Written submission Marks and Spencer
Marks & Spencer written evidence to the Scottish Parliament Rural Affairs,
Climate Change and Environment Committee’s inquiry into the Dairy Industry
Executive summary
1. Marks and Spencer (M&S) is a leading international, multichannel retailer selling
a wide range of high-quality food, clothing and home products. We operate in
more than 50 countries and employ almost 86,000 people worldwide.
2. We opened our first Scottish store in Glasgow in 1919 and now operate 72 stores
in Scotland, employing approximately 6,500 people and serving nearly two million
Scottish customers each week.
3. Scotland is a vital source of innovative and delicious food for M&S. We source
over 2,500 products from Scottish farmers and growers, who supply M&S with
beef, dairy products, fish and root vegetables for sale in stores not just in
Scotland and the rest of the UK, but for export around the world.
4. Our reputation for quality, innovation and sustainability is built on excellent long
term relationships with our suppliers, including dairy farmers and processors in
our supply chain. Indeed, we purchase approximately seven million litres of milk
from eight Scottish dairy farms each year, and all M&S Scottish liquid milk is
produced and processed in Scotland for retail, café and hospitality by eight farms
in the Lanarkshire area.
5. Our Milk Pledge Plus Scheme was established in 2000, with a dedicated and
segregated pool of dairy farmers. The scheme pays a fair and transparent milk
price to farmers based on independently verified cost of production indices. As a
result, M&S currently pays the highest milk price in the UK at 34.264 pence per
litre. The premium we pay above the average farm gate price means that we
have invested an extra £2 million into farm gate milk prices for our Scottish milk
producers over the past fifteen years.
6. We have also worked closely with our dairy farmers to improve our fresh milk
offer to M&S customers, including developing leading farm standards and animal
welfare, as well as producing milk with lower saturated fat than conventional milk.
Current market conditions in the dairy industry
7. Most dairy commodities are international traded and consequently prices can be
quite volatile. In recent months prices have fallen sharply, primarily due to
increased global supply combined with reduced demand for dairy commodities,
stemming from import bans from Russia and reduced dairy imports by China.
8. These recent trends have had a significant, short-term impact on average farm
gate milk prices across the UK and has led to many retailers cutting the price of 4
pints of semi-skimmed milk to £1 or less. M&S has resisted this erosion of value
for fresh milk and maintained retail prices at £1.39.
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9. In addition, dairy farmers supplying fresh milk to M&S have been isolated from
the market price volatility due to our long-standing milk pledge payment scheme,
M&S Milk Pledge Plus, which is reviewed regularly to guarantee our dairy farmers
a stable and sustainable income.
M&S milk in Scotland
10. All M&S Scottish liquid milk is produced and processed in Scotland for retail, café
and hospitality by eight farms in the Lanarkshire area. It is processed at the
Muller Wiseman East Kilbride site. Our Scottish M&S milk pool has been in
existence for fifteen years since the inception of the M&S milk scheme. This has
represented a significant investment in Scottish dairy farming, including delivering
market-leading farm gate milk prices and support in farm standards and animal
health and welfare.
11. We purchase approximately seven million litres of milk from Scottish dairy
farmers each year. Currently, our farm gate milk price is 34.264 pence per litre
(ppl), against a Muller Wiseman price of 25.9ppl. On average, the M&S price has
been two pence per litre above the Muller Wiseman price over the past fifteen
years.
12. The premium we pay above the average farm gate milk price means that we
have invested an extra £2 million into farm gate milk prices for our M&S Scottish
milk producers over the past fifteen years (across the whole of our UK milk pool
this equates to more than £20 million).
M&S Milk Pledge Plus
13. We launched the M&S Milk Scheme in 2000. The principle of the scheme was
developed in collaboration with the dairy farmers that supplied our milk, resulting
in a dedicated and completely segregated supply pool of farmers, paid using a
mechanism that delivers a long-term, stable milk price.
14. In 2004, we developed the Scheme further by introducing our ‘payment pledge’
and since then it has evolved into the industry’s leading dairy scheme, with M&S
consistently paying a leading farm gate milk price and currently paying the
highest milk price in the UK.
15. Our transparent pricing model, based on the cost of production, was developed in
consultation with processors and dairy farmers within the pool. The M&S liquid
milk pool is split into four regional pools - Scotland, England, Wales and Northern
Ireland. We believe it is very important to have good communication and a close
working relationship between all parties involved in the milk pool. That is why our
