt: The degree of non-compliance in Europe that we anticipate is so great—

Richard Drax: It is one third, is it not?

  Andrew Jorêt: —that it is unthinkable that that production will just be slaughtered because it is illegal. That will not happen, so that egg will be there. So I do not think there will be an immediate shortage. Our concern comes back to unfair competition.

Andrew Opie: I certainly would not think there would be any immediate problem with shell eggs because they are 100% UK on major retailers' shelves, so that is covered. We have heard earlier that all of them will be compliant. As to processed eggs, a lot of that product would come from the UK anyway; what went into the supply chain would be manufactured here, and a small element would come from the EU or outside the EU. Therefore, we would not anticipate any problem, particularly not with shell eggs but not with processed products either.

Q115 George Eustice: Mr Jorêt you said earlier that you supported an intra-EU ban on eggs that did not comply. I just want to ask Mr Opie whether that is also the position of the British Retail Consortium. Would you support an intra-EU ban on product within the EU that did not come up to standard?

Andrew Opie: Yes, absolutely. I said earlier that our main supplier base is UK farmers. The last thing we want to see is our own UK supply base hamstrung because it is being undermined by illegal imports. It is not something that we will entertain in our supply chain, so we do not see why they should also be subject to unfair competition. We would not have a problem with that. It will not affect our supply chains; we will still put the same products on the shelves as we do now, and we are taking steps to make sure that we do not take illegal eggs. Therefore, it would not affect us and we do not see why UK farmers should be affected adversely.

Q116 George Eustice: The other area in which I was interested was the extent to which the move to enriched cages might affect demand for other production systems, such as barn-produced eggs or free range. There is no doubt that cage-produced birds became a kind of totem for factory farming generally over the last 25 years. The Daily Mail would cover it—chickens are always up there. That is undoubtedly what has driven the success of free range egg production, but is there a danger that this undermines that if basically people take the view that it is all okay now because these new regulations are in place? Do you see that having an impact on demand for free range?

  Andrew Jorêt: I suspect not, and that the people who are buying cage egg do so because they are very price-driven. They probably do not want to be reminded about the production method, if I am honest about it; it is all about price. The colony egg will still be substantially the cheapest form of egg production. Therefore, while we are talking very much about free range growth, we are not also talking about the complete demise of any cage production in this country. I think that will go on for some time to come.

Andrew Opie: I would concur with that.

Q117 Chair: Referring to feed and energy prices, have they had a big impact on your production and operating costs?

  Andrew Jorêt: At farm level very much so. Feed is the biggest single item of cost in eggs at farm level, whether it is cage, colony or free range eggs, and that has nearly doubled. That has put producers under enormous short-term pressure because as of yet, that has not really translated through into retail prices so we can feed back additional margin to producers. Therefore, in the short run there is a problem.

My colleague Mark Williams indicated that there had been a little imbalance in the market. Collectively, we have slightly over-expanded on free range and have had a surplus. That expansion is temporarily on hold while the market catches up with itself, which it is doing. We forecast that by the end of the summer we will be back in balance. We will then perhaps see prices having to rise to reflect the higher costs.

When you look at forward pricing, wheat today is about £195 per tonne; new crop wheat is still coming in at about £170 per tonne. It is at a record high level; it has never been there before. Therefore, it is not just a case of going through a short period when there are high food costs and we all tighten our belts and struggle and then carry on at old levels. I think there must be some translation of pricing through into the consumer market in the end.

Andrew Opie: It is a very difficult market at the moment, because on the one hand you have real pressures on suppliers, which we are very well aware of. Retailers themselves have rising costs. Oil is really important in terms of distribution and all those sorts of areas. On the other hand, you also have consumers who feel increasingly under pressure. Therefore, you have a market where according to our figures food prices have risen by about 4%, which is unusual. We have been through periods of deflation, not inflation. However, we have consumers who are increasingly under pressure in terms of their own budgets, so to try to pass those on but also ensure a sustainable future for farmers is increasingly difficult.

Chair: You have been very generous with your time. Thank you very much indeed for your contribution to the inquiry.

2   Note by Witness: Noble Foods Ltd produces over 60 million eggs per week Back

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