Economy, Trade, and Rural Affairs Committee

I'm going to start the inquiry off with my questioning about the Welsh Government strategy, but I'll ask you, first of all, to formally introduce yourselves for the record and the positions that you hold in your various companies or organisations. If I could start with you, Huw, first and then ask David to do the same.

Yes. Good morning, everybody. I'm Huw Thomas, the chief executive officer of Puffin Produce, which is a fresh produce business based down in Pembrokeshire, with about 250 staff now and about a £50 to £60 million turnover, primarily doing potatoes to the major retailers, but also a range of vegetables as well, primarily leeks. We work with a group of about 25 farmers throughout Wales, supplying spuds into supermarkets. I'm also the CEO of Pembrokeshire Creamery. It's the same shareholders that own two sister businesses, which is currently bottling about 50 million litres of milk, again for the major retailers in Wales, working with a group of 14 farmers in west Wales, bottling milk.

Thank you, Huw. David.

Good morning, everybody. My name's David Harries, I work for the Food and Drink Federation. We're a trade body that represents food and drink manufacturers throughout the UK. I manage and run the FDF Cymru operation. I'm based here in Wales, living in Pembrokeshire, and travel quite widely. Thank you.

Thank you, both. Is the Welsh Government strategy currently fit for purpose, given that it was brought together in 2021 and there have been several changes in the intervening years? Do you think that the current strategy on food processing and procurement in particular is fit for purpose? Huw, I'll ask you to start.

I think the short answer to that is 'yes'. It's a very high-level strategy, so I think the aims of it are still as relevant today as they were two or three years ago. It's about growing the industry and growing more products to feed the Welsh nation as well. It is what it is. I think there's no need to change that top-level strategy. I think the delivery underneath is the more important bit to me, really. I think the high-level strategy is fine.

David.

Yes, I'd agree with that. It's been a success story: the Welsh food and drink industry has grown; gross value added has grown. It's a good set of results, given the headwinds we had with Brexit and COVID during the period of this study. So, yes, I agree with Huw, I think it is, at a high level.

So, how do we know that it's delivering, then? You've used the GVA figure there, David, and we've seen various growth figures, but how do we know that's because of the strategy, rather than because of the general growth that's happened across, and inflation as well, which has pushed up, obviously, the monetary value of produce? So, what indexes are we using to measure the delivery of it that would be tangible and you'd be able to say, 'That's the proof that this strategy is working'? David, I'll ask you first, and then ask Huw to supplement.

I think the support that Welsh food and drink producers get from the Government—. I'm talking now about the innovation centres, Cywain, Menter a Busnes, there's a whole network there that helps support these industries. So, those were introduced, I understand, as part of this strategy. As I said, it employs now over 26,500 people. It's the largest industry in Wales at the moment, and it represents 2 per cent of our employment. So, I think the strategy has had an impact on that.

You said, Huw, in your comments, that delivery was important. I think we'd say 'Amen' to that. Everyone agrees on that. Because, very often, Wales is brilliant at strategising, but not very good at delivering. Can you point the committee to some tangible delivery goals that this strategy has delivered?

Speaking personally, I think you have to be a bit careful of the GVA figure, because, obviously, you've got inflation in that, you've also got commodity price movements. If the price of milk and red meat go up, that's going to affect the GVA figures. So, I think the best way to look at it, for me, is that there are elements that the Welsh Government can have an influence on and some they cannot, perhaps. If you're looking at the bits that you can have an influence on, it's down to the programmes that are delivered by the Welsh Government, and I think it is then down to the measurement of the success of those programmes. That's down to individual measurement of a piece of work that the HELIX project or one of the trade development schemes has had, and how much new business has been won, what new products have been developed. I think it's down to that granularity, in my mind, and accurate measurement of the success of the services that the Welsh Government provides as support, I would say.

You've touched on adding value as well, because that's really important, and the sector that you come from—Puffin's remit, in its initial stage, was to add value to the produce that your co-operative members were producing. How do we know that the strategy has been successful in adding value? When you look at what England are doing, what Scotland have done, and what maybe the Republic of Ireland and Northern Ireland have done, how successful have we been at adding value to our agricultural produce, so that that wealth stays in Wales to be reinvested in Welsh businesses?

I think that's an interesting one. I've never seen a piece of work like this, but it would be interesting to benchmark against other countries. You mentioned Ireland there, the success of Bord Bia, and what they've done is supported a number of big businesses and made them champions and really driven those big agri-food businesses. Then, when you get to scale, you've got the flow of raw material and you've got the cash and you've got the technical know-how to get in to a more diverse range of products. Quite often then, they can be export products and these types of things. I think the only way to really measure that—and I don't know whether this work has ever been done—is to look at that, look at how many of these value-added products have been produced in Wales, but, most importantly, benchmark it against our competitors. What are other nations achieving in that area?

But I do think things like the food business accelerator scheme, the grant schemes, they, in our business, have driven that growth, and as you get bigger, you then broaden your range of products and you start adding more value. We're getting into different products all the time, as we move forward and get scale, and I think scale is an important factor to be able to have successful new product development, and launch new products and get into a more diverse range of products.

Would you have knowledge if there's much connectivity between, maybe, the sector that you come from and, obviously, the higher education sector? I'm thinking of Cardiff Metropolitan University, which have done a lot of good work in developing food products as such, which, basically, can add value to what we produce here in Wales. Have you got much understanding of whether those links are strong here in Wales, and, ultimately, do they deliver for processors and food producers here in Wales?

