Safeway puts its case

5 April 2002

Safeway puts its case

Supermarkets have been

accused of profiteering

from the food chain at the

expense of farmers.

Andrew Shirley put

farmers weekly readers

questions to Kevin

Hawkins, communications

director at retail giant

Safeway, for him to justify

the stores actions

Q The big stores have already pushed out most small retailers, now you are doing the same to farmers, and farms will just get bigger and bigger. Does Safeway worry about the future of the family farm, or is it just concerned with buying food at the least cost?

A It is not a question of supermarkets driving out smaller farmers, I think it is the economics of agriculture that are doing it and the prospect of further reform of the CAP will accelerate that process. Of course we are concerned about the small farm, we do not want to see the whole of British agriculture become the preserve of massive mega-farms. But I think if you are a small or medium-sized farm in a commodity market, and you are not in some sort of collaborative scheme, you are going to struggle almost irrespective of what the supermarkets in the UK do.

Q Do you feel that communications between producers and supermarkets such as Safeway are as extensive as they ought to be?

A No, for too long communication has been terrible. Because of this farmers have the impression that retailers are making a lot of money at their expense. But at the end of the day the retailers are not making very much at all. There are issues to talk about and the retailers have got to be there to answer them directly and not engage in megaphone communication through the media.

Q You have said you believe that the food chain should be more transparent and one of the suggestions is that farmers supplying supermarkets should reveal their costs of production. Would you as retailers be prepared to show your costs to the farmer?

A I see no problem about talking very openly, as long as there is no competitive issue involved, to farmers about costs and prices in the supply chain. I think the only way we will start to build trust in the supply chain is by being as open as we can on those issues and in those areas where there is no real competitive sensitivity.

Q Even a few pence on the cost of a litre of milk could make a difference between profit and loss for some farmers. Why cant supermarkets increase the price, especially as you are on record as saying that the price of milk does not influence where people shop?

A We (the retailers) actually between us did put our prices up in spring 2001. But we have got to be very careful because we cant be seen as colluding and we certainly could not collectively decide to put up prices to the consumer even to give the farmers a better return, as that is contrary to the Competition Act of 1998. I even advocated that once and I got a threatening letter from the Office of Fair Trading. But I would like to see the industry set a target price for farmers and try to move towards that over the next two to three years.

Q UK livestock farmers have invested heavily to produce meat to the highest welfare and quality retail standards.Yet supermarkets still seem happy to sell foreign products of inferior quality, and certainly of more dubious welfare standards, without necessarily highlighting this to the consumer. Why?

A I refute entirely any charge that we import cheap, foreign rubbish. We do not because that compromises our brand name. I cant speak for other supermarkets, but our policy is that when we sell meat and any fresh product from outside the UK, it is clearly labelled as such and the customers know what they are buying.

Q Many of the smaller pig producers are on the verge of collapse and it appears the industry will soon be dominated by a few big players. Is Safeway happy to see this happen?

A It is interesting that pigs are not subsidised, unlike beef and lamb – they never have been by the CAP, you have a pure unsubsidised market operation which is supply and demand driven. What is happening – exactly what I predicted would happen when the CAP is reformed or abolished – is that the advantages will go very rapidly to those processors or farmers who have got scale economies. What is happening in pigs now is a mirror into the future, it is a clear projection of what will happen in other commodity markets once subsidies are removed.

Q Even in season, the supermarkets often stock foreign vegetables over home-grown produce – for example, winter greens. Why dont you make more of an effort to buy British?

A We buy as much British as is available but of course there are problems with British produce. First of all the growing season is limited, second no two crops are ever alike – a bumper crop one year and a lousy crop the next, and because customers expect you to keep your shelves full all the year round. It is not a question of lack of support for British producers – we do as much as we can to support them when we have the product, but if we have not got it, we cant sell it .

Q There have been reports that supermarkets are telling buyers not to source from cattle markets. Does Safeway support auction marts?

A There is no suggestion whatsoever that we are telling our processors or anybody not to deal with open livestock markets at the moment, because even before foot-and-mouth started our reliance on open livestock markets was minimal. But, contrary to what some farmers think, the market price at any given time is not decided by a small group of big supermarket buyers. It is decided by the relationship between supply and demand.

Q How would you advise farmers to take advantage of the food chain to become more profitable?

A What we can do and must do, and are doing, is to work more closely with farmers to make sure what they produce actually meets the needs of the consumer. &#42

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