Sainsbury’s – Written evidence (FPO0034)

 

About Sainsbury’s Group

Sainsbury’s Group comprises Sainsbury’s Supermarkets, Argos, Habitat, Nectar and Sainsbury’s Bank. We are the second largest retailer and the second largest private sector employer in the UK, with around 180,000 colleagues.

 

We are committed to running our business in line with a number of corporate values, including: Sourcing with Integrity, Respecting the Environment, and helping our customers to Live Healthier Lives. Each of these values is enshrined in its own Value Management Group, with each group chaired by a senior director who is accountable to the Operating Board and responsible for ensuring we are taking the right action to propagate these values.

 

Sourcing our products ethically and sustainably helps us to improve people's livelihoods and tackle climate change and environmental damage. In line with our commitment to source ethically we are proud to have been named the Best Sustainable Seafood supermarket in the world by the Marine Stewardship Council, and to maintain our status as the UK's leading retailer of RSPCA Assured products.

 

We care about our planet and the effect that both we, and our global suppliers, have on the environment. As such, we are committed to reducing our emissions, water use and waste. We have been zero waste to landfill since 2013 and recently signed up to an industry-wide target for all the plastic packaging we use to be reusable, recyclable or compostable by 2025.

 

Sainsbury’s has a strong track record of being an industry leader when it comes to creating a healthier environment in supermarkets. For example, in 2005 we became the first UK food retailer to introduce front of pack labelling on our products; and in 2016 we were the first major supermarket to announce the phasing out of multi-buy promotions such as Buy One Get One Free.  Since 2005 we have invested over £186 million in sports equipment and experiences for schools through our Active Kids scheme and recently launched a network of Active Kids summer holiday clubs - with 10 per cent of places being given away for free to ensure that children from low affluence backgrounds are able to take part. We are also committed to ambitious reformulation targets, having already achieved an 18 per cent reduction, since 2015, in the average sugar tonnage of products being sold across key categories like ice cream, biscuits and cereals. We are members of Peas Please, a campaign led by the Food Foundation to reverse declining levels of vegetable consumption.

 

How do you make a healthy and sustainable diet accessible and affordable for everyone?

Sainsbury’s is a responsible UK retailer committed to helping our customers to live healthier lives, to sourcing with integrity and respecting the environment in which we operate. At the same time, various data point towards our customers’ increasing demand for food that is healthy and sourced in an environmentally responsible way.[1] Meanwhile, a protracted period of deflation in the UK grocery market, and the sustained increases in market share being won by the discounters, demonstrate the fiercely competitive climate in which we are operating and the need for us to keep prices low. In line with these market conditions we cut prices, earlier in the year, on more than 1000 own brand products, including commodities such as dairy, meat, fish, poultry, fresh fruit and vegetables. This resulted in an 18 per cent – or £5.85 - saving for customers on a basket made up of these items. Since the start of 2019 the business has invested £40m in reducing the price of fruit and vegetables; this includes taking action to ensure that loose items are at price parity with bulk purchase, pre-packaged items in order to ensure customers can benefit from value regardless of the volumes they require.

 

In short, while Sainsbury’s is committed to a superior set of values that govern our retailing practices, as will be demonstrated by case studies below, market dynamics and changing customer demands also reinforce the need for us to sell food that is simultaneously nutritious, sustainably sourced and affordable if we are to thrive as a business.

We recognise that there can be a premium attached to sourcing, producing and retailing food according to sustainable practices. Nevertheless, we can cite various examples of where we shield customers from the resulting price increases at the same time as working to mitigate the impact on our business in order to ensure our practices are financially sustainable. This involves investing in technology, innovation and mutually beneficial creative partnerships that generate efficiencies throughout our supply chain, in order to help us recover some of these costs.

 

Case study: mitigating the costs that arise from investing in sustainably sourced fish

We have invested huge amounts in making sure that the fish we source is sustainable, a point demonstrated by winning the Marine Stewardship Council’s (MSC) UK Supermarket of the Year for five years in a row, and the fact we sell 260 MSC-certified products; this is 56 per cent more SKUs than our nearest rival, and includes prepared product ranges such as ‘On the Go’ sandwiches and snacks which are designed to provide customers with accessible and affordable meal solutions. We are committed to ensuring our customers are able to consume at least 2 portions of fish a week - including 1 portion of oily fish - at affordable prices and in line with NHS guidance around maintaining a healthy diet.

