AGBIOVIEW SPECIAL: Unilever Chairman: 'Facing the Future - The UK Food Industry in a Changing World'
'Facing the Future - The UK Food Industry in a Changing World'
Niall FitzGerald, Chairman, Unilever
Annual City Food Lecture, 15th January 2002
Ladies and Gentlemen
A character in Moliere's Femmes Savantes observes "It's good food and not fine words that keeps me alive".
I am afraid that you will all have to subsist on words for a while - you can tell me whether they are fine or not at the end. I am very grateful to Sir Peter Davis for inviting me to speak to you tonight. As the Chairman of one of the world's largest food companies, I am delighted to have the opportunity to discuss this subject with such an expert audience.
Food is an immense subject. Access to food, the price of food, the quality and safety of food, innovations in food production - all these are factors which have quite literally shaped the entire record of humanity. The history of the world is the history of food.
Food in the world today raises so many issues that it would be impossible to do all of them justice this evening. So I want to focus on the way in which we in the UK are increasingly influenced by what is happening to food on a global and particularly European basis. A walk around any local supermarket will demonstrate how international a business food is now becoming. What kind of challenges does this present to the UK food industry?
The key points
The essence of my argument will be this:
* I am convinced that we need a fresh approach across Europe to food safety, to farming, and to innovation in food. We must embrace change, not fear it. That will require courage from our politicians and better engagement with consumers.
* We need more imaginative regulation, with the focus on issues that are a real risk to health. It should not prevent consumers having access to the products that they want. We have become frightened of what is new, and reluctant to engage in rational scientific debate.
* Agricultural subsidy has become a comfort blanket. We need to cast if off and embrace a diverse use of the countryside and a concentration on foods which offer real added value to both farmers and consumers.
* We in the UK must recognise that we have to change too. This is not something that starts at Calais.
* We must open our markets to the crops of the developing world. It is hypocrisy for us to shed crocodile tears for poorer countries yet confront them with tariff and other barriers which exclude them from the richest economies of the West.
I want this evening to set out a vision of what the future might be if we can rise to these challenges. I believe and hope that we can.
Risk and food
I want to start with the whole area of risk and food, and approaches to food safety. The principle underlying food safety regimes in Europe is deceptively simple. Consumers are entitled to the greatest possible reassurance that what they buy and eat - whether they cook it themselves or have it cooked for them - will be safe.
As you know, in the vast majority of cases the food and catering industry delivers on that. But when we descend from principles to practice, what do we find? We find a situation of costly inputs and ineffective outputs. Recent food controversies have damaged public confidence in the regulatory process, the food industry, and the authority of science. Regulations are scattered and hard to understand. Procedures are - as we have experienced - lengthy and unpredictable.
So I look forward to the establishment of a European Food Safety Authority with great hope but with some apprehension. The hope comes from the clear need for an independent science-driven body, which has been strongly and rightly urged by Commissioner Byrne. Science and politics can make for an unhappy marriage. The apprehension stems from a concern that the legislative framework within which the Authority will have to work must be clear, transparent, and swift.
If the new authority learns from the approach of our own Food Standards Agency then I shall be encouraged. The FSA's broadly-based board, its commitment to openness, and its willingness to work with all food stakeholders have all helped it to operate effectively. I think there are lessons there to be built upon. Of course, the real test will come if there is another food safety crisis in Europe. In such an event, the European Food Safety Authority must play a key role. If we create a Europe-wide system then we must handle crises on a Europe-wide basis. The temptation for member states to undermine that system by erecting their own additional controls and regulations must be resisted. We are hardly likely to get immediate agreement on these lines.
In the first place, member states already have enforcement bodies like the Food Standards Agency here in the UK. The reaction of other countries to the UK's BSE difficulties demonstrated how politically difficult it can be to abide by the rules of the European club in the face of domestic pressures. The French are still blocking UK beef exports despite the illegality of their actions. That demonstrates how powerless EU institutions can sometimes be in the face of national non-co-operation, which - for someone who is a firm believer in the importance of the European ideal - is, I can tell you, disappointing.
