Philip Clarke speaks at Queen's University, Belfast
14 March 2013
Thank you for inviting me here today to open your new Institute for Global Food Security here at Queen's University.
Thank you for inviting me here today to open your new Institute for Global Food Security here at Queen's University. It is indeed my honour and pleasure to be asked to open such an important new centre in such a distinguished seat of learning, and I’m sure this Institute will make a great contribution to the debate on what is an issue of huge importance, not just to the food industry, but the wider world.
There also couldn’t be a more timely moment for this Institute to be opening here. Never before has the food supply chain been in the spotlight in the way it is today.
So today I’m going to talk about two things; my thoughts on the opportunity for the food industry here in Northern Ireland, and then Tesco’s point of view on the really important issue of food security.
But I can’t talk about food security without first addressing the important issue of food trust, brought into sharp focus by the horsemeat issue of recent months. You will hopefully see that, unlikely as it sounds, the three themes are intrinsically linked.
The horsemeat issue which we and other retailers have been confronted with over the past two months has shaken consumer’s confidence in all of us involved in the food supply chain. Customers, whatever price they pay and whichever products they can afford, have the right to expect that the product in the pack is what it says on the pack. When they discovered they couldn’t be sure that was the case, their confidence in our industry was hit hard.
We have been doing all we can to restore that confidence. We are implementing a world-leading DNA testing programme on all processed beef coming into our supply chain, and communicating with customers in every way we’ve can – hopefully you’ve seen some of the advertisements we’ve placed in the papers.
These were important immediate steps. But what the discoveries have taught us is that there are more fundamental changes needed in how we source the products we sell. This has been a wake up call for us all, and I see it being a pivotal moment for our industry.
A couple of weeks ago I spoke at the National Farmers Union conference in Birmingham. I used that opportunity to talk about the need for a transformation in the food supply chain, making it shorter and creating a more direct connection between us, and the farmers who produce the products we sell.
As I said then, the food retail industry, and that includes Tesco, has to take its share of the responsibility. Has to accept some blame. We have allowed our supply chains to become at times adversarial, and often too complex.
I have always been of the view that we need to work more closely with producers. But the horsemeat issue has reinforced my view and has demonstrated that we have to move much more quickly than I first thought would be necessary.
I am very clear that the best way to have more control of the meat supply chain is to produce more of it closer to home. We know our customers’ appetite for products from the UK and Ireland is greater than ever and we want to give them every opportunity to buy products produced locally.
So I have committed Tesco to sourcing as much as we reasonably can in the UK and Ireland. It’s what our customers want, and we want to work with the farming community to increase capacity for the production of meat and poultry in the UK, so we can meet the demand from our customers to want to see it produced closer to home.
Already all the beef in all our products sold in the UK and Ireland comes from the UK and Ireland and I announced two weeks ago that all our chicken – fresh, frozen and in ready meals – sold in the UK will come from the British Isles too. We’re going to have to work hard to help our partners in the farming community plan with more certainty for the future by offering longer contracts to all our suppliers who want them.
Talking specifically about Northern Ireland, I know just how important agriculture is to the economy here. Tesco is a major supporter of Northern Irish agriculture. We spend over £500m a year on local products, and now stock around 1,800 from 90 Northern Irish suppliers. And we want to do more.
We’ve got a team dedicated to local sourcing in Newtownabbey, who I hope many of you know. They are dedicated to developing strong, long-term and mutually beneficial relationships with our suppliers here in Northern Ireland. They understand how you want to export to our other businesses around the world.
So we already do a lot to support Northern Irish agriculture, but I think we can go even further. My aim is to source as much of what we sell in Northern Ireland from Northern Ireland. It's what our customers want, it’s what we want. So today I am pleased to announce that we are doubling the amount we spend on buying fresh beef, pork and chicken from Northern Ireland farmers. That will mean that within the next few weeks, we will go from sourcing less than 20% of the meat we sell here locally to around 90%. And we're not going to stop there - we're going to do everything within our power to get as close as we can to 100%.
Whilst this is good news for the Northern Irish meat industry we know many of you in this room want the opportunity to take it further and to export your products overseas. I know from talking to people here today the scale of the ambition for the agricultural sector in Northern Ireland, and if the Northern Ireland Agri-Food Strategy Board’s aim of producing 30-40 per cent more food here by 2020 is to be achieved, clearly that means exporting more food to the rest of the UK, to the Republic of Ireland, and beyond. That’s where I think the really big opportunity lies
Some of our biggest Northern Irish suppliers already supply our businesses in other parts of the UK. Companies like Moy Park and Foyle Meats are among our biggest and best suppliers and have grown alongside Tesco, working in close partnership. As part of the spirit of partnership with the agricultural community I’ve talked about, I want to see this happening more. More Northern Irish companies supplying quality Northern Irish products to more of our businesses.
With Tesco, that doesn’t just mean the UK and the Republic of Ireland. Our expansion beyond the UK presents some real opportunities for Northern Irish suppliers. We already sell Irish beef in our stores in Central Europe, in Hungary, Czech Republic, Slovakia and Poland, not just the stewing beef which has traditionally formed part of the diet in these countries – increasingly there’s an appetite for steak, something for which the island of Ireland is rightly renowned. And as we develop the foods categories in our Central European businesses, an area where we see real growth potential, there will be opportunities there too.
