Mr. Tony Keohane:

We thank the committee for the invitation to appear before it. We will be dealing with the four topics we have been asked to address: the proposed code of conduct in the grocery goods sector; pricing and impact on primary and secondary suppliers; support for local produce; and labelling. I am accompanied by my colleague, Mr. Dermot Breen, director of corporate affairs, and Ms Anne Cleary, our Government affairs manager.

Tesco runs 142 stores across 25 counties in the Republic of Ireland. We have been a major investor in the Irish economy, investing €1.5 billion since 2000. Our value to the Irish economy is calculated to be in excess of €2.7 billion per annum. We buy more than €2 billion of Irish goods and services annually and employ more than 15,000 directly, 7,000 of them in new jobs since 2000. We know a further 29,000 additional jobs exist to support our business in suppliers, manufacturers and supporting partners, including 11,000 farm families supplying fresh produce to Tesco on a daily basis.

There has been a lot of discussion on the need for regulation in the grocery sector and we are aware some people have been calling for a statutory code. On the face of it, this might appear to make sense. We believe there is good and bad in any code, with advantages and disadvantages. Like the Competition Authority, we believe the case for a code has not been made. We believe, however, that the EU code that is on the way provides a reasonable alternative in that it avoids some of the red tape and the administration costs that are likely to accompany the proposed national code. The EU code is based on a number of principles. We respectfully suggest the code could provide a framework to proceed on. Essentially, however, this is a matter for Government to decide.

There has been a lot of talk about pricing in our sector. There is a view that the larger multiples are forcing prices down and not passing them on. Against a background where the grocery market in Ireland is highly competitive, the Competition Authority has studied the retail sector in detail and has concluded there are normal healthy tensions between retailers and suppliers. Our focus is on the hard pressed consumer but also on supporting a viable and sustainable supply base in Ireland. We know food prices in Ireland are determined not just by domestic but also by international market forces, including commodity price movement, input costs, seasonality and quality standards.

I draw the committee's attention to the chart on page 7 of the pack we submitted. It shows the independent data from the CSO covering 2010, 2011 and 2012. Under the heading of general consumer prices, there are general price increases across the market in those years as follows: 1.3% in 2010; 2.5% in 2011; and 1.2% in 2012. Retail food prices in 2010 declined by 0.3%, increased by 0.9% in 2011 and by 1.4% in 2012. Irish supplier food prices increased in 2010 by 6.4%, in 2011 by 4.6%, and in 2012 by 2.3%. Agricultural farm gate prices in 2010 increased by 15.6%, in 2011 by 15.9%, and in 2012 by 3%.

That clearly shows retail food prices have increased far less than supplier prices since 2010, and typically by less than the general consumer price index, with wide variants in 2010 and 2011. This demonstrates the level of competition within the sector and confirms that the market is functioning and prices agreed at farm gate level are not necessarily passed on to consumers.

Tesco is very proud of its support for Irish products. This is a core and fundamental part of the way in which we do business and we provide this support for good reasons. It makes good business sense, customers demand it and Irish products are second to none. Tesco is extremely proud of the work we do to enable local suppliers to develop into national and, on many occasions, international suppliers. As I noted, the value of our purchases of Irish products for local and export sales is running at more than €2 billion per annum. We have 400 Irish suppliers, ranging from artisan companies to large, medium and small suppliers. Of these companies, 300 employ fewer than 50 people, while approximately 80 are exporters which support 29,000 supplier jobs and the 11,000 farm families who supply us with fresh food.

Tesco operates with Bord Bia an active Irish supplier development programme in which we recruit suppliers and offer them support on business and product development and market learning and access. We actively recruit new suppliers on an ongoing basis and run exhibitions around the country for this purpose. Last year alone, we engaged 71 new Irish suppliers and we intend to add more this year. I will cite two current examples. Keogh's crisps from Oldtown in County Dublin is one of our suppliers which came through the Bord Bia programme. It supplied 600 Tesco stores in the United Kingdom over St. Patrick's weekend with 100,000 bags of crisps, which was a fantastic achievement. Glenilen from Drimoleague in west Cork also came through our supplier development programme and has developed from being a local supplier in County Cork into a regional supplier in Munster and, more recently, a national supplier. In two weeks, it will become an international supplier to 60 Tesco stores in the United Kingdom.