The danger is that national regimes will create their own agendas, leading to an inevitable loss of focus and the creation of regulatory confusion. Our own FSA is not immune from this - despite its generally good start. It appears, for example, to be taking an increasing interest in the advertising of food to children. I question whether this nannying is sensible in principle - based on objective evidence - or answers to consumer concerns. It could also represent a diversion of scarce resource from issues of food safety which, in the light of worries about BSE, e-coli, and salmonella, are surely the priorities.
Novel food regimes
But the hardest tests for the new European Authority will not just come from issues over the safety of existing foods, but in its attitude to new and innovative food products. It is vital that we get the balance right between risk and safety when dealing with innovation in food. The prospect of the inflexible use of the so-called 'precautionary principle' is particularly worrying. If properly used, the precautionary principle makes sense.
But, as some have argued, it could be used to require authorities to work on the basis that if there is any uneliminated risk from a product, however unlikely, no green light can be given. This might be attractive to politicians and regulators. Understandable enough: they know that they will get no thanks for preventing public risk, but plenty of criticism if things do go wrong - as the former Miniistry of Agriculture discovered in the UK.
It is dangerous though because it immediately creates a playing field which is fundamentally not level. New foods must satisfy criteria that simply do not apply to the existing market. I'm told, for example, that if the humble potato were being introduced in Europe now, rather than in the sixteenth century, it would never have got through the regulatory regime. Given a choice between the precautionary principle and a plate of fish and chips, which would you rather have?
It seems a pity that we now have to regulate common sense.
Mention the word innovation in food and everyone thinks Genetic Modification. We have become so hung up on GM that other innovations, such as functional foods - foods which are enhanced to confer additional health benefits - are being caught in the same net.
I declare an interest. Unilever has a commercial interest in developing these new markets. But regulators must appreciate that we are interested in these innovations because there is consumer demand for them. The fact is, consumers increasingly care about how the food they eat supports their lifestyle and health choices. We are moving beyond answering the question, "Is this foodstuff safe to eat?", to asking, "What good will this food do me?".
We have already seen some of these foods come to market, including spreads which reduce cholesterol, like our own highly successful Flora proactiv.
I will not dwell on what we had to go through to get approval from the EU scientific committee. But we learnt lessons from the process, and I believe the Commission has learnt them too. We accept and support the need for a rigorous approach, but it must be coupled with a more predictable and transparent approach to product approvals, one which all member states will support.
And one thing is absolutely clear. We are just at the beginning of the road as a far as functional foods are concerned. The pace of scientific research in this area is relentless.
And it is not just about better feeding. It is about helping to prevent or offset certain illnesses - and in a way which is more affordable to societies as a whole, certainly when compared to treatments and cures which may not be affordable.
Looking ahead, the opportunities in this area are immense.
Take the science of genomics - the collective name for the technologies involving DNA sequencing, the functional analysis of genes, and the processing of the resulting knowledge via bioinformatics.
The practical result of this knowledge will be the ability to provide life-enhancing functional foods which will help to counteract the harmful effects caused by external factors such as poor lifestyles, lack of exercise, and so on. It is the new frontier of technology. We must be involved. Certainly if we are committed to a competitive Europe, then we cannot afford to be left behind. A badly structured European regulatory regime could harm investment in this, one of the biggest new markets of the future.
The result? Less innovation, fewer jobs, and increasing pressure on an already creaking healthcare system.
If such innovation is not to be choked off, or moved elsewhere, we need streamlined approval procedures with strictly enforced deadlines. I ask the question: do Europe's politicians have the courage to seize the opportunity to rebuild public confidence and create the conditions to meet consumer demands for food which delivers health and vitality?
If they do, they may be surprised by the reaction from consumers. Most regulatory regimes in food are predicated on two questionable assumptions.
First, the ideal is a system which permits no risk whatsoever. The second assumption is that, consumers are passive recipients of official advice. Therefore, trust can be established by providing more and more information and reassurance, enabling people to make absolutely rational choices about food consumption.
Both of these propositions are examples of the axiom that the best is enemy of the good.
In fact, no risk is the biggest risk of all.
The fact is, a no-risk system is unachievable, but in an effort to deliver it, we are in danger of erecting the kind of barriers to innovation I referred to earlier. And, as a result, consumers - you and I in other words - have developed a strong degree of scepticism about advice from any quarter: from scientists, governments, companies, and indeed from NGOs.
