Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Examination of Witnesses (Questions 431-439)




  431. For the record, we have Penny Coates, who is the Business Unit Director of Asda, Ian Merton who is a Director of Food at Sainsbury's and Lucy Neville-Rolfe who is the Corporate Affairs Director of Tesco. Thank you for coming. Our purpose in this inquiry is to try and work out the future directions for farming in the light of various scenarios, almost none of which is the scenario sketched by Sir Don Curry but different subsidy regimes, different sociology and different consumer patterns. If you could, so far as possible, both my colleagues in their questions and you in your answers, direct your answers to that more strategic idea rather than squabble about whether supermarkets and farmers like each other, that would be extremely helpful. All of you in written submissions emphasise changing consumer demands, people going for more and more processed food, more ready meals, the so-called traditional meal opportunities are diminishing, this sort of thing, and yet everybody says at the same time we want to give more value and more prominence to local products, regionally identified products. How do you square the market place which is it appears going for more and more processed products in which, by definition, you do not quite know what is in them or it is not so immediately apparent with a quite clear regional identity? How does the farmer buy into it?

  (Mr Merton) If you want me to lead off. I think there are key issues which customers are also concerned about. Clearly convenience food is an ever increasing requirement in today's society but at the same time our customers are saying to us, "We want more locally sourced foods too" so hence we have been trying to provide the choice for them to decide how to move forward. We have been playing both those avenues. In the case of local sourcing, we have now developed over 3,000 lines which we have in our stores throughout the whole of the UK to offer customers a choice of both local foods and new and innovative foods which are in tune with today's customer requirements. I think we can do it through choice and the customers soon tell us if they think we have got it right or wrong.

  432. If I buy one of your 97 sorts of pre-washed lettuce, at least I want to be told where the lettuce came from. If I buy a tin of something, a processed product, how do I know? Do you demand your processors also have a regional sourcing policy?

  (Mr Merton) It depends on the products. Obviously if it is a local product then we would declare where it has come from locally, if it is a more mainstream product then we would have country of origin obviously on the product. Our policy is to make sure we do openly label products and where they come from and that would tend to be country of origin rather than specifically local regions. A good example perhaps of more mainstream produce, our fruit and vegetables have always been labelled with the county for the past few years. We feel you have to define what local means. We think at least by going by county it is specific and people do understand that rather than saying is local one mile, ten miles or 100 miles away.

  433. I am going to ask all three of you this but I will probably get the same answer. When I walk into a supermarket today what do you think are the main differences from a visit to the same supermarket five years ago and what would you expect me to find five years from now in that supermarket? The whole thrust of this is trying to work out how are farmers and agriculture linked to all this. We may have to conclude that food has very little to do with farming at all.

  (Mr Merton) If I start off, I am sure my colleagues will want to add something. As we have moved forward things have changed rather dramatically in terms of what we now offer our customers which is, again, taking into account the convenience aspects of their lifestyles. This appears to be a trend which they require as well as some reassurances about environmental, welfare and other things such as organics providing a choice of products. This is a developing thing. It does change and is changing all the time. The way in which we in Sainsbury's do this is obviously work through our partnership schemes in trying to make sure not only we understand our customers' requirements but we pass this back down the chain through our supplier base. We are developing now the farmer links in conjunction with our supplier base to make sure everybody starts to understand what is happening and to try and predict some of the things we may wish customers to have the choice of in future based on consumer panels and evidence we get from customer perception or things they have asked us to do for the future.

  (Ms Neville-Rolfe) Can I perhaps add and respond to your challenge on five years ago and five years forward. I think if you look back five years the stores would look a lot different. There has been a lot of investment by all the supermarkets in the stores. You would see a lot more organics, we have a range in our largest stores of 1,000 organics. You would see a lot more processed foods, such as pizzas. You would see the market coming through, if you like, worldwide recipes, not necessarily produced outside the UK, places but pizzas and ethnic foods and all of that sort of thing coming through very strongly. You would see a higher level of quality meat and vegetables as the quality has come through the supply chain over that period. You would be able to go for 24 hours to a lot of shops. You would see the vans going round in the aisles, at least in our stores, and I think some of Sainsbury's. You would see a lot more non food sold alongside the food. You have quite a lot of difference. If you look forward five years, I think a lot of those trends will continue. You would see also a lot more point of sale in our stores on price, because value and price has become more overt on the point of sale. Going forward, you will see a lot more of the same. You will probably also see more emphasis on healthy eating because one of the trends going forward that we have picked up from our consumer research, which is very extensive, is that health and safety matters a lot to consumers. So they will be looking both obviously at non food services and at healthy foods. Of course, with rising incomes, people only buy so much food. You may get some of the pound going on things like Finest, more expensive meals, but you will find them moving into leisure related also. The final change has been the shift to eating out. I think the catering sector now is nearly as big as the supermarket and food retailing sector. So a lot of meals are being eaten out and I think you will see a further advance in that direction.