Competiveness and efficiency will be key to achieving the goals set out for the expansion of Northern Irish agriculture. Our customers remain under pressure, and rightly don’t expect to have to pay more for a better supply chain.
But success won’t come just by driving down costs. I agree with Professor Elliott that the three pillars of authenticity, safety and quality, always traditional strengths of Northern Irish agriculture, are more important than ever, and need to be at the heart of any strategy to grow the sector here.
Maintaining a strong focus on, and reputation for, food safety is more important than ever. In the new world of the food supply chain I have outlined, we can’t afford to have anything but the highest standards, and when you have a strong focus on growing export trade, the need for overseas markets to have confidence in the products that they’re importing assumes even greater importance.
So we’re all going to have to work very hard to weed out any rogue elements which can risk the reputation of the food industry we work in. So we can restore trust in food we are going to be taking a forensic examination of our supply chains everywhere we source from – I am sure we will find things we don’t like, but where we find that, we will act immediately to put it right.
Our aim is a supply chain which is transparent – not just so that we can have open dialogue and true partnership with you, but so our customers can have complete visibility of where their food has come from, and how it has been produced.
This approach of ensuring we have great local presence and knowledge in our markets, as we do in Northern Ireland - so we can support our suppliers and offer our customers many local products - is also key to how we manage a global supply chain in which there is increasing competition for resources.
Arguably, one of the great achievements of the supermarkets is making good produce from around the world accessible to the everyday shopper, enabling a balanced and diverse diet, and that’s something we at Tesco are proud of. But the challenges of global supply chains have never been greater than they are today. And I think that’s why the launch of this Institute today is so timely. It is a huge issue but one which doesn’t get much attention, I suspect because most consumers, and the media, take the supply chain for food which appears on the shelves of their store for granted.
The background to these issues is macroeconomic. The global population is growing, and an increasingly affluent middle class, have a great expectation of a protein rich diet as standard. So the competition for the food which is being produced around the world is growing. Collectively as a food industry we need to become more efficient and less wasteful to enable us to meet this growing need. Tesco is determined to ensure we continue to be able to offer the best products to customers wherever we trade.
But this has become much harder. Take fruit from South Africa for instance. There was a time when as a retailer from a wealthy country like the UK, there was no issue with getting first pick over the highest quality fruit.
Now times have changed. There is demand from growing regions, like the Middle East and Asia, creating competition for this product. Some of these rivals are not interested in the things we are - in addition to quality, not quite interested in labour standards on farms.
So we find ourselves in an unfamiliar situation, and what we’ve discovered is that the traditional supply chain is hopelessly out of date when it comes to dealing with this new world order. If we’re going to maintain security of supply, and meet our customers’ expectations, we need to do things differently.
So how do we deal with this? Well what we’ve found works is cutting out the middleman, and directly managing the relationships for ourselves. We have got very exacting standards at Tesco, and many of these are very important, but at the same time we also realise there is a bit too much bureaucracy. We want to be a customer of choice for our suppliers – not just a company people do business with because we’re big, and part of that is reducing unnecessary demands and focusing on what matters.
We have put in place sourcing hubs across in many of the countries in which we operate, both in food, GM and clothing, putting in place the infrastructure to help suppliers to be as efficient and productive as possible. We have put experts on the ground to help suppliers navigate the technical and ethical challenges they face, to share good practice and to give us confidence good standards can be met.
I’ll say it again, a supply chain with a lot of middlemen is inefficient. Best practice and efficiencies leak from it. By moving away from a transactional relationship to a direct relationship with the supplier, it helps us get much more visibility of the supply chain. This has two benefits. First it means we can see where there are opportunities to simplify the supply chain and create efficiencies Secondly, we can see that things are being done the right way, to ethical standards Tesco can be confident in.
Ultimately if we can help our suppliers be more productive, they will be more profitable, and they will make an active choice to continue supplying Tesco. We can offer longer contracts to give more certainty, supply chain finance, and access to other Tesco markets such as Asia.
But all this needs us to change and we are changing in many ways. One of the most visible signs of change is the appointment of a new Agriculture Director to be a voice for farmers at the highest level within Tesco, and our existing Tesco Sustainable Farming Groups, which have proved successful in giving pork and beef farmers more certainty, will be extended to other sectors.
These have been difficult months for the food industry. But I have always taken the view that you should never waste a crisis, and you should see the renewed vigour we are putting in to building meaningful partnership with suppliers and into sourcing from the UK as an opportunity for us and particularly people here in Northern Ireland.
Those three pillars of safety, quality and authenticity which this Institute is so focused on have always been vital to grow a position in the food supply chain. But as I stand here today, they will be more important than ever. Everyone here has a part to play, and so does this institute, and I wish it every success and will follow its development with interest.
The food supply chain – the principle focus of my speech today – is the direct link between the farmers, retailers and customers. We must now re-forge this link so that it binds together the rights and interests of all parties. And the key concept you see is partnership – between the retailer and the farmer, on behalf of customers. That is of paramount interest, for without the trust of customers, there can be no sustainable business. I think we are at a moment of truth. We’ve all got a part to play, and so does this Institute. I wish it every success.
Thank you very much for listening.
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