Tesco chief executive Philip Clarke speaks out at the NFU Conference about the new measures the grocer has introduced in the wake of the horse meat scandal. Here is his full speech.
The theme of this conference - Farming Delivers in Uncertain Times - is a sentiment I couldn’t agree more with. It’s an appropriate title because the NFU, under Peter’s leadership, is both an organisation that delivers and a powerful and effective voice for its members. It’s my pleasure and honour to be invited here today. It is also a very timely moment to be addressing your conference, so thank you Peter for inviting me.
Not since BSE has the meat processing industry been under such scrutiny. The events of the last six weeks have shocked the whole country. Customers don’t like what they’ve been hearing about how some of the meat they put on their plates is produced.
So you would expect me to use today’s speech to address the very serious issues which have arisen, which I will. But I also want to talk about the huge opportunity which exists, not just to regain the trust lost over the past six weeks, but to create a supply chain which customers can understand and have confidence in. So today I am going to announce some new commitments Tesco is making to UK farming. Some are immediate commitments we’ve been working on for some months, some will take a bit longer.
Tesco customers tell me they are concerned about the provenance of their meat, and that they want to buy British. And the vision I have is of a bright future for British agriculture, a future based on better relationships and upon a transparent supply chain. We are the UK’s biggest retailer, the biggest customer of UK agriculture, and I firmly believe that means we should be the best supporter of British farmers.
Events over the past six weeks have been a wake-up call for the whole industry. Over many years, the way retailers source food has been allowed to become too complex. Reducing this complexity is in everyone’s interests, specifically by shortening the supply chain where possible and increasing co-operation between producers, processors and retailers.
What this complexity in the supply chain has also done is to leave it open to exploitation by rogue elements operating in the processing industry.
This is a pivotal moment for our industry. And it can also become a transformational moment. A strong and dynamic food industry needs real partnership between retailers, processors and farmers, underpinned by a powerful and effective regulatory regime.
The issues which have been making the headlines are not Tesco-specific. There is barely a major retailer in the UK which has not had to withdraw a product, and the problem extends beyond retail to the catering industry, beyond the UK and across the EU.
But we cannot hide behind the breadth of this challenge. I am absolutely clear that, as the market leader in the UK, it is Tesco’s responsibility to lead the way out of this crisis.
Over recent years we have already made our first steps towards a new model of a relationship with some of the farmers we work with.
I’m proud of what we have done to help our liquid milk farmers. Six years ago, the Tesco Sustainable Dairy Group was established to address the huge uncertainty our milk farmers face as a consequence of volatility in the markets.
And so, long before last year’s dairy crisis, we committed to pay our farmers a price above the cost of production, ensuring that their businesses turned a profit so that they can plan and invest for a shared future. It’s fair to say this initiative was launched to a good deal of scepticism, but it has proved to be a game-changing move - one that provided much-needed stability to the sector and represented a genuine commitment on our part to building a mutually-supportive relationship with dairy farmers.
And in the autumn we took this one step further, beyond dairy, where we offered direct contracts to farmers prepared to supply Aberdeen Angus Beef and fresh pork. These direct contracts are overseen by a committee of farmers with the express aim to develop a new spirit of partnership and to offer them the certainty of a fair deal financially. We have invested £25 million in this scheme which means we can now pay beef farmers an above market price for their meat and offer pork farmers a cost that is directly linked to the price of animal feed – a major concern, and worry, for many of you and therefore for us too.
So we have made a start. But events over the past month have reinforced my conviction that we need to move faster and try harder.
I am happy to confirm that all of our beef – fresh, frozen and in ready meals – is already from the British Isles.
And today I am announcing a sincere commitment to source more of our meat closer to home. Where it is reasonable to do so, we will source from British producers. And I invite the NFU and the wider industry to work with us to increase UK capacity for the production of meat and poultry.
As a first step, I am announcing that from July, all of our fresh chicken must come from UK farms. No exceptions. We will also move over time to ensure that all the chicken in all of our products – fresh or frozen – is from the British Isles.
These commitments represent a genuine shift in how Tesco sources the products we sell. But we cannot do this without you.
And so this needs to be a true and sustainable partnership, one built on mutual trust and understanding, one in which both parties can prosper and make a fair profit. The processors should work with us in tripartite partnerships and shouldn’t be a barrier to Tesco and farmers talking and working directly together.
I am determined to build a clear and sustainable relationship of equals, and one which gives our customers confidence in how their food is produced. That has to be good for all of us in this room and all of us in the country.
What we are working to achieve is transparency: transparent relationships with our suppliers and transparent relationships with our customers.
To achieve transparency in our supply chain, we are therefore undertaking a root and branch review of how it works.