 

That is why we have brought a new enriched salmon fillet to market which price matches the discounters at the same time as being fortified with additional omega-3 (in the form of EPA and DHA omega-3 fats). Working with our supplier, Mowi Scotland, we have adjusted the feed to deliver a more nutritious product at what is the highest specification available on the market.  A specified feed formulation did add cost to the process, but we have been able to mitigate these through the creative relationship we cultivate with our supplier.

 

For a start, Mowi are vertically integrated: this means they are able to offer us an end to end model that stretches from growing the fish all the way to packing it for us. We have also built a strong relationship over the last 11 years, providing them with the continuous demand, business stability and the right set of conditions to invest in creating the economies of scale that have helped us keep costs low for customers. At the same time, the high sourcing standard we have demanded of Mowi, which our customers demand of us, has resulted in a gold standard production model for salmon that they are able to export into other markets, creating new growth opportunities for them that support the benefits of working with a retailer of Sainsbury’s scale.

 

This case study provides an example of how working with one vertically integrated supplier over a long period of time, while taking a holistic view of the end to end food process and underpinning it with stability of demand that supports investment in order to reduce cost, can help Sainsbury’s deliver healthy and sustainably sourced fish at an affordable price for our customers.

 

We can also demonstrate examples of where environmentally and ethically responsible sourcing are more cost-effective than less sustainable alternatives: FAD free fishing is a technique used to catch skipjack tuna that does not use Fishing Aggregation Devices (known as FADs). While FADs enable fisheries to catch lots of tuna quickly, they can also attract other marine life that end up being caught in the bycatch. Sainsbury’s now fishes from free schools, FAD free, which has enabled us to add to our range of responsibly fished tuna products. We work with OceanMind, a not-for-profit organisation which independently analyses and confirms, through the use of satellite positioning technology, that the vessels we use are supplying us with FAD free tuna.

 

Sainsbury’s does bear a validation cost for asking OceanMind to conduct this analysis on our behalf. However, there are ways for us to offset this added cost of production in order to insulate customers from any price rises. For example, the average free school caught fish is larger than FAD catches, resulting in higher factory throughputs and better yields. These benefits are compounded in instances when the suppliers we use are fully integrated and able to deliver end to end operations.  The design of the vessels being used in FAD free fishing tend to be more fuel efficient too, which also reduces cost.

 

What is the role of supermarkets?

Supermarkets have a responsibility to sell food that is sustainably sourced, affordable and healthy at the same time. Where such processes result in a premium, we can demonstrate examples of working collaboratively with our supply chain partners to generate the efficiencies that help mitigate against cost increases. In general, we find that committing to long and durable partnerships with our suppliers helps in this regard, providing both parties with stability and the space to invest in more efficient and environmentally responsible practices that pay back in the long run and are mutually beneficial. Indeed, since December 2012 we have invested over £18m into our agricultural supply chains, through development grants that enable cutting edge scientific research with our Farmer Development Groups, and with commercial applications such as annual carbon footprint assessments that help our suppliers lower their input costs.

 

For example, we use a cost of production model for milk, delivered through our network of 240 farmers that make up Sainsbury’s Dairy Development Group (SDDG). This model takes into account fluctuating input prices - such as feed, food and fertilizer - every three months to ensure that we pay a fair price for the milk we purchase. We accept that, versus the market, there is a premium attached to sourcing with integrity in this way, but we work to shield customers from resulting price increases in order to stay competitive on commodities. Indeed, Sainsbury’s own brand semi-skimmed milk was one of the products we reduced the price of in June 2019, as referenced earlier in this document.

 

The role of supermarkets in encouraging healthier lifestyles

We believe that healthy eating (and reducing obesity) is a complex issue that requires a multifaceted response. This is reflected in the varied action we have taken over a number of years: investing over £186m in school sports equipment through our Active Kids programme, and recently launching a network of summer holiday clubs to help children stay fit; committing to an ambitious product reformulation strategy, as demonstrated by the 557 tonnes of sugar we have removed from our juice drinks in the last year; and investing in innovative new product ranges, such as Little Ones,  baby foods with no added sugar or salt that are designed to encourage the early development of healthy habits.