I think it's very difficult—. Be careful not to underestimate how close we are to organisations like that. I've literally got the phone numbers of the half a dozen leading people in Cardiff Met in my phone. I'll ring up, 'Oh, I've got an idea', or, 'I've just come out of ASDA headquarters and they want me to look at this, can we have a look at it, please?' That relationship is that close. And it's the same on the trade development side, when they're up meeting the supermarkets—so, you've got the regional heads of the supermarkets having interactions with the Welsh Government—it's a very fluid—. We literally get a phone call the day before, going, 'What are you up to, and what are they asking for at the moment?' There is a very good network there now that's been established for a number of years, with a number of experts within contractors to the Welsh Government that are very good at what they do. You used Cardiff Met as an example. Professor David Lloyd and his team underneath him are the people I would ring every couple of weeks and say, 'Can we look at this?', or, 'Can we do this?', or, if they've seen something, they ring me. Wales is the right size to be able to have those relationships to do those types of things, I think, and that's one of our advantages.

David, would that be similar to your trade body, in that you're able to have those sorts of contacts back to the processors in Wales, and the primary producers, to try and provide the products that your members can obviously then utilise and add value to the agricultural scene here?

Yes, absolutely. You mentioned ZERO2FIVE and Professor David Lloyd, but there's also one down in Horeb in west Wales, and there's the other one up in Llangefni as well, so there's three of the innovation centres. There's also AberInnovation, which we work closely with, and businesses work closely with, and the Advanced Manufacturing Research Centre as well. And there are others. There's Total Food Marketing, Cywain, Menter a Busnes. So, there's a whole infrastructure here. And, as Huw said, they sound a lot of organisations, but the amount of people in them is relatively small, and a lot of the businesses I talk to and see, our members and non-members, would have had some interaction with these organisations.

And are we quite typical, from looking across the rest of the UK, in that sort of network and that support and provision to the sector, or is there another part of the UK we could look at, or, dare I say, Bord Bia in Ireland, which might be a good model for us to consider in trying to strengthen those links with the research and the intellectual base, to turn primary products into added-value products for the sector?

I don't know about Ireland—Huw might have more on that—but certainly I've had colleagues—. Our CEO from FDF London came, and from Scotland quite recently, and they don't enjoy the same support as we get in Wales. Both who came down in the last six months were impressed by the level of support, and the breadth of support that our businesses get. And there's also, I never mentioned, the cluster network, so you can get down there into that detail where we've got, I think, nine or 10 individual clusters: fine food, honey, seafood. And I think every company, be it micro, small, medium or large, can tap into some resource to get support and advice.

Thank you, David. Luke.

Diolch, Cadeirydd, and morning, both. Just thinking now about some of the other Welsh Government strategies in this area, and we've had recently the publication of the community food strategy. I'd be really interested in getting your responses to that community food strategy. I'm not sure who wants to kick off first, but maybe I'll come to David first.

I think, Luke, my knowledge on this will be limited, so I'll perhaps ask Huw to comment on this first.

It's a difficult one. I come from the kind of coal face of hard commercial food production, dealing with the retailers every day, trying to get cauliflower grown in Pembrokeshire and out of the ground and to a supermarket depot for 50p, if you know what I mean. So, one thing I haven't really seen on the community food strategy is the economic model, to be honest. I can see it's a great social thing, I think it can help lots of different people, but to have a year-round food supply, the amount of money that is now needed to do that in a cost-effective way, so we put food on the plates of the Welsh population at a sensible price, so the people of Wales are not paying three times as much as anybody else, so that fresh fruit and veg is price-competitive—we have to be careful that the economic model stacks up, in my mind. If you look at potatoes, for example, a number of people around this table have been to see Puffin Produce. We've probably got one of the most automated factories in Europe now, and we’ve also got huge amounts of potatoes in cold storage. If you grow potatoes that are planted in March and harvested in September, October, you then need huge fridges to store those potatoes to be able to put them out to the people of Wales for the following 12 months. Are we going to be building a potato cold store near or next to one of these kind of community gardens? How does the economic model work to be able to put cost-competitive products on the shelves?

I'm much more of a fan of larger, more automated farms that specialise. You then have got a number of routes to market for your products. If you've got an oversized cauli it can go for floretting to freeze, or floretting for ready meals, and then the right-sized caulis go to the supermarket, and the undersized ones go to FareShare, or whatever it is. You need scale to be cost-competitive, and to be able to have year-round low costs. ‘Low cost’ is an emotive thing to say. I think we can do the right environmental work, and we can put things on the shelf competitively, so that the people of Wales—. With limited resources we can make sure they get good amounts of fresh produce at a reasonable price. I think the one thing I've seen about the community food strategy, and I think it's fantastic, don't get me wrong. I think some great initiatives are in there, and if there are people prepared to drive the smaller type of community-led food initiatives around Wales, fine, they will have their role, but there will always be the role for larger scale horticulture food businesses, I think.

So, just to be clear, what you're saying is that the economic side of this community food strategy hasn't necessarily been thought out to the degree it should have.

Well, I've never seen—

There are good elements in there, but—

Hold on, Luke. Hold on, Huw. Your sound is quite low, Luke. I think it's something we have to do at our end, it is. So, please continue, but we might end up having to wiggle around some buttons in the control room here. So, sorry to cut across you, but we were just missing a few words.

