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The main item for the public part of today's meeting is evidence on the pig industry. We are taking evidence on the challenges that the pig industry in Scotland faces. Earlier in the year, we agreed to hold a short inquiry into the matter. On 1 April, we heard from two panels of stakeholders, including industry representatives, and supplementary information has been provided by NFU Scotland, Quality Meat Scotland and Vion Hall's. That information has been circulated to members.
Good morning, Mr Brown. I add my thanks to you for making the effort to come here.
Good morning and thank you for giving me the opportunity to present some information on the market as we see it.
I note your sense of optimism. However, do you share my fears for the pig industry, and the fears that were expressed to the committee as recently as last month? The industry has no incentive to carry on. Sow numbers are down to 35,000 although, in the view of the Scottish Agricultural Organisation Society, the critical mass for the industry is 45,000. Vion Hall's is obviously undergoing a strategic review of its investments, but there seems to be a catch-22 situation in Scotland: Vion Hall's does not know whether there will be pigs to invest in; and producers do not know whether Vion Hall's will be there to invest. Would you like to discuss the issues relating to Vion Hall's strategic investment and to the critical mass of the Scottish pig industry?
To be fair, the committee has had the gentleman in charge of Vion here to answer that. Because of Asda's relationship with that plant and with the Scottish industry, we are keen that Scottish pigmeat should be available for our stores. We are also investing in some markets that the Scottish industry has traditionally not been able to access. Our Extra Special range—our top-tier range throughout Britain—is extra special pork. The pigs are all outdoor bred and the pork all comes from Scotland and carries a logo indicating that it has been specially selected.
It would obviously be a concern to you if the investment was not in Scotland.
The harsh reality is that Broxburn kills about 10,000 pigs a week, and I take nearly 7,000 of them.
Thank you for that answer.
You have spoken about your mutual relationship with Broxburn over the years. I will give you another quotation from Brian McMonagle of Vion Hall's from a couple of weeks ago. He said:
It would leave me looking for 75 per cent of my pork.
Is there no obvious other source in Scotland?
I would struggle to find another source in Britain for that sort of volume. The pig industry has always been driven by supply and demand; the first lesson that anybody ever learns in an economics course is the pig cycle. I think that we are on an upward trend in the pig cycle at present. The DAPP is at an all-time high and is likely to rise again today and go over 50p. If anything, the market is providing the signals for the industry.
How does your mutual relationship with Vion Hall's work in relation to establishing price? Things are affected by market movements, as you say, but the pig industry has told us that it has sometimes been difficult for the industry to achieve the price that it requires to allow it to continue to invest and to produce the stock that you ultimately require for your customers.
We base our pricing on the DAPP.
Excuse me, will you explain what that is?
It is the deadweight average pig price, which is a published standard number in the industry. During the past year, we have priced ahead of the DAPP, because of concerns that the industry was struggling—especially as we went through high cereal prices last year.
That takes me to the point that I was trying to get at. I appreciate that you can speak only for your own company, not for the whole supermarket industry. To what extent do your company and the rest of the supermarkets accept the need to take that responsible attitude and work to ensure that you have a Scottish or United Kingdom supply by offering the price that is necessary to sustain the industry and your ability to sell to your customers?
You are right: I cannot answer for the evils of my competitors.
Answer for your own evils.
I will. I sit on the trading floor at Asda and, as is true throughout the sector, the primary focus each week and each morning is availability—in the jargon, is there anything on the shelves? The issues of price, quality and value are secondary to ensuring that we have something to sell. No trader in my business or any other is congratulated on organising a price that means that no one supplies. We have to find the balance within any trading relationship. However, we have to spend an awful lot of time ensuring that we secure supplies. As Government intervention in agricultural markets is withdrawn—that is not entirely appropriate to the pig industry, but decoupling and other measures have had an impact—supermarkets and processors are increasingly securing their supplies and taking more responsibility for the procurement of their raw materials.