Why? Because the authorities feel that we have to try to offer definitive risk-free guidance. Yet, consumers make their own estimation of the risk involved in following guidance, aiming off for the interests of the advising body, getting second or third opinions from family and friends, and arriving at a decision which may be rational, emotional or - most likely - a mixture of the two.
They work on the basis of what might literally be called a gut reaction. The open approach which the FSA has taken is key to progress here, but we need to go further. Food safety authorities must engage in dialogue with their citizens and deal with them on an adult-to-adult basis, providing clear and frank estimates of risk, and remembering that people value choice in food as everywhere else. Denying them that choice on the basis of an inflexible use of the precautionary principle, for example, is not good governance or sensible regulation.
Of course there is also a clear responsibility on all of us - at whatever stage in the food chain we are involved - to participate actively in achieving the highest possible standards of safety and hygiene. There has to be co-operation between all of us with the key aim of improving the confidence of the consumer in the whole food chain.
Reforming European agriculture
I want to turn now from Europeans as consumers to Europeans as producers of food.
Reform of CAP: There have been enough analyses of the failings of the Common Agriculture Policy to wallpaper the whole of the European Commission's HQ in Brussels. I do not propose to repeat that exercise now. The UK government's stated policy of switching support from subsidies to rural development and environmental schemes is on the right lines.
A reduction in subsidies will create short-term hurt: but such an approach is in the long-term interests of European farming and those who earn their living from agriculture and related industries. We do have the opportunity to set an example of how this might work in the UK. Very shortly, the government's Policy Commission on Farming and Food will report. Peter Davis is a member of the Commission - so too is my own Unilever colleague Iain Ferguson.
You can ask them later what will be in the final report - and I am quite sure they will not tell you! But the existence of such a high-powered review - admittedly born out of the desperate state of the UK agricultural sector - gives us the opportunity to grasp the nettle of reform.
We have known for years that CAP is a disaster. The last attempt at significant reform was ten years ago, under the strong leadership of a fellow Irishman, Ray McSharry. Since then, the pressures of inertia and politics have meant that reform proceeds at the pace of a snail - or should I say an escargot!
No longer. The pressures on CAP are growing - partly as a result of the successful beginning of the Doha round of world trade talks in November, and partly because of the enlargement of the European Union. Enlargement places an intolerable strain on CAP because it is impossible to support the agricultural economies of Eastern Europe as we have done in the West.
The European Commission maintains to the contrary that extending the CAP regime to new members is affordable. Even if that is so, we are entitled to ask the question, is that a good use of European taxpayers' money? I have heard senior commissioners argue that CAP reform should be postponed until after enlargement takes place. That seems implausible to me. Either we bankrupt ourselves by extending the CAP system to the new members, or we operate double standards, exclude them, and give the lie to the very idea of a European Union.
No, we must get to grips with CAP reform now - or at least immediately after the French Presidential elections in May. And, as part of that reform, the mid-term review of CAP this year must answer the question, is the present regime sustainable? Agricultural production which is not sustainable from the environmental point of view should not, in principle, be supported.
In any case, the agreement at Doha means that CAP reform is far more than a purely European issue. Doha marked a major step forward, a real sign of hope. And I want to take this opportunity to pay a tribute to the European team which played a pivotal role in reaching an agreement, including Patricia Hewitt. Their willingness to negotiate imaginatively ensured that environmental issues will now be part of the WTO agenda as well as being driven forward at Rio plus 10 in Johannesburg later this year.
That is a major advance in joined-up policy-making - for the world. And when you consider the troubles we have had in achieving joined-up government here, that is really good news! Doha also marked a great shift in the European attitude to trade liberalisation. At the talks, the European Commissioner for Agriculture, Franz Fischler, summed up the realities of the new round. "It was clear from the very beginning", he said, " that we have to give and to take."
Precisely. In return for the agreement to negotiate on freedom of trade, and to include for the first time environmental issues in the Doha round, Europe has had to agree to - and I quote - "comprehensive negotiations aimed at substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies, and substantial reductions in trade-distorting domestic support." End quote.
