DG GROW
Meeting between DG Timo Pesonen and
from
FoodDrinkEurope
Timo’s office, 12 June 2019, 15:00
The future actions of the EC in the food sector and the High Level Forum
for a Better Functioning Food Supply Chain
BRIEFING NOTE (Commission Internal)
Scene setter/Context of the meeting: You are meeting Ms
,
of FoodDrinkEurope – the
EU association representing the interests of the food and drinks
industry. FoodDrinkEurope requested this meeting to: 1)
exchange views on the contribution of the food and drinks
industry to European growth and jobs, 2) share with you their
priorities and ideas for the next five years and 3) discuss the the
High Level Forum for a Better Functioning Food Supply Chain
(HLF).
Regarding their priorities, in their latest publication “
Let’s step up
to the plate - Europe’s Food and Drink Industry Priorities for the
EU Institution 2019 – 2024” they cal for a stronger promotion of
the single market, better enforcement of rules in place, creation
of a Commission Directorate-General for food and a strong
industrial agenda. They also ask the Commission to contribute to
the creation of policies that are conducive to innovation and
greater consumer choice.
With regard to the HLF, over the last 4 years FoodDrinkEurope has
been one of its most active members. However, they decided not
to endorse its final report even before the circulation of its final
draft. The reason for their opposition was that the report was not
aligned with their views on several issues, in particular in the area
of territorial supply constraints and dual food quality.
DG GROW believes that the Forum is built on the ability to find
common ground between different positions. Most other industry
organisations accepted the text (including several of
FoodDrinkEurope’s sector members), recognising its overall
balance and value even without agreeing with 100% of its
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Template 3
content. FoodDrinkEurope not only did not endorse the report, it
also actively lobbied other Forum Members to oppose its
adoption. This put a strain on our relationship with them, and we
believe that they are trying to restore it now.
Objective of the meeting:
• Listen to FoodDrinkEurope’s ideas on what DG GROW
should be doing in the next five years.
• Express reservations over the FoodDrinkEurope’s handling
of the final report of the HLF.
• Show openness towards their positions, while stating firmly
that DG GROW will continue to act in the areas identified as
priority by the Commission and the overwhelming majority
of HLF Members.
KEY messages
• We would like to thank FoodDrinkEurope for their active
participation in the HLF. This has been much appreciated.
• Despite differences of opinions between some HLF
members, the debate has shown many commonalities. We
stand behind the value of the ideas reflected in the final
report of the HLF.
• The Single Market is and will remain a corner stone of our
food policy. We will continue working together to defend it.
• We remain committed to tackling all remaining barriers in
the Single Market for food, regardless of whether they
originate in national rules or business practices.
• We look forward to continue our cooperation with
FoodDrinkEurope during the next Commission mandate, as
we believe that stakeholder involvement in our policies is of
vital importance.
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Line to take
Contribution of the food industry to growth and jobs
1. The effective and frictionless functioning of the Single
Market is essential to promote growth, jobs and consumer
welfare. Thanks to the four freedoms, European consumers
can enjoy diverse, safe and affordable food products.
2. We welcome FoodDrinkEurope’s commitments to “step up
to the plate”, especially on the sustainability agenda. We
would like to see concrete ideas on how the food business in
Europe can contribute to the fight against climate change.
We are ready to help you promote and communicate such
actions.
3. We need to remain sustainably competitive. We need to
focus on how the European food industry can compete with
our main international competitors in the next decades,
without losing its core values.
4. We plan to intensify our efforts on the trade agenda, hoping
to facilitate the access to markets for European food
exporters.
5. Overal , we want to create environment al owing the
European food supply chain to remain a global champion in
the next decades.
The High Level Forum for a Better Functioning Food Supply Chain
(HLF)
1. The current HLF is working until the end of 2019. There are
ongoing projects on the Foodeuro and the consumers’
perception of dual quality.
2. The final report is an important document, as it shows a
strong consensus of an overwhelming majority of its
members (45 out of 50), including most of the key-actors in
the food supply chain. For this reason we will seriously
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consider its findings in all future food policy actions, but will
not limit ourselves to this.
3. The Commission services are committed for implementing
the two pilot projects on Dual Food Quality promoted by the
Parliament and further initiatives for protecting consumers
could be promoted in the future.