The figures that you gave seemed to indicate that you took about 70 per cent of the Broxburn production. Is that correct?
We take just over half—perhaps 60 per cent—of the total Broxburn production.
I take it that the amount of pigmeat that you source from Scotland has gone up over the past 10 years or so.
Yes, over 10 years, it probably has increased.
If your take is going up and, as the figures that we have show, the pig herd has declined dramatically over the past 10 years, others who used to take a significant amount of Scottish production must no longer be doing so.
First, what you say is obviously the case. I am not sure that any of my competitors has the level of commitment to the Scottish industry that I have. You can ask them.
You said that you source about 75 per cent of your products from Vion. Where does the rest come from?
I take some out of English processors such as Tulip and Dawn, as well as Vion's plants in England.
What percentage of your overall pork products is Scottish, then?
I will break it down by sector: 75 per cent of the sausage in our Scottish stores comes from Broxburn and is labelled as Scottish, 80 per cent of my Extra Special sausage sold throughout Britain comes out of Broxburn and is made with Scottish product—it is not necessarily labelled as such, but that is what happens—and all my haggis comes from there. The area where Scottish product is least prominent is probably bacon.
Do you know why that is?
Traditionally, there is not a massive bacon industry in Scotland and I am using the pigs already in pork sausage.
That is interesting, because when Vion's representative, Brian McMonagle, appeared before the committee, he said that he had difficulty using some parts of the pig. My understanding is that the parts that were not used for loins, chops, bacon or spare ribs would have gone into sausages.
It is parts of the pig such as shoulders and legs that, traditionally, have ended up in meat for processing. One of the happy consequences of the present economic circumstances is that we are seeing a switch to other cuts, and not just in the pig industry. The committee will be familiar with vacuum packing, which uses shrink wrap plastic. Vac-packing tends not to provide the most customer-friendly and appealing products, but it gives us an extremely cheap way of packaging. Our sales of vac-packed legs and shoulders have risen substantially because people recognise the value of such cuts. We are seeing that in other areas, too. Sales of dark chicken meat have risen relative to sales of white breast meat.
I have a quick question on an issue that Peter Peacock pressed you on. You explained that Asda had priced ahead of the DAPP in order to secure supply. It emerged from previous evidence that, although the fact that pigs do not go through the auction process in the same way that beef and lamb do has been a strength in certain circumstances, it might be a disadvantage from the point of view of responsiveness to supply and demand. Do you see that as a strength or a weakness?
I do not think that a live pig market would have any impact whatever. There is a spot market for pigs; generally, that is done over the telephone. Similarly, with other deadweight procurements, when people in abattoirs are short of material and ring round farmers to find product, a farmer's first response is not usually, "Oh, I can lower the price."
I want to take you back to the pig cycle that you mentioned. We have a graph from NFU Scotland. I take your point that, in the aftermath of the BSE crisis in 1996 and thereafter, pork consumption was very high. Nevertheless, you said that the pig cycle is now on an upward trend.
The potential is there.
However, it is unquestionably the case that there has been a downward trend over the past 10 years. You are confident that, because of the shortage of food in general, the pig cycle is on an upward trend. We want to send the right signals to people in the pig industry in Scotland. We want to be able to say that there is a future and that we would like them to be part of it, if they want to be.
Yes. If we look at the situation Europe-wide, surplus legs and shoulders are no longer being dumped into Russia, for example. Things are increasingly in balance. In fact, there is a shortage of pigs. When I spoke to an abattoir this morning, it was chasing pigs. That is why the price is rising. When the price rises, people are more confident. I do not know whether all pig farmers will seek to expand. I certainly hope that the present demand creates a floor in production. I would like to see production increase. As I grow my pork sales and my business, the Scottish pork industry has an opportunity to take advantage of that.
On market direction, you hinted that outdoor pig production is a growing market and that it is easy for new entrants to come into it.
The capital costs are obviously lower, although availability of suitable land can be quite a challenge.