I think I'd like to see an economic model of how much it's going to cost and how it becomes self-sustaining over time economically, in my mind, or how much money from the public purse it's going to need to be put into it every year to sustain it.

Okay. So, is that generally the view across the food and drink sector? How has the broader food and drink sector received the community food strategy?

To be honest, I haven't seen a lot of our fellow businesses since it's been published, so I wouldn't be able to give an honest answer on that, to be honest. I know I’ve spoken to a couple and I think the economics of it, and the long-term economics of it, is something that we need to be careful of. But don't get me wrong, I think community-driven schemes like that, where there's somebody owning and driving it, and the benefit it can have to the people who are involved in that, can be a great social thing, I think, and I that's the key win for me. But the bit I would say always is please don't ever think it's going to replace commercial food production in Wales.

Did you have anything you wanted to add, David?

Speaking to the manufacturers, it's never been raised with me or mentioned by any of our members in the other manufacturing businesses that I deal with.

Okay. Just very quickly from me, then, Chair, I know there are questions on business support to come, but one thing we consistently hear back when it comes to the broader business support landscape is that there doesn't seem to be much joined-up thinking between what's available and the strategies to distribute some of that support. So, thinking specifically about the food and drink sector and the different strategies that are out there from Welsh Government, do you think that those strategies are joined up, that they are working in tandem, that they aren't competing against each other?

I believe they are, Luke. The Welsh Government I think have got to be complimented on what they do—the trade shows they put on at the Royal Welsh Show, they have the food hall there, Blas Cymru will be happening in the International Convention Centre this year; there will be 100 companies coming into Wales. In 2023, I think it generated £38 million of business from Blas Cymru. Other major shows: the food and drink expo in Birmingham—I was at that in May this year, and the Welsh food and drink stand stood out. It was by far the most impressive of the whole set-up. So, yes, I think they are joined up. Again, as I said, there are a lot of organisations, there are a lot of moving parts out there, but it's a smallish community, and I think they do well and complement each other.

Can I add a little bit to that? I think most of the decent food businesses know how to navigate that, and know what's available and where. And also, then, the smaller businesses that are starting off—. I think David's mentioned the cluster mechanism, and there are some good people in the Welsh Government that can direct people in the right direction. I think as soon as you start getting a foothold and know what services, I think it does all tie together. It may look a bit disjointed, but I think people know how to navigate it and know what's available and even the guys who are starting off soon get to navigate it, I think.

Okay. Diolch.

Okay, Luke. Sam.

Thank you very much, Chair. Good morning, both. You touched on elements of business support in Andrew's questioning, and Huw, you mentioned the benchmarking against other countries—something that could be explored further. But something that I picked up on was the relationship with universities et cetera, seeing what Puffin have done in terms of horticulture, but also now with Pembrokeshire Creamery. What are we lacking? Are we lacking the ideas or are we lacking the delivery? Because I always remember Lesley Griffiths, when I was shadowing her, saying that she was incredibly proud of our food and drinks sector, and it's absolutely right that we are proud of it, but are we missing people like yourself who've got the ideas to come up with it and say, 'Look, I think there's a gap in the market here for us to add value to x product that can then be retained in Wales, rather than shipping potatoes across the border to be chipped, or whatever it might be?' Or are we missing the specific dedicated business support that's nimble and agile enough to be able to react quickly enough when those gaps are identified?

I definitely would agree with the second bit of that. One thing we can be guilty of in Wales is being too slow. I know the Welsh Government have got budgetary constraints and pots become available, but when you've got an idea, in our sector it usually comes from speaking to a supermarket and they go, 'Right, we've got an opportunity in this area—some business has closed in England', or they want somebody else to do roast potatoes or whatever, and you then have to move. You probably need to have that production facility up and running within 12 months, and where we sit now is there might not be a grant scheme for another year. It's very difficult.

If you're down in west Wales—I think I've said this many times, but people really need to understand this—when you build a food factory in Pembrokeshire, you spend, say, £3 million on the building, and the bank come along the day it's finished and value it at £1 million. So, they will give you, then, 70 per cent, 80 per cent debt on the £1 million; they will give you £700,000 of debt on a £3 million building, because of the property values in Pembrokeshire. If you were building that in Swindon, you'd build it for £3 million, the bank would value it at £3 million, and they'd lend you 70 per cent of £3 million. So, it's hard, if you haven't got the cash around you—. And as a business, I guess, we will generate x amount of cash every year, and we will look what we're going to do next with it. That's how business works, isn't it, really? If you then need these big blocks of cash, without—. If the grant support is not available, or some kind of property development-type grant, and it's not available for another year, you can't take that opportunity to make roast potatoes that the supermarket has presented you with.

So, I think, it's—. Some of the other countries, they do identify their leading businesses, and they make sure they really support those leading businesses, instead of having to wait and apply for grants with everybody else—somebody making brownies in their kitchen, if you know what I mean. It's how do we support the fastest growing. I know I've got a self-interest in saying this, but if Wales really wants to create—. Because every time Puffin steps forward like this, it's creating 100 jobs at a time, and it's securing the futures of 25 farmers, if you know what I mean—each investment that we're doing. So, it's that kind of tailoring support, and being very quick and nimble to be able to put the support in place to support that idea, is what I think we lack.