So, what does that really mean? It means we are going to examine all aspects of the supply chain, looking at the processes we use, and making sure we can be totally confident in how our products are being sourced. We’re proud of our high standards, but we are challenging every aspect of the supply chain to see how they could be more robustly applied where necessary.
I am in no doubt that we will find things we don’t like. But when we find them, we will change them. Let me assure you: we will accept nothing but the very highest standards in our supply chain.
Working directly with farmers and growers is key to our new approach, and so as well as making commitments about the provenance of our meat, I want to make some commitments to how we work with you. You have told us how powerful and helpful you find our existing Tesco Sustainable Farming Groups, which has proved a successful model for partnership with some of our dairy farmers, so today I am announcing an extension of these across our agricultural supply base to cover all proteins. We will also explore the potential to extend this approach to fruits, vegetables and salads too.
Furthermore, we are appointing a new Tesco Agriculture Director who will lead the development of these groups and will ensure that the farming industry has a single point of contact with Tesco.
We recognise that if we are to have a genuine partnership with you, we need to give you the certainty you need to maintain and grow your business.
Again as a demonstration of my commitment to building this new spirit of collaboration, today, I am committing Tesco to offer contracts with a minimum period of two years to all our suppliers who want them.
I am also announcing today that we are going to extend our very successful producer network, a social network of producers to help all of us share knowledge and communicate more directly with producers, farmers and growers. We will do this with a phased approach, starting next month with dairy farmers. I think it’s a really exciting further step on this journey towards a true partnership.
It needs to be a true partnership as we are only as good as the products we sell, the products you produce, the products our customers feed their families. I say “we” because we are not three distinct groups: farmers, retailers, customers. We are interconnected, interdependent, and ultimately the responsibility of everyone in this room is to the customer and delivering that partnership.
Tesco’s success is built on a focus on the customer, and I am absolutely committed to ensuring that our entire product range offers quality. This applies as much to our Everyday Value range as to our Finest range. I will never accept the patronising argument that somehow a value product shouldn’t meet the same exacting standards as the core range.
I will also never accept the equally patronising view that providing people with affordable food – what some people dismiss as “cheap food” – is somehow wrong. It does not follow that the measures I am announcing today mean that food needs to become more expensive.
Everyone at Tesco is committed to offering the highest quality food at every price point. Whatever a customer is able to afford, there can be no compromise – what’s on the pack (and only what’s on the pack) is what will be in the product.
I have put in place an industry-leading raft of measures to restore consumer confidence in our product. We will be implementing an unprecedented DNA testing programme on all batches of processed beef coming into our supply chain, and are putting in place a new Tesco standard so shoppers know that the products they are buying have been through the most rigorous testing regime in UK retail. To hold us to account, we are also establishing an independent panel of experts which will help us to improve the way the supply chain works in practice.
I have emphasised the importance of communicating, of sharing information with you. But if we are to have a genuinely transparent supply chain, we need to share the same level of information with our customers. Today’s connected customer expects to be able to find out everything about the products on the shelves – what’s in it, where it was produced, and how it helps them make informed choices about their diet.
We’ve been communicating with our customers, acting immediately when we’ve found problems, and ensuring our customers have been kept informed in a timely fashion. But this intense focus on communicating with our customers is not just about weathering the storm. The age of the internet, and the growth of social media, enables us to have a much closer, personalised dialogue on an on-going basis with our customers. And so we’re setting up an interactive website which will offer our customers levels of insight into what’s in their food never before seen in the UK, and helping them understand the industry-leading testing regime we are putting in place.
We will also use video to open up the supply chain, enabling our customers to trace every step of the journey from farm to fork. And that journey should now be much shorter. By shorter, I do not necessarily mean that the products we sell will invariably come from the farm down the road. In a global environment, that is not possible. But I do mean shorter in terms of the links in the chain. If it does not make the product better for our customers, that link will go. Every link puts distance between you and us: so we want that chain to be shorter.
The commitments I have made today are genuine, and I expect to be held to account on them. That is why I am setting up the independent oversight panel I mentioned earlier. You are our partners and you will spot very quickly if a commitment we make proves to be hollow. I expect you to test us and I expect you to tell us if we’re not delivering.
I grew up in Tesco and I am enormously proud of Tesco. But I also know that we haven’t always approached our relationships with our farmers and producers in the true spirit of partnership. I have come here today to acknowledge that and to tell you what we are committed to changing that for the better.
- We’ve put in place better controls
- We’ll bring food closer to home
- We will build better relationships with you, our nations farmers
Taken together this amounts to the most radical change between a retailer and producers that has been attempted. I am certain that it can work.
I offer today the hand of partnership: a partnership between you, Tesco and our customers. A partnership based on transparency. A partnership which can transform the offer to customers.
Taken from Tesco’s Talking Shop