Would you like to say a little more about the market potential of outdoor-bred pigs? Is it similar to the market potential of outdoor chicken and eggs?
Opportunities exist for further market segmentation. Sales of our top-tier products, such as our Extra Special range, are growing. Other retailers have similar top-tier ranges. At present, we are benefiting from people deciding not to eat out in restaurants and treating themselves to higher-quality products at home.
That is probably a good point at which to move on.
Do you source most of your bacon from the rest of the United Kingdom? Do you source any from Ramsay's in Carluke, for example?
I will have to get back to you with a response on that. My colleague will make a note of your question and I will get a response to you.
Last night, I had the pleasure of enjoying one of your Extra Special 10-day matured, outdoor-reared Scottish pork loin chops from your store in Leith.
I am glad that you enjoyed it.
It gave me the opportunity to look at your labelling and compare it with that of some of your competitors in my constituency. Possibly the reason why you are here and they are not is that your labelling is clearer both in terms of the country of origin—stating whether a product is Scottish, British or from elsewhere—and in terms of welfare standards.
Excellent. Are we done? Can I go now?
Therefore, you are probably in a good position to advise us whether customers appear to be willing to pay higher prices to know, for example, a country of origin. We have been told that welfare is a key issue in terms of price. You obviously find it worth while to flag up the country where a product comes from. I presume that you have evidence that people are prepared to pay extra to know a country of origin or a welfare standard.
I will make my answer Scottish specific. There is more identification with Scottish products within Scotland—those are the products that the consumers want. Supermarkets are successful in supplying customers with what they want by listening to them, and that is how we drive our business forward. Other parts of the United Kingdom have varying levels of regional identity. For example, the Cornish are keen on their regional products as well.
I have the argument with my husband about barn eggs and free-range eggs, but I just think that he is being mean when he says that it is kinder to keep hens in a barn.
I would be happy to take you to see our systems. All our eggs are Scottish and come from Glenrath Farms.
The UK pig industry has adopted higher standards of pig welfare than those in the rest of the EU, and it argues that it has to bear the cost of better welfare measures such as not tethering the pigs. Irrespective of whether a pig would prefer to be indoors or outdoors when it is raining, it is clear that the use on an intelligent animal of the stalls and so on that we see in Europe constitutes a poorer welfare standard. Do you have any evidence that the customer is aware that British pig farmers have to meet a higher welfare standard than pig farmers in the rest of the European Union?
It is not a widely held perception. The only species whose welfare has been consistently known about is poultry. A huge amount of publicity has been given to caged egg production over the decades, yet the majority of eggs that are sold in the UK are still from caged hens. I always use that as an illustration. Mr Oliver's efforts resulted in a small blip in sales, but things have now settled down again.
Do you take part in the freedom food scheme that the Royal Society for the Prevention of Cruelty to Animals runs?
We have freedom foods for some species, but that is not a massive market driver.
You would say that, at the end of the day, it is price that drives—
It is quality and value.
A combination of price and quality is involved.
I always think of a line between price and quality. One determines what value is for oneself somewhere along that line.
Forgive me for butting in, but you talk about legislation in 2013 and how it will affect the pig industry. We are concerned about getting the pig industry to 2013. At our previous evidence session, pig producers told us that they are unlikely to make the investments required in relation to legislation on nitrate vulnerable zones to get them to that point. I do not want to be apocalyptic, but if we go below a certain critical mass, Hall's will not be there. Are producers being unnecessarily apocalyptic by suggesting that there will be no industry post-2013?
I am still hopeful and positive that there will be a thriving Scottish industry. Pollution legislation is being applied throughout Europe. I have been out looking at dairying in Denmark, where dairy farmers complained that land prices were high because Danish pig farmers were buying land to spread muck on.
Right. Okay.
I want to return to the point that you made about the Scottish market looking for a Scottish product. I want to be clear about how you display products in your UK supermarkets. You have a labelling system in Scotland that is different from the system for the rest of the UK to reflect Scotland's desire to see Scottish products. Is that correct?