Okay.

Could I just ask, Huw, you said other countries identify companies more quickly to, obviously, go in and assist. What countries are you—?

Well, Ireland is a perfect example of that. They've really backed their big dairy co-operatives and their big meat businesses. That's what they did throughout the 1990s and early 2000s, which turned those businesses into big global businesses. They really concentrated on a dozen key businesses, which you will know the name of most of them, Andrew, and they grew exponentially in 10, 20 years.

And you'd be familiar with the 'Food Harvest 2020' document that drove a lot of that investment, then?

Yes.

And that would be a good template to, obviously, consider.

Yes. It's picking your winners and driving your winners, to grow them as fast as you can.

Thank you. Sorry, Sam.

No, no. Thank you. David, is that something, from your membership of FDF Cymru, that they're saying as well—that they've got the ideas, it's just that Government is a little bit slow, or the grant isn't quite available, or they have to fit their idea within something that's pre-set that Welsh Government is looking to follow, rather than the agility that's required?

I think, as a practical example, any company that has a new concept for start-up, they've got the innovation centres, and they would go then to them with their idea. The innovation centres then would help them develop. They've got those whole facilities there—for advice, technical advice, product advice et cetera. And then they'd set up their business. As Huw said, it's a small community. The companies I speak to, the manufacturers, most would have had some dealings with the Welsh Government, across the piece here. But I think the challenge is, as Huw's on about growth, that these companies then come out of the innovation centres as micro or small; the challenge then is we want the micros to become small, to become medium, then to continue growing. But the infrastructure, I believe, is there for these businesses.

Because there's a good example in Llaeth Preseli, in Pembrokeshire, who started at Horeb, and now are producing gelato on the farm from their own milk, having developed that. So, there are examples of that.

But if we're looking at the raw produce, obviously, the sustainable farming scheme is going to have an impact on agriculture, going forward. What are your concerns, or what opportunities do you see, with the sustainable farming scheme for your producers, ensuring that then you're getting the quality of produce to go and continue to fulfil the contracts you have?

Again, I'm unabashedly saying that long-term partnership with the major retailers is really important for Welsh agriculture. And I think we—. The retailers, I think, probably got themselves a bit of a bad name 20 years ago, but I think that has completely changed now. I think they're now looking for a much more longer term partnership. There's been a lot of consolidation in the food processing industry. So, how the industry is structured now—. There's a lot smaller number of businesses in real partnerships with retailers. I think that then comes down to the farmers underneath them. And if you're going to—. With ever-decreasing funding that will come to the farmers of Wales—it's bound to—their best hope, I think, is to be locked into long-term supply chains with retail partners that will perhaps pay for the environmental work and pay for the quality and pay for the investment that they need.

We've got some fantastic businesses. You look at South Caernarfon Creameries Ltd and First Milk in Haverfordwest—really well-invested factories, but we've still got half of the milk from west Wales being shipped out across the border to have value added to it, perhaps costing 5p or 6p a litre to put it in lorries and move it out of Wales. Why? The best thing for the dairy farmers of Pembrokeshire is to have enough processing infrastructure in Pembrokeshire linked to the major retailers that is mopping up that milk. The Tesco cheese that comes out of First Milk—those are the types of models that we really need to back, because Tesco is always going to want to pay a sustainable price for that block of milk, because it needs cheese on its shelves next year. So, that's how I see the large commercial farms, and it's keeping that within the supply chain.

The Welsh Government do a good job on linking with the retailers now, but there's a lot more we could do with really helping set up these groups for dairy and for red meat, and to get long-term price stability that allows investment on farm—don't forget, that's key as well. If you're a dairy farmer in west Wales and the price of your milk is doing this every three or four years, how do you go and invest £0.75 million in a new parlour? Unless you can see the future and are confident to invest, the industry is really going to struggle in a post-subsidy world, in my mind.

Okay. And, Dai, just moving on for a final question, in terms of your membership, when they're talking about the consumer, what's the No. 1 concern the consumer is having at the moment? Is it a conscientious consumer who is looking at what Huw mentioned—the environmental impact of a product—or are they still looking at how much it's costing? The stats show that in the UK, in comparison to continental Europe, it's far different, what we pay for a weekly shop in comparison to those on the continent.

I'll try and answer that, Sam; it's more a retail consortia question. I think there is a move to that. People are becoming more aware of the environmental. Also, on top of that, there's health as well—packaging, labelling, what we're eating, high fat, salt and sugar. And, of course, price. It's a difficult time. Today, we made an announcement that food and drink inflation went up to 4.8 per cent from 3.4 per cent last month. There are ever-increasing demands. The cost of energy in this country is contributing. Input prices have tripled. Cocoa, for example—the price of raw cocoa has tripled. So, there's price, and increasingly, on the environmental, where our food comes from, the provenance of it, and health and what we're eating.

Okay. Thank you. Thank you, Chair.

Could I just ask you about the point that you used there in relation to a cold store built in Swindon vis-à-vis a cold store built in Pembrokeshire? You have got totally different localised economies there. That's a massive funding gap, that is, for an investor, a business, to try and overcome. Do you see or have examples of a role where Government or Government agencies are able to try and step in and support that promotion of the new build, where such, as I would call it, a market failure exists?