 

We recognise that low affluence customers tend to consume less healthy baskets of products than affluent customers and are committed to action which helps nudge the former towards healthier choices.

 

The business is working in partnership with the British Nutrition Foundation (BNF) to analyse Sainsbury’s Nectar data comparing the diets of low, medium and high affluence groups throughout the period between January and December 2018.

 

While the differences between high and low affluence groups were reasonably small in terms of percentages, the data still reflect findings in the available literature: that the largest difference between the two affluence groups was seen in fresh vegetables and fruit (higher purchases in the high affluence group) and cakes and puddings (as a marker for free sugars intake – with higher purchases in the low affluence group).

 

Table 1: Comparison of the number of units purchased of food and drink categories as a proportion of the total shop for low and high affluence groups (BNF report for Sainsbury’s).

 

 

Proportion of total shop

 

 

Difference low affluence vs. high affluence

Category

High affluence

Mid affluence

Low affluence

 

 

 

 

 

 

Cakes and puddings

3.3%

 

3.8%

 

4.4%

 

1.2%

 

Fresh fruit

7.9%

6.6%

6.2%

-1.7%

Fresh vegetables

13.8%

11.7%

10.7%

-3.2%

 

We strongly believe that encouraging low affluence groups towards healthier diets is a broader challenge than simply cutting the price of healthy food. Images 1 and 2 below demonstrate the affordability of a range of healthy fruit and vegetables available at Sainsbury’s, in comparison to a standard Snickers bar: a variety of fresh and tinned products – which each represent one of a person’s recommended 5 a day – retail for significantly below the price of confectionery.

 

As mentioned at the beginning of this submission, we have invested millions in lowering the price of fruit and vegetables since the start of 2019. This has been supplemented by measures to help guide customers who are on a tight budget, including offering price transparency at the point of choice through our groceries online platform and rolling out Smart Shop technology to help customers monitor the cost of their baskets prior to checking out of store. We have even started offering free side portions of vegetables to children’s meals at our in-store cafes; though anecdotal evidence suggests that these items are frequently left on the plate.

 

Image 1

 

 

 

 

Image 2

 

 

 

In light of the complex factors that influence healthier diets, we have launched a partnership with the Consumer Goods Forum to test a series of in-store health interventions – taking place in a selection of our Lambeth and Southwark-based stores – that are designed to monitor customer behaviour and, in particular, help nudge low affluence consumers towards healthier choices. These interventions are focusing on three key areas: encouraging healthier swaps within categories, reducing calories from discretionary foods and drinks, and increasing consumption of healthy products.  For example, we are doing some exploratory research on where to position products, including assessing the impact of placing healthier options at eye level. 

 

The trials are still live and we are not yet in a position to report findings. Nevertheless, given recent government proposals to regulate the shopping space through location-based restrictions, and given the complicated nature of this issue – not least because of the need to maintain a fair and level playing field with the Out of Home Sector (OOH), which is increasing its overall share of where the nation buys and consumes its calories – we are advocating more testing and the build-up of evidence to inform policy-making before any decision is made around implementing indiscriminate bans on products being located in certain parts of the store in an attempt to curb obesity.

 

Do you have any comment to make on how the food industry might be encouraged to do more to support or promote healthy and sustainable diets? Is Government regulation an effective driver of change in this respect?

Government regulation – or action – can certainly be an effective driver of change.  The scale of public challenges such as rising obesity rates and climate change demand not only industry-wide action, which the Government has a role in enabling, but a whole systems approach to generating solutions founded on a partnership approach that unlocks the potential of technological innovation and uses data-driven insights to provide an evidence-base for better decision making. We are fully committed to playing our role in the public policy challenges in which Sainsbury’s has a stake. Indeed, our Director of Sainsbury’s Brand, Judith Batchelar OBE, is a Board Member of the Food and Drink Sector Council - charged with helping to increase sustainability throughout the entire food chain - and responsible for chairing its Innovation Working Group, as well as being a Non-Executive Director of the Environment Agency.