Yes. We use the Specially Selected mark, which is a protected geographical indication from Quality Meat Scotland. It is applied to as many products as possible. If we take out promotional lines and some of the Smart Price lines, we calculate that 70 per cent of our pork lines in Scotland have the Specially Selected mark. The figure will rise to 80 per cent during 2009 as lines are switched to Scottish production.
Is there any particular marketing of Scottish produce as Scottish south of the border? Does such produce have any cachet at all south of the border?
It should be remembered that I have the Quality Standard mark, which is operated by the British Pig Executive in England and Wales, with promotional campaigns for that particular logo, and that I am held to account. The pig industry in England and Wales surveys what I do through the porkwatch scheme, the results of which are presented on websites, and checks the amount of material that I sell with that logo on it.
Right, but there is nothing—
Scottish pork has no particular cachet in Middlesex.
That is the point that I am making. There is nothing specific about Scottish pork compared with Berkshire pork that gives it a higher selling potential south of the border.
Forgive me, but can you tell me what is so different about Scottish pork?
That is exactly the point that I am trying to get to. There is no difference.
Chris Brown is inviting you to suggest a difference.
That is the point that I am trying to get at. From Chris Brown's point of view, there is no difference in the quality of Scottish pork that gives it a marketing advantage anywhere in the UK.
I have an opportunity to stick my head through the noose. The same genetics are involved. Obviously, Scottish rain and soil are uniquely and joyously Scottish, but they are not that different.
But that joyous rain does not result in better-quality pork products. I am making a genuine point. There is nothing distinctive or different about the product in Scotland per se that would help to sustain the Scottish industry because it gives it a marketing advantage elsewhere.
It is incredibly difficult to differentiate the quality of many agricultural products. Forgive me again for saying that products such as Scottish lamb are not that much different from other products. I am keen to stress that we do not have the basic science. I would love to be able to go into an abattoir chiller and say, "That one's tender and that one's more flavoursome," but we do not have the fundamental muscle biology understanding to be able to say that.
What you say is interesting, because it goes against the grain of what is said in the marketing of beef, for example. That marketing can explain Scottish beef's cachet—perhaps not in Middlesex but certainly in France, Italy and similar export markets. Is there anything that we know about the genetics or muscle make-up in relation to beef that we do not know in relation to other products?
The genetics are the same across the British isles. We all celebrate the Perth bull sales, as was, and the number of bulls that go off to Ireland. We should also remember the transfer and exchange of materials and the amount of semen and embryos that are traded globally. We have bought in a process from a company called Igentity, which can look at the genome of an animal from a hair sample and give interesting information on things such as docility and rib eyes. We are subsidising our beef-supplying farmers, but we are not there yet. It is disappointing that we have to get those data from Australia, America and Canada; we do not have our own data for the British isles or the UK in particular.
The animals might not be genetically different, but I would have thought that different breeds are bound to produce different tastes. The climate and the feeding will have an effect—the feeding will be different in different places.
We are back to the joyous rain of Scotland.
Scottish salmon might not be a good example, because we do not have salmon in the way that other countries do, but Liam McArthur has said that Orkney beef is an example of a premium product. Does the extent to which people believe that a product such as Scottish pork is better than other sorts of pork come down simply to the strength of the marketing? Are people trying to get across the idea that there is something different about the Scottish product when, in fact, there is nothing terribly different?
In retailing, perception is reality.
On the issue of labelling, you clearly have the Elaine Murray badge of authenticity. However, some decorated shelves in Scottish stores are—a little like the Scottish Government—swathed in saltires, and there may not necessarily be a distinction between products labelled as being produced in Scotland and products alongside them that are not produced in Scotland. You say that you respond to consumers' demands, but some people's views may be a bit blurred by shelf decoration.
I will never say that there are no British products underneath a Scottish saltire, but in general that is the case. I tend to be held to account by people, such as NFU Scotland, who are keen to enter my stores and see what I am doing, and we are very open, which perhaps makes our business different from catering or—dare I say it—public procurement. You can see what I am doing and where my products come from.