CAP and the developing world: CAP reform is often viewed purely through the perspective of European consumers. Although it will be good for them, that is much too narrow a view. What is equally important is the stimulus which CAP reform can have on the economies which need it most: those of the developing world.
If globalisation is properly managed, then it will create the opportunity for commodity producers in Latin America, the Caribbean, and above all Africa to find free access to markets in the developed world. And the situation, as you know, is desperate. Take Africa. According to the UN's Food and Agriculture Organisation, between 1969 and 1992 the population of sub-Saharan Africa rose from 268 million people to over 500 million. The undernourished percentage increased from 36 to 41%: or from 96 million people to over 200 million. It is estimated that over 300 million people in sub-Saharan Africa will be malnourished by 2010.
Europe must accept that general prosperity can only be advanced if European markets are open to the produce of developing countries. The alternative is damaging not only to the economic growth of the developing world, it locks European producers and consumers into a high-cost system of subsidies and inefficiencies. There are no winners. And even more dubious morality. Dwell for a moment on the following appalling statistic. One billion people in the developing world exist on the equivalent of $1 a day - each cow within the European Union is subsidised to the extent of a $1 a day!
Virtually the whole of sub-Saharan Africa was of course at one time under the control of European colonial powers. Ties remain strong, even if there are accompanying tensions. Of course it is vital that Africa leads itself out of its present difficulties, but Europe has a special role to play, not least in promoting good governance. Markets matter, but they cannot function without soundly-based government.
The developing world and biotechnology
Above all, Africa and other parts of the developing world must not be excluded from access to advances in crop biotechnology. If anything, that is where the need for sustainable increased yields is the most glaring of all.
In that context, I was struck by a powerful article in the Washington Post recently by Florence Wambugu, a Kenyan plant scientist and campaigner for improved agricultural methods in Africa. She wrote of the progress that had been made in field tests of the growing virus-resistant sweet potatoes in Kenya - offering a potential increase in yields of 80 per cent. Reflecting on the rarity of this sort of programme, Ms Wambugu wrote: "I believe the blame lies with critics who say that Africa has no chance to benefit from biotechnology and that our people will be exploited by multinationals. These critics, who have never experienced hunger and death on the scale we sadly witness in Africa, are content to keep Africans dependent on food aid from industrialised nations while mass starvation occurs." These are strong words, but Ms Wambugu's passion is justified by the sheer difficulties Africa faces.
Reforming UK agriculture
A record of continuous change: Agricultural practices and food processing have never been static. Our European forefathers made the switch to settled agriculture in the stone age. One wonders if there was a Neolithic George Monbiot - urging his clansmen to stick to the old pastoral ways and avoid this dangerous and potentially harmful innovation.
Since that fundamental development our agriculture has been driven forwards by endless innovations: the plough, the watermill, plant breeding, the use of agricultural machinery, and now the prospect of biotechnology. There is no reason why change in the UK has to stop now. To cease to innovate is to accept stagnation and failure.
The first positive development is the growth of organic farming - something which has been very much led by the Soil Association in the UK.
You may well be surprised to hear me welcome that, or indeed to consider it as an innovation. But of course it is: until the organic movement came along farmers, like everybody else, had pretty much accepted that 'more will mean better', and that any means to achieve that was fine. We have discovered through bitter experience in this country how wrong that attitude was. The UK government recently announced plans to triple the land under organic cultivation by the end of 2006. There is evidence of increasing consumer demand for organic produce - certainly the initial growth in the market at what are still premium prices is impressive. One of the reasons incidentally why Unilever acquired a small organics business in Scotland last year.
Certainly, as an alternative to environmentally damaging agricultural practices, organic food has many attractions.
We must however be aware of the limitations of organics. At present there are obvious structural problems in the organic marketplace. Well over seventy per cent of organic food eaten in the UK is imported, for example. In addition, proponents of organic food seem divided as to whether their ideal is organic food per se, or organic food produced by independent farmers and smallholders. The romantic view!
There are also doubts about consumer attitudes. The bold decision of Iceland to move wholly to organics was not successful, although the demographics of Iceland's customer base were admittedly not ideal. Consumer research published last week, however, suggests that the high hopes of consumer interest in organics were misplaced. The study indicated that consumers now had less faith in the health advantages of organic food over conventional produce. Whether they are right or wrong, perceptions are important.