farmers have the opportunity to elect producer representatives and a national
milk pool chairman. These representatives work closely with the milk processors
and with M&S to ensure that farmer views are represented throughout the supply
chain.
16. We pay our farmers a transparent milk price, which reflects the key costs of milk
production. The core price is reviewed at six monthly intervals and changes are
driven by changes in the cost of production indices, which are based on
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independent data relating to fuel, fertiliser and feed prices. The calculation is
verified independently each month before publication, and any changes to the
milk pricing mechanism are discussed with producer representatives before
implementation. The core price is the same across all UK regions.
17. Working closely with our farmers for the long term has also enabled us to further
differentiate our fresh milk in the marketplace. In 2011, we launched the Healthier
Milk Project to deliver milk with 6% less saturated fat than conventional milk by
adapting the way that our farmers fed their cows. Using a natural diet, and
through the removal of palm oil from dairy cow diets, our fresh milk is better for
customers and for the environment.
Support for dairy supply chain
18. Through our close working relationship with dairy farmers we have also
developed leading farm standards and animal health and welfare performance.
Our code of practice provides effective assurance to internationally recognised
standards, so that our customers can be confident that our products are safe and
produced by professional, caring producers. Our standards build upon the Red
Tractor Farm Assurance Scheme, reflecting the most recent scientific evidence
and industry best practice.
19. In addition, we support our dairy farmers through visits from a specialist dairy
veterinary surgeon, who manages the delivery of our health and welfare
assessments and supports farmers in achieving leading standards in disease
control, cow comfort, mobility and metabolic disorders through the delivery of
improvement plans for each farm.
20. Similarly, we run continuous improvement workshops with our milk pool,
equipping farmers with practical knowledge that can help them improve on farm
welfare and, in turn, farm business performance. We also monitor environmental
performance (including carbon footprints), ethical staff management and
biodiversity, as well as holding farmer engagement meetings, encouraging
farmers to share best practice between them.
Approach to sourcing and sustainability
21. We source from more than 40 food suppliers across Scotland, who between them
are buying from thousands of Scottish farmers audited to M&S Select Farm
standards. In total, we source approximately £300 million worth of food products
(at a cost value) from Scotland.
22. In addition, we are fully committed to the highest standards of product labelling
and marketing, because the integrity of M&S food remains an important part of
our ongoing relationship with customers. Our product labelling highlights where
M&S food is produced, including country of origin information and the use of the
Saltire on our labels in Scotland where appropriate. This approach helps our
customers to make more informed (and local) choices about the products they
can buy in M&S stores. Furthermore, we introduced origin labelling for milk (in
dairy products) back in 2009 to demonstrate our continued support for domestic
dairy farmers.
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23. Building long term, sustainable partnerships with farmers and growers in our
supply chain is a central theme of our M&S Plan A eco and ethical plan. These
partnerships give our suppliers the security to invest in the future, whilst ensuring
that our products are sourced from the best possible local farms.
24. Our producers are passionate about the high quality raw materials they supply for
M&S. We recognise their achievements and support them in taking their business
forward through our Farming for the Future programme. This initiative aims to
help farmers to identify risk factors, develop learning and share best practice to
improve the profitability and sustainability of their businesses and supply chains.
25. Specific M&S Farming for the Future programme activities include:

M&S regional ‘Farming for the Future’ awards and overall ‘Farmer of the Year’
award

Funding research and innovation through on-farm projects helping our farmers to
lead the way in sustainable farming

Running an Indicator Farms programme to help find ways to improve efficiency,
environmental performance and ethical practices on farm

Attending and providing sponsorship at the many agricultural shows throughout
the UK, including the annual Royal Highland Show

Funding the development of the M&S Agricultural Leadership Programme at
Cranfield University School of Management - this helps bring new people into the
agricultural industry and develop the skills of young people already working in the
sector.
Steve McLean
Head of Agriculture and Fisheries
Marks and Spencer plc
February 2015
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