It is exactly that: market failure. The food business accelerator scheme that is out there at the moment, the grant scheme, does bridge that gap. There were more generic, probably, development funds that were available to all sectors. There was a pot there a couple of years ago. I don't know where that is now. But I think that is key to addressing some of these—. The trouble is, to attract an investor, then, that's going to—. I use that analogy of a £3 million cold store in Swindon or Pembrokeshire. The one in Pembrokeshire, you can get £700,000 of debt on it; the one in Swindon, you can get £2.5 million of debt on it. The funding gap is a couple of million quid, and to get an investor to be prepared to back that, to get return on the investment, in comparing the two locations, is very difficult. I think that's one of the reasons that we haven't seen a lot of building of large commercial food businesses in west Wales. It's one of the drivers. It's the pure maths of the investment, to be honest. I think we need to have financial mechanisms that bridge that market failure.

Are you aware where the Development Bank of Wales assists in that field?

Yes. They do bits and pieces, but, again, they're not much different to a commercial bank—

Right.

—in that. The big difference has been the grant schemes over the years—the processing and marketing grant and then the FBAS grant. They're the ones that really make the difference.

Okay. Thank you. Hefin.

Can I ask about public procurement? To what extent do you think public procurement of Welsh food is significant in supporting business growth for Welsh food and drink businesses?

Thanks, Hefin. With the sort of numbers I've got, the public procurement in Wales amounts to around £96 million per year from a sectoral turnaround of £9.3 billion. So, relatively, its value is quite small to the size of our industry.

It's a whole range of businesses that supply into public procurement in Wales. You know, obviously, when you get a business like our businesses, you've got to work with a distributor. You know, we haven't got a fleet of vans out on the roads; we work with companies like Castell Howell, who, if they are then doing a tender for a block of schools or hospitals, we will work with them and make sure our products are flowing through them to the schools. So, there is a mechanism there that works. I'm not so familiar with how they tender that and the economics of that. I know there is a drive now in those tenders for the products to be Welsh, and I think, in the last five or six years, we've seen a lot more demand from people like Castell Howell for our products to meet those tenders. So, I think that mechanism is working.

As we were talking earlier on, I think there is also a role for—and I come back to it—the community food strategy. If there's, you know, leafy salads produced on a small scale in a region, there's no reason that the menus can't be adaptive enough and the supply chain can't be adaptive enough to take that product for x number of weeks over the summer, and then just perhaps fill in the rest of the year from somewhere else. It needs to be live. You know, there need to be the skills in the schools, in the kitchens, and the procurement needs to be more live, really. I think the procurement regulations are so stiff now, everybody's frightened of judicial reviews and there's nobody with a lot of common sense any more that can just go, 'Yes, we'll take that product for six months and we'll make it work at that amount of money, and then we'll go on to this product.' You know, there has to be the freedom within the system to do that. If you're in these rigid tender mechanisms driven by legislation and, you know, anti-fraud or whatever it is, we become—. Procurement, I think, has become a very bureaucratic process now that kind of almost has the opposite effect, in my mind, of moving us away. We need to be able to give people power to be able to go out there and sort this out and procure products at a sensible price in a live way.

Does that power rest—? To resolve those regulatory issues you just mentioned, does that rest with the Welsh Government to do that? Could they just, with a stroke of a pen, sort it out?

Well, I think, you know, state aid always used to be thrown at us in these types of arguments. I don't know where we stand on these types of things now or, you know, where we are with our trade agreements with Brussels or whatever, but we surely should have a look at this, in my mind. I don't know—I'm not a lawyer—what the regulation is, but we need to have people with power that can make sensible decisions in this area, and it's not all—

So, my question is: where is that power? Is that power with the Deputy First Minister, for example?

Yes. Well, I think you can then—. The Welsh Government surely could be able to lead that and put those guidelines down to NHS Wales or the councils or whatever, who then are actually procuring the food on the ground.

That's the whole point of the community food strategy, and—. Do you feel it goes far enough, I suppose, is the question.

I'm not a lawyer, but what is—? I'd like to know the answer to the question: what could Wales do in this area to make it more flexible and more live and put the procurement power into the hands of people that know what they're talking about?

Well, that fits with the Welsh Government's whole foundational economy strategy, but they don't seem to connect.

I think there's a piece of work to be done to look at this. There's a piece of work to be done on this, but I think Welsh Government, historically, have chosen to continue with the state-aid rules when we were in the European Union, but the legislation that's been passed in Westminster would now supersede that, I would have thought, with the United Kingdom Internal Market Act 2020.

I would suggest, Chair, that that issue sits with the UK Government as well.

It would be good to know the art of the possible, wouldn't it, really.

Unless there is anything else you want to add on public procurement of food, which you think that we should work into our communication with the Welsh Government—this is your chance to say, 'This is what should happen'—I'll leave that open to you.

Any other points you want to address, gentlemen, on public procurement? No. Happy with that. We'll move on to Jenny.

Thank you. As we've already established, the public procurement arm of Government is a small player compared with the market. But I think one of the roles of the Government is to ensure that there is food resilience in a very uncertain world, and where we're most at risk is in terms of veg and fruit. Just looking at the UK as a whole, we only produce, I don't know, 6 per cent to 9 per cent of our needs, and if those distribution lines get disrupted, we're in trouble, because people need to eat veg and fruit to stay alive. So, David Harries, obviously, you represent the big players in this field. How do you see the future, given that some of our traditional markets in Europe for fresh fruit and veg are drying up, literally?