Tesco is the largest buyer of Irish produce, spending €177 million annually on beef products, which is equivalent to 14% of total beef exports. Our dairy exports account for €178 million, or 13.3% of overall dairy exports from Ireland. These are primarily supplied to Tesco customers outside Ireland, mainly in the UK. We are committed to maximising Irish sourcing, particularly in fresh food and have a strong and growing story of commitment. All our fresh milk comes from Irish farms and is approved by the National Dairy Council. All our fresh pork, beef and lamb is 100% Irish, as are all our eggs. Tesco poultry also comes from Ireland, 50% from Northern Ireland and 50% from the South. Tesco brand sausages, rashers and cooked meat, bacon and ham are 100% Irish. In season, we support the growing of Irish berries, salads, peppers, cucumbers and tomatoes and work on import substitution with our supply base, replacing €100 million of imported tomatoes with tomatoes grown in Ireland. Tesco brand bread is 93% from the Republic, with the remaining 7% from Northern Ireland. We are extremely proud of this track record and keen to expand our Irish supplier development programme in future.

As I noted, Tesco is also a significant export player, as the chart shows. Tesco exports are valued at €705 million annually, which means 9% of total Irish food and drink exports go to Tesco customers outside Ireland. These are mainly in the areas of meat, where exports are valued at €205 million, dairy, with exports worth €178 million, and drink, with exports of €116 million. Our Irish supply base is also extremely proud that it produces products that can achieve such export figures. We aim to continue our strong support for the Irish supplier development programme and continue working with Bord Bia. We have already kicked off our 2013 programme and arranged meet-the-buyer sessions, marketing events, workshops, technical support on-site and mentoring sessions. Tesco aims to be a strong contributor to the Government's Harvest 2020 export growth objectives. We will work hard and continue to build relationships across the Irish supply industry.

The need for accurate and comprehensive food information labelling is a fundamental prerequisite for consumer trust. The recent horsemeat contamination scandal has shocked customers and retailers. Customers have told us they want better information about what is in their food and where it comes from. Our commitment is to ensure that which is on the label should be in the product, nothing more or less. We accept that failures have occurred throughout the food chain and this requires committed engagement of everyone in the food supply chain, not least the retailers. Our investigation into what occurred has been methodical and thorough. We are committed to taking every step needed to ensure this does not happen again. The report of the Department of Agriculture, Food and the Marine on the horsemeat scandal clearly identifies failures in the supply chain and the European Union is investigating this matter on a wider basis. There is clearly a need for reform and Tesco will play its part in correcting this problem and setting new standards. We have promised our customers that we will ensure they have the confidence in the food we sell in terms of quality, provenance, nutrition and value.

Tesco has already put in place better surveillance and tighter controls, including DNA testing. We intend to shorten and simplify the supply chain. We will continue to ensure we source local meats from Irish farmers and producers. We will build on existing good relationships with Irish farmers and growers, working more directly with them and ensuring longer-term, reliable supply agreements. Labelling will be more important in future and we hope the new labelling regulations being developed by the European Commission will fully address consumer concerns while also being commercially practical. In the meantime, we will include a hybrid of the GDA and traffic light coding information on Tesco products to provide nutritional information and enable informed consumer choice.

Tesco is committed to further developing the growth of our business in Ireland through continuing to deliver value and quality in everything we offer. While we are conscious of our scale and the contribution we make to the economy, we are also very aware that this comes with responsibilities. As one of the largest employers in the country, we provide good opportunities for people to succeed and a great place to work. As the largest supplier of food to Irish people, we are dedicated to supplying the widest range of good quality food at affordable prices. As the largest exporter of Irish food, we are dedicated to sourcing more and more products in Irish companies and helping them to export and expand to international markets. I assure members that Tesco is committed to its long-term future in Ireland for the benefit of consumers, suppliers, primary producers and all of our stakeholders.