 

One area where Government regulation could be effective in encouraging healthier choices is in mandating responsible portion sizes, which could in turn establish a level playing field, help guide calorie-based reformulation and, for the purposes of front of pack labelling, educate customers on what responsible meal sizes look like. These would need to be realistic, offering targets that provide effective guidance for product developers (versus sales-weighted averages which continually vary depending on sales), and be monitored against accurate and real-time data. To that end, we welcome Public Health England’s new focus on setting targets for calories.

 

Such reformulation criteria would also benefit from being integrated into other nutrient criteria e.g. for schools, hospital procurement, advertising to children and dietary guidelines. This would help ensure better consistency of messaging and a clear line of sight for food industry innovations. Guidance on what “healthier” - and not just “healthy” - choices within categories entail would also be helpful, both for industry and for the customer.

 

A healthy sustainable diet is one that includes a much greater proportion of wholegrain than the British public consume today, in addition to having a higher fibre intake in general and a greater intake of fruit and vegetables. However, there is currently no regulated definition for wholegrain, nor a database to monitor the typical wholegrain content of common foods, to assist the food industry in quantifying the changes needed to purchasing patterns.

 

As government increasingly draws on support from business to help tackle public policy challenges, and puts an emphasis on the use of retailers’ own infrastructure to drive change (such as installing Deposit Return Schemes designed to increase recycling rates), it is important that principles of proportionality and evidence-based research be applied to any new regulations being considered either in the realm of public health or the environment; particularly within the context of a physical retail sector that is undergoing transformative structural change and seeing its profit margins eroded as fixed costs rise faster than volumes. In short, the trading environment puts extra emphasis on the need for laser-focussed interventions that have already been tried and tested and face the burden of proof. Certainly, poorly conceived or disproportionate regulations could have a huge and detrimental impact on retailers’ ability to invest in their customer offer and/or colleagues’ pay.

 

At the same time, it must be acknowledged that large supermarkets have taken substantial action to make our store environments healthier. For our part, we have cut the price of fruit and vegetables, stopped multi-buy promotions on products like confectionery and crisps, and invested huge sums in product reformulation and calorie labelling to promote healthy choices (e.g. as of 2018, 77% of the traffic light labels on our own-brand products were green and amber).

 

Policy measures designed to regulate supermarkets still further – such as the Department of Health and Social Care’s (DHSC) recent consultation on further restrictions to promotion-based sales need to more adequately address the realities of the new retail environment and mitigate the risk of creating an uneven playing field between large supermarkets (which seem to be disproportionately targeted) and other channels which are lagging behind on this agenda.

 

For example, Quick Service Restaurants, cafes, pubs and bars are all experiencing faster growth in their out-of-home snacking sales than large multiple retailers; and over 50 per cent of the share of food and beverage sales from convenience stores now come from smaller Symbol and independent stores.[2] Yet, current plans by DHSC to exempt the smallest stores from proposed placement restrictions, or to excuse non pre-packed products from restrictions on promotions (such as an unwrapped croissant in the OOH sector) risk giving other vendors a commercial advantage in retailing these products and undermining public health goals (such as reducing over-consumption).

 

Other areas the Government may want to consider include repurposing farm subsidies in order to encourage more environmentally sustainable farming systems and the production of healthy, nutritious food.

 

Putting a greater emphasis on cooking skills, food literacy and nutrition in schools could also help improve children’s relationship with food and encourage healthier diets.[3]

 

 

Joe Chapman

Senior Public Affairs Adviser, Sainsbury’s Group

 

 

12 September 2019

 

 

 

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[1] For example, Kantar ‘reasons for consumption’ data from 2019 show that ‘more natural/less processed food’ and ‘health benefits’ are increasingly influential components in customers’ choices (relative to five years ago).

[2] See, for example, Kantar Worldpanel OOH (52 w/e 17 June 2018 vs. 18 June 2017) for Total Snacks; and data from the Institute of Grocery Distribution (IGD) for 2018 showing  >50% of the share of food and beverage sales from convenience stores come from Symbol and Independent stores. Restricting placement restrictions to larger retailers would limit the scope of the regulation to just 24% of convenience sales.

[3] For example this barrier to healthy eating is raised in a report by Shift Design.  Available here: https://shiftdesign.org/content/uploads/2018/06/Families_and_food.pdf