Okay. Thank you. This will all fit in with the work that's going on now at the moment with the UK food strategy, which, at the Food and Drink Federation, we're committed to and we're working closely. And, yes, I agree—with climate change, and, I think, even now, our supply chains could be disrupted, with everything that's going on now in the middle east, the strait of Hormuz, the Red sea could be disrupted. So, I think we need to produce more here, we need more resilience in this country, and we cannot be dependent on the likes of Morocco and Spain, where a lot of our food comes from, down in the south, which have water shortages, climate change. So, yes, we need more resilience in this country.

The supermarkets have grasped the idea that people want to eat more fresh vegetables, because that's why you're offering carrots at 8p a kilo in the run-up to Easter, or some of your members are. But how do we stop you just dumping onto the NHS the cost of the very poor diets that most of the population are eating?

I think, on the price of the carrots, the price would more be a retail issue rather than a manufacturing—

I'm not saying you determined it. I'm just saying that a particular retailer chose to draw people into their store using that as a pull. They're entitled to do that. But you can see that they've got it, that people do want to eat vegetables, but that they're struggling to find ways in which to make it affordable.

Huw, do you want to—?

Those are a bit of a personal bugbear of mine—the Christmas and Easter promotions of fruit and veg. I think it, in my mind, devalues veg. But please don't underestimate how competitive the retailers are with each other. They're always watching each other, and if somebody thinks they're going to steal a block of consumers over Easter, the other supermarkets respond to make sure they do the same promotion so they don't lose customers. That's how that has worked, and it's now almost become embedded, which is a bit of a shame, because I think consumers see a 10p bag of carrots and they think that's what the cost to produce a bag of carrots is, where it's nowhere near that. The supermarkets do that at their own cost. They don't pass that cost down to the producer. But, I think, again, it's consumer perception in my mind—the long-term education of consumers, how to cook with vegetables, shopping regularly enough to buy fresh vegetables, and being able to cook and use them. I think that's where we need to start is driving a demand, and I think the question you started with before that, Jenny, which was about the water shortages in Morocco and Spain, we need a lot more protected crops in this country.

Essentially, we need a lot more greenhouses, in my mind. A lot of greenhouses—. If you go over to Belgium and Holland, which I'm sure you have, you will see the thousands of acres over there. That was built in the early 2000s, or perhaps before that, a lot of it, when the euro was weaker, in order to supply the UK from the continent. But glasshouses cost £1 million an acre to build. We have got good light sources, good light quality in Wales. If you can site something like that next to a power station that is producing waste heat or these types of things, I think that Welsh Government could have a role in that, in that planning infrastructure. Why can't you put a 20 hectare greenhouse next to a power plant somewhere that would produce enough tomatoes and cucumbers and peppers for Wales all year around? One greenhouse like that would. So, it's just a matter of investment, to be honest, somebody brave enough with a bank, then, to be able to do that investment, to be able to onshore that element of food production.

Okay. So, you see that, in order to really change, to improve our food resilience, we're going to need to do it in relatively large production centres.

It's the only economic way to do it. Labour is very difficult in a business like ours now, to have people who want to stand in a leek field in January and pull leeks out of the ground and trim the roots off with a knife. We spend a lot of time trying to recruit local people to do that, but largely unsuccessfully. So, we do bring seasonal agricultural workers in from other countries on six-month work visas to be able to do that work. So, the ultimate endgame is automation, in our mind, and to be able to automate. These modern broccoli harvesters or robots picking tomatoes, they're millions of pounds each. You have to have scale to be able to have the right economic model for the long term, in my mind.

What can France and Italy tell us about changing the culture, because those countries would not serve up the stuff that we serve up?

A lot of that food is coming from decent-sized commercial farms in those countries as well, though. If you go to the east coast of Italy, there's some of the best farming I've ever seen, and that is fed into the food system of Italy. But it's an excellent-quality product produced locally with short supply chains. It's not picked when it's green; the tomatoes are picked when they're ripe because it's all very local and close. But it's still done on very well-managed automated farms.

Okay. But, as David has already pointed out, the consumer is looking at labels these days and wants to know where their food is coming from and how it was produced—slave labour or people who are paying a fair wage. In the future, people will carry brixometers, which will measure the density of food. So, how close it is to the field it was produced on is going to be quite important. I just wonder, David, how much the supermarkets are thinking about this, given that you are such dominant players in the distribution networks.

I have say that I assume they are. Again, Jenny, just to say that we're manufacturers, so that would be really a question that the British Retail Consortium would probably be best to answer, rather than us.

Okay. All right. You're manufacturers, rather than representatives of the retailers and distributors.

Yes, that's correct.

Okay. Apologies. So, I suppose, in terms of increasing the amount of vegetables and fruit that we're able to produce in this country to improve our food resilience, how much do these innovation centres really know about growing veg? I've been up to the one in Llangefni, and I'm not sure just how high this is on their list, as opposed to things like meat production and milk.

