Examination of Witnesses (Questions 431-439)|
WEDNESDAY 27 FEBRUARY 2002
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 dot.com 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 talkswe do this four times a yearwith
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
rangeand 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.
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
(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.
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?