You’ve been widely praised for your support of British food and your pledge to double British sourcing by 2020. How do you feel this ambitious target can be met and are you confident British producers can increase production to help you meet that target?
Justin King: We have supported British food and British farmers for more than 140 years. We always aim to offer British products at their best, when they are in season and when the quality is as our customers expect it to be. All our fresh chicken, eggs, milk and sausages are British, and we were the first retailer to use only British flour in the sliced bread sold in our store bakeries. For the past three years we have been the largest UK retailer of British apples and pears, selling one third of all the British pears sold in the UK - which is twice our market share on food overall. And at Christmas we sold only UK-grown poinsettias - the only supermarket to do so.
Our customers are telling us loud and clear - they want to buy British. This not only plays to our traditional strengths, it also makes our target of doubling the amount of British food we sell by 2020 absolutely right for us, our customers and our farmers and growers.
We know that these targets will require increased capacity within the farming supply chain and we are confident that we can drive sustainable intensification as a way of achieving better crop yields from the same resources. A good example of this is our groundbreaking Concept Orchard scheme. Originally developed as a way of halting the decline of the traditional British apple and pear orchard, we’re now introducing new varieties and increasing yields through innovative growing practices. Concept Orchard has also helped our UK growers to increase their yields from 20 to 60 tonnes per hectare.
We also work closely with over 3,000 British farmers through our development groups (which span livestock, dairy and fresh produce) with the aims of working collaboratively to share best practice and to reduce the impact of farms on the environment and improve animal welfare standards.
We hear producers in countries such as South Africa complaining that the price wars in the UK make it a country they are less keen to deal with. What can supermarkets do to ensure the UK is still an attractive destination for international growers?
JK: Working with suppliers to develop and secure their businesses for the future is the key, even if there are competitive pressures - which will always exist - that drive down prices.
Over 40 per cent of the fresh produce we source during a calendar year comes from the UK. Europe makes up a further 22 per cent and the African continent a further 12 per cent, with Kenya and South Africa being the most significant sources.
South Africa is the third biggest supplier of our fruit after the UK and Spain, supplying us with oranges, grapes, pears and stonefruit, as well as avocados, strawberries, figs and even lychees. Growers there are actively developing other product categories such as soft fruit, cherries and melons, which makes South Africa perfectly placed to meet our requirements in these categories when they are out of season in the northern hemisphere.
We are applying many of the same principles of supporting our farmers and growers in South Africa as we do in the UK. For example 2012 will mark the third year of Sainsbury’s African conferences, where we bring together our key South African and Kenyan producers in two separate conferences held in Cape Town and Nairobi. These conferences enable us to get together with the farmers and growers who collectively supply us with over £300m of fresh produce annually, to debate the important in-country issues they face and help us to understand how best we can work together to deliver sustainable improvements. Their regional expertise and local knowledge is invaluable, as are the benefits of bringing people together to form exciting, mutually beneficial networks, and discuss critically important issues for the future of our industry. Sainsbury’s is a responsible retailer, and we want to work closely with all our suppliers, and these conferences give us a great forum in which to do so.
How worried are you about food security generally?
JK: Most people will be familiar with estimates that by 2030, the world’s population will rise from six billion to eight billion, a 33 per cent increase, that the demand for food will increase by 50 per cent, the demand for water will increase by 30 per cent and the demand for energy will increase by 50 per cent. The implications and challenges that arise from that scenario need to be taken very seriously. It’s vital for our business and the future of our suppliers that we understand the challenges and identify the right solutions. That’s why food security is absolutely central to our 20 by 20 sustainability plan.
For example, setting a clear target to double the sales of British products in our stores by 2020 gives British growers and farmers the confidence to invest for the future. Combined with the substantial investment Sainsbury’s has made in our grower and farmer development groups to identify and drive more sustainable production systems, this will have real impact in addressing one important element of food security.
By 2020 we will increase our fairly traded product sales to £1bn and the challenge here is to ensure these supply chains are not only commercially and socially sustainable but environmentally sustainable too.
This is especially relevant when you consider that climate change and shifts in natural resources are expected to have most impact on sub-Saharan Africa, where many of these products are sourced.
One of the toughest challenges is that presented by water and we are researching scientifically robust metrics to measure total water use and identify the associated strategies needed to manage this resource sustainably. Sainsbury’s is involved in a number of projects all over the world identifying how we can use scarce resources better. Initiatives include better water management, just-in-time watering, improved irrigation systems, rainwater harvesting and many more. It comes back to the importance of working collaboratively and in partnership with all the different parts of the supply chain. By doing that we aim to ensure that all the different links in the chain are strong and working well together to achieve the holy grail of food sustainability for the future.