The market in the UK for organic milk has been badly overestimated, leading to a glut in the market and collapsing producer prices. The whole thing is a bit of a muddle. There was resistance from the organic movement to supermarkets which wanted to reduce the price differential between organic and conventional produce.
These may be temporary phenomena. But they also illustrate fundamental tensions.
The way forward
My own view is the success of organics must be governed by the twin priorities of expanding the amount of land under organic production in the UK, and the consumer market share. That is regardless of who is doing the production.
In other words, proponents of organic methods cannot defend a position in which access to organic food is limited, not least by price. Is it to be a middle class preserve? Furthermore, if organic food is seen as a disguised method of protecting inefficient producers it will be little better than the present system of subsidies for intensive production.
We also need greater realism from the organic movement on world food issues. The movement's standard response to the question, "Can organics feed the world?" is apparently to argue that there is already sufficient food to feed the world - but it is inequitably distributed. Well, yes, but as a practical argument, that is the equivalent of the old joke about how to get to Dublin - and as an Irishman I am allowed to make Irish jokes - "well, if I were you, I wouldn't start from here."
We are not likely, for a host of reasons, to have the redistribution of food on such a colossal scale. The organic movement represents a positive step for agriculture and the environment, and I welcome it. But if organic methods are not in themselves able to cope with increasing population and hunger, wherever it exists in the world, then we must look elsewhere.
That is one of the reasons why in Unilever we have undertaken pioneering work in the area of sustainable agriculture. It is part of our whole identification with sustainability, as expressed in three areas closely linked to our business: water management, fisheries, and agriculture itself.
As agriculture provides over two-thirds of the raw material in our foods brands, a sustainable supply of agricultural products is vital to us. So, for good business reasons, we have been working closely with our suppliers to promote a sustainable methodology.
Let me introduce you to the sustainable pea. Our UK subsidiary, Birds Eye, has been working with pea growers for more than fifty years. Drawing on the strength of those relationships, we have been working in partnership with our growers since 1998 to develop a model of sustainability for our Birds Eye frozen pea business, one of the most powerful brands in Unilever. This has involved a unique collaboration between ourselves, farmers, academics, and NGOs - ornithologists, environmentalists, wildlife trusts, and Forum for the Future, one of the UK's leading sustainable development organisations.
The project is at an early stage, but the results so far are hugely exciting. It is possible to maintain quality and productivity, while reducing the use of pesticides and chemical fertilizers, and encouraging biodiversity. We are achieving similar results across the world with tea, with tomatoes, and with spinach.
Sustainable agriculture seems to me to offer a third option - dare I call it a 'third way'? - between unsustainably intensive agriculture and organic methodology. We are eager to share what we have learnt. Our long-term aim is to help promote a common benchmark set of indicators for sustainable agriculture that can help those farmers who want to move away from over-intensive methods. That would also have appeal to consumers who are increasingly interested in what lies behind the food that they see on their plates.
Farming in the future
This consumer interest does, I believe, offer a real opportunity to the UK's farmers. Much of what I have said might be taken to mean that I see a bleak future for the UK agricultural industry.
That is not the case. We do need reform, but the battered UK farming industry still provides huge amounts of quality food to consumers. The new Department for Environment, Food and Rural Affairs - DEFRA - is still an infant, but it has made an encouraging start.
Its challenge now is to manage down overproduction and environmentally harmful agricultural methods. There will be diversification away from farming to other rural economic opportunities. But in a post-CAP reform world, there will still be opportunities for farmers to produce added value produce - whether it is marketed as sustainable, organic, local, or traditional.
Here I must compliment Peter Davis and his colleagues on the rural action programme of Business in the Community. The recent work they have done with the Institute of Grocery Distribution (IGD) to promote the marketing and sales of small-scale quality produce is excellent. Business can play a role as important - perhaps more important - than the government in rural agricultural regeneration.
The increasing interest that consumers show in purchasing meat which is farmed humanely is another positive sign. We have to be realistic, of course. For very nearly half of UK consumers, according to research by the Food Standards Agency, price remained the most important factor when buying food. In fact, price was a staggering four times more important than anything else. Taste and quality were very poor seconds.