That's a difficult one. I think the skills of people—. Again, I'll talk personally. We grew, last year, probably 700 or 800 acres of leeks, but the people who really know how to grow large-scale leeks in the UK, you can probably count on one hand. And most of those sit in competitor businesses—they're farmer-owned businesses that are now £100 million-turnover businesses producing leeks. It sits with the people who've owned and run those businesses for the last 20, 30 years, and that's the case in most of those. There isn't somebody that the Welsh Government can hire as a consultant who is an expert in this. You've almost got to either pinch or poach somebody out of those businesses, or you've got to grow them yourself with bright, young agriculture graduates, so that you then keep training and make them real specialists, if you know what I mean. I think that's the kind of route that we've taken, that latter route, but also working in partnership with some of the big established businesses in England. Don't underestimate how small the number of people who really know how to do this is. It is very difficult for the food centres and for Farming Connect, or whatever, to provide people who are experts in large-scale veg production, because the pool of people is very, very small.

Okay. You've mentioned potatoes and leeks today—other veggies are available. Why is A. N. Other producer not thinking, 'Well, there's obviously a market here for brassicas' or whatever it might be—

And there are those dotted around. There's a guy called Martin Griffiths, who we work with in Pembrokeshire, who does a whole range of crops. There was Nick and Pat Bean down in Manorbier, who did a lot of fruit and stuff as well. There are businesses that forge their own way and find their own local markets. There are those, and I think we definitely need to support those businesses as well, because perhaps they will then be growing a whole range of things: asparagus and cherries, and lots of different things. That is a model, but that's usually sold at the roadside or through farmers' markets at a real premium price as well, to keep those businesses sustainable.

So, what's Scotland got to tell us? Because they seem to have been quite successful in understanding that their seasons are about a month behind the ones in England and Wales, and in targeting those niche markets. How could we do similar things—not the same, because they've already occupied that space? But how could we improve our food resilience to ensure that we are growing more of the food that we need here and not have to worry about horrendous things going on in other parts of the world?

Yes, I'll come back to my answer before, which is investment. If you're going to grow 500 acres of leeks, it costs £4,000 an acre to plant, so that's £2 million before you start, just in the planting cost. You then need a leek-washing machine that's £1 million. You need a shed to put it in. It's big amounts of money—big amounts of cash that need to be invested. If you're planting that crop now, this time of year, to start harvesting it in the autumn, and harvest it through the next winter, you need to find £3 million, £4 million, £5 million.

Okay. So, that is your message to Welsh Government, is it, that if we want to increase horticulture, we've got to find—

I don't know whether it's a—. There's only so much the public purse can stand, but that's the reality in my mind. The reason it's not moving forward, perhaps with the ambitions that the Welsh Government want, is that it's because you need investors, or you need people with deep pockets to be able to pump-prime these industries. Whether the Welsh Government have got the money to do that, I don't know, but it's the economics of it is what I will always come back to.

Okay, so, David Harries, do your members have any role in all of this? Because what we're talking about mainly is fresh fruit and vegetables, and they don't need manufacturing—they need washing and presenting in a way—

[Inaudible.]—further back in the whole cycle, the produced vegetables then would come, if they're not eaten fresh or sold to supermarkets, as ingredients for our manufacturers, so we wouldn't be involved in this side of it.

Okay, but there is an element, obviously—

There is an element, yes.

—some will go into being sold fresh—

It's the whole 'farm to fork'.

Yes, okay, but there's nothing that your members are demanding in terms of an increase in supplies of particular products that they don't think they're going to be able to get.

That hasn't been brought to my attention.

Thank you.

Can I just add one bit? I think, coming back to public procurement, it is a great way to get a smaller business going as well. I mean, if you can start off doing 20, 30 acres of leeks into the west Wales schools, you then perhaps could get a small supermarket contract after that. If you've got an ambitious young grower who can then start to build up their cash, giving them a leg-up to start with public procurement, using public procurement has got to be one of the routes that we need to look at.

So, are you saying that it's just too early at the moment to be able to tell whether there's any sign that that is happening? Because what public procurers are offering at the moment is, I understand, quite a good price.

I'd have to look at the economic model of that. You have to make a decent living, you have to have cash available to reinvest and replace your tractors, and these type of things. So, 'What is a good price?', I would say. I would say, 'What does the price need to be to make that business sustainable?'

Okay, thank you.

I think as well, just to add, for the companies entering into public procurement, some growers, there's an element of risk here. Having contracts can offer a stable, sustainable income and opportunities to grow, while support is available, but if local authorities then withdraw the support or budgets are cut, a company that's invested, as Huw said, invested quite a bit of money—farms, I should say—could be at a loss here.

Hannah.

Thanks, Chair, and apologies for joining you slightly late this morning.

Just turning to the dairy sector, so I think, Huw, this is probably directed at you in the first instance. I think the committee and I are keen to hear more about your involvement in the establishment of the Pembrokeshire Creamery, if you're able to share some information with us.

Yes. So, I was brought up on a potato and dairy farm in Narberth, then went and did other things for a number of years and then came back. So, I always could see there was—. Pembrokeshire and the west of Carmarthenshire is probably one of the best places in Europe to produce milk; we get a lot of rain, we've got a lot of good grass growth. We've got a load of amazing family farms down there, young farmers with 300 or 400 cows; I'd say probably friends with Sam there, if you know what I mean.

So, I always could see this resource there, and to then have milk coming in from England, or even worse, in my mind, fake Welsh milk, that was Welsh milk, but half the economic footprint sat in England, because it's been shipped across and then put through an English factory and English lorry drivers bringing it back to this—. I'm not anti-English, but I'm just saying about keeping the economy in Wales and keeping the value added in Wales—sorry, perhaps I should have put that a bit better—that we wanted to put authentic Welsh milk on the shelves. Then, because of our relationship with a number of big retailers, we could have those conversations at a high enough level that we needed to do this.

