Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

I wish to apologise for being late but I was in the Dáil for Question Time.

This committee is trying to ensure that primary producers are in a sustainable position. We are also trying to ascertain the pressures on primary producers concerning conditions and price. I accept what the witnesses say in their document, which is that in large measure they do not deal with primary producers but with processors and big factories. Ultimately, however, the squeeze put on the processor is also put on the primary producer. We are not examining this issue to be confrontational but to deal with what we have been told is a major issue with long-term implications for primary producers. We want to see what the driving factors are, including those for the consumer. The difficulty is always to get the right balance - there is no black or white, right or wrong.

One shop may be slightly cheaper than another, so all the emphasis is on price. In another shop the emphasis may be on price and quality, but the prices may not be marginal. A third shop may put more emphasis on quality and sourcing Irish products. Do we have evidence from consumer research that the vast majority of customers go for price, which is paramount? Or are there other issues, such as local suppliers and keeping local jobs, that might provide a counterbalance? In other words, how much do we know about consumer tolerance and behaviour on all these issues?

I think it would be fair to say that if one empirically asked members of the public if they support Irish products, they would say "Yes". There is no question or doubt about it. Where one product is cheaper than another, however, does the "support Irish" principle go out the window in practice, despite what people might say? We do not know the answer to that. Presumably these are issues the witnesses have to deal with daily in making their hard choices. They must compete in the marketplace with people who might put price ahead of everything else. I wonder, therefore, how much we actually know about these various stimuli.

Perhaps the witnesses can explain to us why it is that own-brand milk, coming from the same dairy processor, is always cheaper than branded milk. My understanding is that SuperValu, Tesco or Dunnes Stores own-brand milk is always cheaper than Dairy X's brand. What is the explanation for this, given that the document states that all the milk and meat comes from one supplier? It is not as if the company is playing suppliers off against each other without customers knowing it. I am interested in the dynamics of that and how it works.

I wish to give full credit to Super Valu. A number of years ago I was working with small food producers and one of the difficulties they had with some multiples was getting on the shelf. It is fair to say that in a Super Valu supermarket one is more likely to find small suppliers, including local producers of potatoes and other vegetables. Given that retailers are independently franchised out, what leeway do retailers have with local purchases? Is there some agreement whereby they can purchase up to a certain amount locally? If they are buying locally, are there central constraints concerning quality and the provenance of goods? It would be good for us to get some feel for how this system is operated.

Major products such as meat and milk come from national suppliers, but there are also niche food products, in addition to potatoes and other vegetables, that could be supplied locally. Does this operate by local discretion and, if so, are there ceilings to the amount of local discretion? Are standards set down by which these apply?

This brings me to the question of ugly fruit and vegetables, either washed or unwashed. My understanding from suppliers is that most supermarkets buying centrally will demand strict size standards. I am not talking about quality in the sense of being in good condition, but they will not take a carrot with two legs. They want products washed and pre-packed. How much freedom do local purchasers have to set their own standards? In other words, is there a market for people who feel that there is more nutrition in a product that comes unwashed from a field? Who decides the standards for the size and shape of vegetables? My understanding is that if one is buying local produce it would be very wasteful to throw out all the good, nutritious food, such as unwashed fruit or vegetables, that may not conform to some standards of size and shape that are preordained by somebody else.

Apart from price, another issue concerns the details of contracts which can put much pressure on suppliers. Once one enters a three or five-year contract is that it, effectively, or is there any flexibility? Depending on what conclusions we come to after all these hearings, it is fair to say that we will be looking at the possibility of education, regulation and legislation. Education would be to explain to consumers the importance of having quality and nutritious foods, in addition to maintaining Irish industry.

Regulation and legislation are obvious. We must ensure that there is a balance in the relationship between retailers-wholesalers, processors and suppliers. We do not want to tilt it totally in favour of one, but if one side of the equation is much stronger than the other, there must be a balance.

I was interested in what witnesses had to say about the code of practice. If it is not perfect at the moment, then the balance could be better. This problem is not only being grappled with in Ireland, but is also recognised internationally as a problem in Europe. Even in America, they recognise this as a problem, so it is not something that members of this committee have made up. The debate is taking place and the more we all engage in it, the better and more balanced the answers will be.

I noted Ms Clancy spoke of the code of practice. Obviously, I would have a major difficulty with a code of practice that would place obligations on small operators here and would not put the same obligations on somebody importing. I also noted what she had to say about small companies starting up, that if one provides for more codes of practice, the burden to comply might be greater on them than on major suppliers. On the other hand, if it is not a statutory code of practice, it is not worth the paper on which it is written. I would be interested in Ms Clancy's comments on how, on the one hand, a code of practice might have teeth to ensure there would not be outrageous behaviour and, on the other hand, would not become another considerable burden on the small supplier. I have had much contact with small suppliers. Hazard analysis and critical control point, HACCP, was to their advantage, but in the early days it also posed a challenge to comply with all the standards.

We will deal with horsemeat another day. There would be a lingering suspicion, which is nothing to do with Musgrave as such, that a possible explanation for what was going on internationally, and let us be honest in saying this is a big international scandal, was that there was such price pressure on suppliers, coming from the major multiples but perhaps coming ultimately from the consumer, that the suppliers had to keep looking for ever cheaper ingredients and, in the final analysis, to maintain viability, they started buying product about which they should have been doubtful because it was too cheap. To what extent is it a problem in the business that competitors are putting a price on products which, as some would tell me, allows some competitors to sell them cheaper than the price at which less powerful players can even buy them? What is the danger that such practices pose in terms of ultimate quality, because something must give in the end?

Would Ms Clancy care to comment on how we might protect ourselves, not against the horsemeat because we know about that but against similar price squeezes having a similar effect? One example mentioned to me was liquid milk suppliers. It is a local market with a northern dimension that could look either east or south, but it is not an international market as we will not import fresh milk from Holland or wherever. The point was made to me that, eventually, if the squeeze by the large multiples continues - I am not naming anybody but refer to the general system in which each must keep track of the others - it will not be economic to produce milk in the middle of winter and we could find ourselves left with UHT milk in January and February. It is fair to be competitive and to have competition in the market, but competition is not a god. As we found with the banks, competition does not solve all problems. Competition can also lead to bizarre results. Has Musgrave, as a group representing the smaller retailer, any suggestion on how we can protect the entire system, including operators such as itself, from the biggest operators putting such a squeeze on price that not only can no one compete in the market, but also they are putting the sustainability of the product at risk?