No doubt the French were delighted to have their prejudices about English cuisine so amply confirmed! There are those who argue that the regime of cheap, plentiful food must come to an end to restrict demand and put the brake on unsustainable agricultural production. That may be so, but we must tread very carefully.
I accept that much of the cost of so-called cheap food is hidden by subsidy and market manipulation. Cheap food also disguises the real environmental costs of intensive production: but we still pay the price in the long term. Nonetheless, cheap food has meant that children in the UK and Europe have, by and large, immeasurably improved their nutritional standards compared to the pre-war period. And there are people in the UK who still live in relative poverty, and price increases would still hit them hard.
Above all, we must remember that consumers must join with us in reform. It cannot be imposed upon them. Second, price increases could only be justified on the basis of promoting sustainable agriculture. There is no argument in favour of protecting producers who are simply uncompetitive. The tendency of European governments to do just that does not inspire confidence, and we must be wary that this is not just a new way to achieve the same discredited approach.
I have spoken so far about two developments that give me hope: the growth of the organic food market, and the development of sustainable agriculture. The third is likely to be more controversial: I believe it is time for a fresh start on genetically-modified organisms in the UK and elsewhere in Europe.
There have been many understandable questions about the effects of GM crops on the environment and on people's health. I welcome these because they are the foundation of a good debate. There have also been numerous instances of alarmist and hysterical reporting, law-breaking, and pseudo-science. It seems sometimes that Europe has taken a step backwards into a time when the scientific discoveries of Galileo could be regarded as incorrect on the basis of dogma alone.
This is not all the fault of the politicians. Our own Prime Minister has spoken out in favour of this new technology, and Frits Bolkestein, the EU's internal market commissioner, has urged us to do more. Yet we face the barrier of deep public suspicion in Europe. Can it be overcome?
I believe that it can if we remember the importance of working with consumers and speaking their language.
The mistake that has been made with GM crops and food is the failure to reach the consumer. People do not want to buy technology. They want to buy things that work for them, that deliver real benefits in terms of health, taste, and quality. So far we have badly misjudged the public mood on this issue. We need to begin afresh. That does not mean following public opinion. It means setting a lead, communicating directly and honestly with consumers, and answering all the questions that people have. If there are areas of doubt, then let us say so.
Early next year we will be able to see the full scientific appraisal of the farm-scale trials of GM crops being undertaken in the UK. While we cannot anticipate those conclusions, if they are favourable to the production of GM crops in the UK then one barrier to a more rational approach to GM will have been removed. At the same time, European leaders who are convinced of the potential benefits of GM foods to the consumer should place dialogue with the public and an increase in public understanding of the GM issue at the top of their in-trays. This is not something that the food industry can do on its own.
I know that this is not a task that politicians will relish. But if science, consumer requirements, and the requirement to have a competitive European food sector are all pointing in the same direction, then our leaders should take heed.
It would be fatal to leave the field open to those who would whip up hysteria without a measured and rational response from those who are entrusted with the welfare of our society.
It requires courageous leadership, not comfortable populism.
Let me conclude by reminding you of one of the oldest parables of all, that of Aesop's grasshopper and ant. As you all doubtless remember, it was the feckless grasshopper who failed to store food for the winter and perished, while the industrious ant had laid enough stocks in to survive.
Are we in Europe the grasshoppers of the twenty-first century?
We consume three thousand-plus calories per head per day provided to us by intensive, subsidised agriculture. By the way, we probably need no more than 2000 calories.
We turn the face of ignorance and blindness to science and pretend that nothing will ever change, although our experience teaches us otherwise.
We take thought only for ourselves while nearly 1 billion of our fellow human beings are malnourished.
Yet, unlike the grasshopper of the story, we have a precious ability: the ability to learn.
This, on balance, is why I remain an optimist about the future of food.
If we in Europe can respond to the many challenges - only some of which I have set out - if we have the courage to embrace change not fear it then we have the potential, not only to improve our own farming and food industries, but to have a major positive impact across the world.
That is an aim well worth fighting for. I hope that you will think so too.