  (Ms Coates) Yes, I would support all of that. I think the moves towards local produce are important to all of the grocers. I think we have all set up teams of people to buy more local products and sell products for localities. Local can be a definition at one store, it can be three stores, it can be a region and that again is driven by consumer demand. Increasingly we are seeing more and more convenience food and, as Lucy said, more and more health food requirements. We have just taken five per cent of salt out of our ready meals recently and I think we would expect to see the same thing with fat. I agree absolutely that the trends will continue going forward, the demand for convenience and for local will continue, as will the demand for healthy lifestyle.

  434. Let me just ask a final question. Let me take a farmer from the Yorkshire Dales in my constituency. He has, let us say, 500 ewes and a few suckler cows or he might have a bit down in the Dales. He looks around him and he says, "There is Tesco with 692 stores, 18,000 square feet of sales area, 185,000 staff and a turnover of £20 million and Sainsbury's with 450 stores, 14 million square feet of space, 140 odd thousand employees and so on, how on earth do I cope with this? What do I do except head for the local butchers to save me".

  (Ms Coates) One of the things that we try to do is we have farmers clubs and, again, I think that has come to all of us. We have farmers clubs and the farmers clubs work on the basis of informing the farmer as much as we can about consumer trends and starting to work with them to deliver what consumers most need in the future. The clubs are free to join. We go out and we do talks—we do this four times a year—with groups of farmers and we work with them looking at how we can create efficiencies within the supply base, things like shared veterinary bills and also how we can breed animals for the future to meet requirements the consumers have. We have a group of processors and farmers who are working with us on that at the moment in livestock as a trial.

  435. Do any of you expect to be selling any British poultry five years from now?

  (Ms Coates) Yes.

  (Ms Neville-Rolfe) Yes.

  (Mr Merton) Yes.

  436. More than now or less than now? Forty per cent of the market now is supplied by overseas.

  (Ms Neville-Rolfe) That depends on the progress of our businesses.

  (Mr Merton) I think there are some key issues here. We are all trying to work through partnership type schemes, and I have left a pack here for you to look at of some of the things we are doing, and I am sure my colleagues have a similar thing. We need to interpret the consumer speak into farmer speak with our suppliers and that is one of the big challenges. Quite often when we are talking about consumer trends, "how do I as a farmer relate to that and have it converted", that is part of the schemes which we all operate. As I have said, we have been doing a lot with partnerships, and I have got a few headline things you can see if you wish to look at them. As we move forward though I think the big issue for the British industry is "How are you going to compete in the market place and which area of the market place do you want to compete in?". For example, taking your question on poultry, the big decision we have all got to face up to is there are levels of quality in the market place and you have to decide in your production environment which area you are going to compete in, whether it is the commodity area or whether it is some of the added value areas, whether it is "Taste the Difference"—a Sainsbury's premium range—and things like this where we add value and the customer pays more because they can see the difference. We have to look very carefully at how we can compete against the world market prices and that will determine how the British poultry industry can thrive in the forthcoming five years or so. Certainly we all want to see a thriving British industry, that is why we are all involved in a lot of food and farming issues directly because we feel passionately we need this, I think the customers want that. Now our evidence from customers says they want that but they are not prepared to pay any price, they need value for money. We need to be clear about which of the quality tiers that we are operating in British poultry can exist and thrive in.

Patrick Hall

  437. Just a quickie. There has been an increase in value added, convenience, processed and of course some people want that, there is no doubt about it but the downside from that is it is a short cut, it is easy and I do not think it is necessarily associated with wholesome taste. Have you considered promoting the idea of cooking?

  (Mr Merton) Absolutely.

  438. Looking five years' ahead, trying to encourage people to return to those skills.

  (Mr Merton) I think we are all doing this, to be fair, in a number of ways. We have all used to an extent celebrity chefs and things to try and promote cooking but on top of that we have got ranges of products, we use a range called "Just Cook", rather than provide the ready meal we produce the product already prepared, ready to be cooked quickly and easily. We start people down the cooking route again to try and realign them with ideas and some of the old values of cooking because we think that is very important. I think there is a growing interest in that.

  (Ms Neville-Rolfe) I would add that the celebrity chefs, the popularity of food programmes on television, all suggests that there is an opportunity there, and probably an opportunity to build on the use of leisure income going forward. It is a very good area. Obviously the school curriculum has not done much on cooking classically in recent times. We have responded, obviously, by having these easier to cook things. I think you have still got to move towards a different sort of food. The reality is that there is less demand for things like beef for Sunday lunches but there is more demand for other sorts of things: processed food, lunch boxes, salads and these present opportunities. If only we could get the market signals through and get British agriculture a share in such opportunities, I think that is a constructive point.

  (Ms Coates) I actually see a polarising occasion which builds on things which Lucy and Ian have said. I see consumers to one extent are much more time poor, therefore they want convenience meals for certain occasions. Equally socialising, there is a lot more eating in socialising so it is an opportunity for us to build home cooking for socialising and for those sort of occasions and build on that. I think both sides have a place.

Mr Drew

  439. That is all very fine but how can you defend forcing down the price of milk by another two pence a pint when we have got most of our dairy farmers not making money.

  (Mr Merton) Who is forcing down the price?

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