Obviously, there have been a couple of failed attempts before, but I don't know the details of those, really, and the supermarkets were prepared to back us. So, we then went out and tried to raise the investment. We were very lucky to bring an external investor in, to bring some money into the business. Puffin Produce put some money across into it. We had great support from HSBC, who are our bank in Puffin, and then the final bridge for the gap, which it wouldn't have happened without, was a £5 million FBAS grant, which, again, bridged that gap on the value of building the building.

So, we managed over a year or two to put all of that package together and we started building a dairy. It was, the same as anything in business, a calculated gamble. We knew we had some retailers that were prepared to come with us on that, so we managed to find some excellent guys who were our board members, who were the guys that built the Wiseman's dairy empire that then sold to Müller about 15 years ago, so we had the right people in the room as well.

So, we managed to get all the ingredients together is what I'm saying. It probably took us a couple of years to do that, I think. And then it's been more of a success than we could have hoped for, really. We built it to do 50 million litres per year; it was full within the first six weeks. So, we're now busy with the second round of investment, doubling the capacity to 100 million litres, which will be completed now within the next month.

Could I just invite Sam? You had a supplementary, Sam.

Yes, please. Thank you, Huw. You made the point there about having the relationships with the buyers, the supermarkets, before actually going and building the dairy unit. Is that on the basis of Puffin's relationship with them and that long-standing relationship and the trust between the retailers and you, so when you did bring to them the idea of Blas y Tir milk, they were on board with it?

It's absolutely that. You've got to deliver at 99.5 per cent, and you've got to be able to know how to run automation, you've got to be price competitive, you've got to be able to do the sustainability work now. We've carbon footprinted all of our potato growers for the last seven or eight years. We've got action plans to halve their carbon footprint over the coming years. For a retailer to trust a partnership is a very important thing now. We were very lucky that Puffin has gone for a number of years and has got that trust now. Without that, if we just tried to build up a dairy business on our own, we wouldn't have had the customers come like they have come, because they know we've got a track record of delivery.

Thank you, Chair.

Hannah.

Thanks very much. You mentioned value added and the way in which it can support those supply chains and the broader economy within Wales. You talked about how it's been successful, and you're adding to that now, so you've led into the final question I really want to ask: what future opportunities would you see across Wales to add value to milk?

This comes back to what I said right at the beginning. The consultants that work for the Welsh Government now, I'm having phone calls from one or two of them all the time going, 'We've spoken to a retailer there, there is an opportunity in ready-to-drink cans of coffee', as an example. For these types of things, that network is quite successful in what opportunities are there. There are the obvious things, partnerships with Castle Dairies and Gower View Foods on the excess cream from our milk going into Welsh butter and these type of things—potting cream. As you go on, we're going to start to look at different things, but we would always be scanning the horizon for what the next opportunity is that can make a margin.

Thank you very much. Are there any other points you'd just like to leave with the committee before we close the session? David.

Thank you, Chair. I just want to add, from a manufacturing perspective, about the work that we're doing about supporting healthier diets and healthy eating. We recognise, as manufacturers, we play an important role in this. We're working very closely with and support all the work the Welsh Government are doing in 'Healthy Weight: Healthy Wales'. In the last 10 years, our members, through reformulation—which is not straightforward, it's quite a complex—have made foods with 24 per cent fewer calories, 30 per cent fewer sugars, and 31 per cent less salt. That work continues. Work that we're doing in Scotland with Reformulation for Health, which has been funded by the Scottish Government, has been a great success. I think it's 92 or 93 Scottish SMEs we've helped reformulate to make healthier choices. We want our population to make balanced, healthy choices of what they eat every day. If you would like to learn more about that, anyone, about what we're doing in Scotland—we've discussed it with the Welsh Government quite a lot—I'd be happy to share.

You've sparked Jenny's imagination there.

If there was a tax on ultra-processed additives, how easy would it be for your members to clean up the products that you make? Because these additives are there to increase the shelf life, I understand that, but if we, as a public, identify that these are not things we want to be consuming, we don't even know what they are or what impact they have on our bodies, you could do it, couldn't you, if you needed to? Do you have any targets for that?

I don't have that information to hand, Jenny.

Okay, I'll come back to you.

Yes, please do. Thank you.

If you have that information as a body, could you provide it to the committee?

I'm happy to share anything on what we're doing on the reformulation and ultra-processed foods and high fat, salt and sugar, of course, yes.

Great, thank you. Huw, did you have any final closing comments, or are you happy with what you've been able to put on the record?

My one message is this: whenever we're writing strategies or delivery plans to the Welsh Government, let's make sure the economics of putting competitive products in front of the consumer is always considered.

Thank you, gentlemen, for coming today. Your evidence is much appreciated, and the way you've engaged with the committee as well. A record will be sent to both of you, so you can have a look at it. If you have any concerns, as I said in my earlier introduction, please raise it with the clerking team. Thank you very much.

I invite committee members to look at papers to note. Are there any observations on papers to note? I've got to look at the Zoom camera as well, haven't I? Okay.

Could I have a proposal to move into private session?

Proposed.

Agreed. We'll now move into private session. Thank you.