And of course this is an area that our customers equally feel passionately about because food security strikes right at the heart of our customers’ concerns about where their food comes from and what impact the sourcing of their food has on the environment and local communities. That’s of course why, for many years, two of our core values have been ‘Sourcing with integrity’ and ‘Respect for our environment’.
Food traceability is an absolute pre-requisite for effective food security, and we continue to invest in the development of systems to link the supply chain and give visibility to our customers of where their products are sourced through on-pack QR codes.
Sainsbury’s is a leader in trialling novel crops and encouraging season extension in the UK. How important is this to Sainsbury’s strategy and how much further can it go?
JK: While there’s no doubt that this will contribute to our 2020 British targets, it is not possible to predict its extent. The whole purpose of the trials we are progressing with our growers is to establish how readily these crops can be grown in the UK and the extent to which they can be progressed to full commercial plantings. We know that buying British is important to our customers and we want to give them as many opportunities to do this as possible.
To what extent does Sainsbury’s source directly from growers, and how do you see the role of the pure importer in the new world order?
JK: We operate many different sourcing models, the choice of which is dependent upon the characteristics of the product, our growers and the country of origin from which we source. We do have a significant number of direct sourcing arrangements. Our key objective in our choice of model is to ensure we can provide our customers with the best tasting, freshest product at all times, which requires that we adopt the most efficient, and therefore sustainable, supply chain available.
There is still a role for the importer working in partnership with ourselves. Perhaps the difference today from the past is that our importers have moved from the role of sourcing and selecting growers on our behalf to working with us to select growers and handling product through the supply chain on our behalf. This enables a far greater level of transparency for all parties in the supply chain and ensures that we are all working together to improve the chain’s sustainability - economically, socially and environmentally - to the benefit of all.
With the delicately balanced state of the economy, what are your predictions for the rest of 2012? Will there be even more pressure on supermarkets to keep a lid on food price inflation?
JK: There is no doubt that 2012 will be a very challenging year for the economy. There is a lot of uncertainty and customers are naturally concerned about this. There are reasons to be cheerful however. The Queen’s Diamond Jubilee, the Olympics and Paralympics - of which we are, of course, the official partner - are all fantastic opportunities to lift the national mood.
Customers will look to us to continue to help mitigate the impact of food price inflation and we are keen to do this. We will continue to offer promotions across the store and our unique Brand Match technology ensures customers get great value on grocery branded goods. Our main focus will be on our own-brand lines as this is a great way for customers to keep costs down without compromising on quality. Our three-tier offer is perfectly placed to give our savvy customers a choice; for example, we know that over 60 per cent of our Taste the Difference customers also buy into the Basics range when they shop.
Do too many price promotions devalue categories? What opportunities do you see for fresh food suppliers to escape
the commodity trap?
JK: Well-targeted promotions give customers the opportunity to minimise the effect of inflation on their shopping, which is really important in the current climate. Our job is to ensure that our promotions are relevant for our customers, and the information we get from Nectar cards makes it possible for us to target our promotions to what our customers actually buy. In addition, our Brand Match scheme gives customers the reassurance that we match Tesco and Asda on branded product prices - including when they have a promotion.
At Sainsbury’s we don’t believe that fresh food will ever become a commodity. Increasingly, customers recognise and demand great quality, and the quality of our fresh food is one of the things that differentiates us from our competitors. As I’ve already said, we’ve worked closely over the years with our farmers and growers to get the best varieties, developed and grown in the best way for the very best results.
How much responsibility should supermarkets take for ensuring suppliers are profitable and can reinvest in their businesses?
JK: We are very proud to have longstanding relationships with many of our suppliers. We want them to be thriving, healthy businesses that can help deliver fantastic products for our customers. We believe in providing quality food at fair prices - you can’t do this if you are forever cutting costs.
Is your appetite for the job as strong as ever? What are your goals for Sainsbury’s over the coming year?
JK: Absolutely. I believe I have the best job in retail and I work with a fantastic team who are all fully committed to our goal of helping customers to ‘Live Well For Less’.
Over the coming year I want to continue to grow our business, creating jobs and opportunities across the UK, and strengthening our relationships with our suppliers. -
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