Successful pilot means Sainsbury’s roll out new scheme to all in January

‘TRY Something New Today’, Sainsbury’s has been urging its customers for the past two years.

Credit: © FARMERS GUARDIAN please contact 01772 799445.

Annie Graham, Sainsbury’s agricultural manager.

It is a slogan that, with a little help from Jamie Oliver, has been credited with helping to revive the supermarket’s ailing fortunes in recent times. It would also appear that the meaning behind it has not been lost on the supermarket’s executives.

Last autumn, Sainsbury’s announced it was trying something new with the way it sourced its milk. Its was to set up a Dairy Development Group (DDG) that would see it source every drop of the 430 million litres of liquid milk its sells annually in its 788 stores from the direct groups of processors Robert Wiseman Dairies and Dairy Crest.

The concept of dedicated milk suppliers was not new among the ‘Big Four’ supermarkets – the Asda-Arla partnership had been established for some time. Tesco now has its dedicated supply arrangement in place.

But what was new was an open-ended ‘financial and physical’ commitment from Sainsbury’s to helping the 320 farmers who make up the DDG forge improvements in all areas of their businesses.

Sainsbury’s pays its farmers a premium of 1.5ppl above the prices paid for their milk by the two processors.

Beyond that, it is committed to spending millions of pounds each year on a wide range of on-farm initiatives covering four key areas – herd health and husbandry, the environment and energy, collaborative working and business improvement.

The initiatives have been developed by a small steering group of farmer members and representatives from the processors and Sainsbury’s since the spring.

Currently being piloted on a small number of farms, they will be rolled out across all scheme members from January, signalling a genuinely new relationship between supermarket and farmer.

“The four key initiatives are things we believe are beneficial to the farmers, to the animal themselves, to the processor and Sainsbury’s and, ultimately, to the customers themselves,” said Sainsbury’s agricultural manager, Annie Graham, who has been driving the project since she joined the company in March.

For example, the DDG standard will require members to record more data on-farm and implement a herd health plan. Sainsbury’s will fully fund milk recording on all members’ farms.

It will also pay for quarterly visits by the local vet to monitor data and cattle and advise on an ongoing health plan, and for a visit every 18 months or so by a ‘flying vet’ from outside the area with specialist knowledge of problem identified as particularly troublesome to the farm.

It will provide carbon footprint audits to encourage farmers to cut down on greenhouse gas emissions and ‘green tools’ like solar panels to heat water to help them do so.

Sainsbury’s will support the 40 per cent or so of members not yet signed up to Entry Level Stewardship get them on to the scheme.

In a direct repeat of the ‘Farm Connections’ scheme already in place for its beef farmers, the supermarket is providing each member with a computer and training in how to use it. The aim is to improve communications across the supply chain and between farmers, and to facilitate herd health planning and milk recording.

Members are being encouraged to collaborate with Sainsbury’s suppliers beef suppliers to find the best outlets for cull cows. DDG is also looking at finding ‘more sustainable’ outlets for bull calves, for example looking at ways to produce calves more suitable for beef production in the UK, so they do not have to exported live.

Sainsbury’s expects to spend about £15m in this financial year on its dairy business, a big sum even for a company that made a pre-tax profit of £477m in 2007.

According to Ms Graham, there is no fixed budget for the initiative and no end date. She said the supermarket sees the investment as necessary to secure future supplies of milk, while also providing positive messages about the way it is produced to communicate to the consumer.

She acknowledged that supermarket sourcing policies have in the past been driven by price and price alone. But that was when global commodity prices were low and supplies were seemingly endless.

Things are different today, as soaring world demand, tighter supplies and rising costs have shattered assumptions that endless supplies of cheap food are in some way guaranteed. Consumers have changed, too.

“Sainsbury’s needs to have security of supply. Historically it has been about just price but we are fully aware there’s a changing agricultural environment,” Ms Graham said.

“It’s also a very different customer compared with five to 10 years ago. They now want to know where their food comes from and how it was produced in terms of welfare and the environment.

“There has also been a change on the farm. They want stability and to take out the volatility that has existed in the supply chain. We can do that by giving farmers the forward commitment on price so they can plan for the future as well.

“In turn, we get a guaranteed market. We know how its been produced and because we are working together we know what’s coming. This arrangement is a win for the farmer, a win for the processor, a win for us and a win for our customers.”

Ms Graham, a farmers daughter, herself, whose remit at Sainsbury’s also covers beef, lamb, pork and chicken, said the key to the project was that it was a ‘genuine partnership’, with ‘every decision involving all parts of the chain’.

The 320 farmers in the DDG are divided into six milk fields, strategically positioned across the UK to fulfil Sainsbury’s liquid milk requirements.

Soon after she arrived from Sainsbury’s beef suppliers, ABP, in March, Ms Graham embarked on a tour of the milk fields to explain to farmers the principles behind the DDG and to hear what they wanted out of it.

A representative from each milk field was elected to join a steering also comprising representatives from Dairy Crest and Wiseman and senior Sainsbury’s executives.

The steering group has met regularly since to develop ideas in the four key areas, some of which are currently being piloted on farms.

The group has recently gone out on a second tour of the milk fields to present the initiatives that will be rolled out across all members from early next year. She said the farmers were ‘extremely enthusiastic’ about the initiatives and that was struck by how much the farmers had enjoyed working together in developing them.

Ms Graham said the initiative put Sainsbury’s apart from other retailers in terms of its relations with its suppliers. “We stand separate because, yes, we want farmers to do things differently, but we are not going to say: ‘This is what we want just get on with it.’ If we want something from farmers we are going to do everything we can to help them along the way.”

The initiative has the support of the farming industry. NFU dairy board chairman Gwyn Jones described the initiative as an ‘excellent arrangement’. “Sainsbury’s relationship with farmers is now very good and has the potential to be the best. They have done remarkably well very, very quickly,” he said.

However, he said the ‘weak link’ was that it still relied on processors to set the price, unlike the Tesco arrangement, which is a direct contract between supermarket and farmer.

“Tesco has gone that bit further in terms of price. Sainsbury’s Achilles heel is that the price is still at the whim of processors, and we have this difference in price between Dairy Crest and Wiseman of 0.7ppl.

“We want to see them develop it a little further and get the price and conditions written into a contracts so we have a Sainsbury’s price and everybody knows where they are.”