Have concerns been raised with you—not by customers perhaps, but by the NFU or others who watch you avidly? Have you had to respond to any such concerns by changing your practices?
I saw the Scottish NFU on Monday and it did not raise any concerns. I do not recall any concerns being raised recently.
We talked earlier about animal welfare conditions. It is often difficult to ascertain exactly what is best for the animal, but there are standard study techniques that consider wildlife equivalent animals and displacement behaviour. There are well-developed ethological techniques that allow us to make a reasonable guess at what is better for an animal, so it is possible to identify, at least to some degree, the best welfare conditions.
I think that I prefaced my earlier remarks by suggesting that I did not want to be too cynical. We sell our Extra Special ranges as outdoor bred, which gives a clear indication of how those pigs have been raised. We are part of a consortium that works with the Royal Society for the Prevention of Cruelty to Animals to define some of the issues. I do not do outdoor reared and I do not do free range; I have always resisted them on the grounds that I cannot define them and nobody can tell me what they are. With outdoor bred, I am reasonably confident that there is a standard—or at least a practice accepted by the industry.
You say that it is open to the pig industry to develop specific labelling, but is there not a risk that a plethora of different marks and labels will defeat the purpose and spread more confusion? Is there value in a voluntary country-of-origin labelling system?
I already label my pork products with the country of origin. In commenting on marks, I am rather glad that I am closest to the door. I operate 350 stores with 35,000 food lines, so a single mark for agricultural standards would make the marketing message incredibly easy to get across. However, difficulties and challenges arise because there are different countries within the UK and different schemes.
In the prepared food market, is it not a lot more difficult to indicate the country of origin of meat? On such brands, there is no indication of where the product originated.
It depends on the product. For our cured meats, we will indicate that the product has been cured in the UK from, for example, Danish or Dutch pigmeat. However, some challenging questions arise with products such as lasagne. For example, how important is it to indicate the country of origin of the meat? Do you want to know the origin of the durum wheat in the pasta? Do you want to know the origin of the cheese? Changes in production and efforts to get the packaging right mean that it can be a costly affair, especially with the large production runs used for prepared foods.
There was a recent scare with the Irish processing industry. Could labelling assist in such situations? Would it improve the traceability of processed products? Stuff had to be taken off shelves simply because the traceability was not adequate.
I would argue that that showed that traceability operations worked. When we could not validate, we took the products off the shelves, so we were able to remove potentially contaminated products as well as products accurately described as contaminated.
Gosh.
It is slightly early in the morning for this discussion, but a big challenge is to get maximum value out of the pig carcase. I know that the issue has been raised with the committee before. For example, we can sell pig ears to the Chinese, and—
Trotters?
Well, the other delight that they love is the rectal muscle.
The what?
The rectal muscle.
Do not ask.
We will explain afterwards.
I am not sure how much further you want to go into this. It is fairly alimentary.
I understand—I am a farmer. I just did not hear.
Everything but the squeak.
But you would not be selling the ears and the trotters, would you? That would be someone else.
I have yet to find a British or Scottish market for those particular cuts.
But they are exported by someone.
People use them. A salted, deep-fried pig ear is something that a Chinese consumer would eat while watching the football. Mr Fearnley-Whittingstall has a recipe if you are interested.
Do you have a recipe?
No, Mr Fearnley-Whittingstall's book has a recipe, but I could not sell pig ears to you—unless, all of a sudden, people asked me to try to sell them. There is a serious point: historically in the meat industry, it has not been the cuts that you can sell easily that make money but finding homes for the cuts that you cannot sell easily.
Mr Brown, I thank you for coming to committee. Although your colleagues from other supermarkets have not come today, we will write to them to ask some of the questions that you have answered. We are all heartened by your belief that the Scottish pig industry has a future, and certainly through Asda. Thank you very much.
You are very welcome.
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