4. The HLF was mandated by the Commission, with the support
of the European Council, to work on “Dual Food Quality”.
This issue is not going to go away, and the food industry
should be prepared to show stronger engagement on this
topic. The same goes for the issue of Territorial Supply
Constraints, as the recent ABInBev case shows.
Supply Chain Initiative (SCI)
1. The Commission has continuously supported and promoted
the SCI over the last years and will continue to do so.
2. However, I am not alone in saying that the SCI could and
should do more.
3. My services met recently with the
of the Supply
Chain Initiative -
, and he was clear that he
wished to be busier.
4. Supply Chain Initiative needs to step up its efforts to link
with the national platforms if it wants to remain relevant.
5. A more active Supply Chain Initiative would have a greater
chance to attract the interest of farmers associations and
convince them to join the Initiative.
Industry4Europe Coalition
1. We welcome the Industry4Europe and FoodDrinkEurope
efforts to promote the role of industry at the core of future
EU policies and engage in a dialogue about the
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transformation of industry, including your active
involvement in EU Industry Days.
2. We are currently in the reflection process related to new
industrial strategy, including results of Industry 2030
roundtable.
Defensives / Q&A
Question: Why did the HLF focus on problems rather than on a
more positive agenda?
Answer: The Commission gave Forum Members a lot of freedom
in agenda setting for this Forum. The main issues part of the HLF
Working Programme were the result of a broad debate involving
al members. The only exception to this has been the issue of
“dual quality”, where the HLF, in line with its mission, was
consulted by the Commission – a powerful, high-level mandate
that was welcomed by FoodDrinkEurope. In its deliberations,
the HLF was obviously influenced by the current political agenda
and was mandated to foster dialogue on issues of high political
visibility and meaning to EU consumers. Nonetheless, the HLF
delivered on topics such as digitalisation and the FoodEuro
which are concrete issues, widely accepted to be of importance
for the future of the food chain. This HLF managed to make a
significant difference in the right direction.
Having said that, the logic of this platform is that the
Commission facilitates the work of the Forum, and its Members
are its main drivers. In other words, the work of the Forum is
driven largely by the input of its Members.
Question: We do not think that the voices of the food industry
are adequately reflected in the report
Answer: The HLF has 50 Members and everyone view is
important, regardless the turnover of their members. During
each meeting of the Sherpa and expert groups Commission
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colleagues went a long way to enable al Members to express
their views and to reflect these views accurately in meeting
reports and working documents. A consensus-based approach
has been practiced by the Secretariat of the Forum very
diligently. We always took note of al opinions and we acted as
honest brokers to deliver a fair picture of the overal views of
Members. Over the last four years, the Forum had 3 plenary
meetings, 8 Sherpa meetings and 10 expert group meetings.
When opinions or recommendations included in the final report
of the HFL were not unanimously supported by Members, this
was unambiguously highlighted in the report, which received
the endorsement of the HLF with the support of 45 Members,
including 19 out of 22 stakeholder representatives amongst
which several FoodDrinkEurope member organisations.
Question: Wil there be another High Level Forum for a Better
Functioning Food Supply Chain?
Answer: The decision to renew the Forum in whatever form lies
with the next Commission. It is therefore very difficult to
speculate about this at this stage. However, it is certain that the
Commission wil listen to the opinions of the current Forum
Members in this respect. Should there be a successor to the
current HLF, we wil work to ensure that its composition,
working methods and Member engagement enable it to “step
up to the plate” successful y.
Question: What wil be DG GROW’s priority in the food sector for
the next five years?
Answer: This is for the next Commission to shape. What we can
say at this stage is that we are delivering on the work streams that
are already underway. This includes price transparency, with the
pilot phase of the foodeuro project. Besides, we would like to
deepen our analysis of the territorial supply constraints, and we
have commissioned a study in this area. Moreover, we wil keep
looking for solutions to address the current fragmentation on food
label ing, both origin and nutritional. Final y, we wil continue our
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close cooperation with the JRC on proposing solutions to better
understand the issue of dual food quality in Europe.
Environmental impact, including climate change, and consumers
protection, both healthy nutrition and misleading practices, are
rising concerns that should be addressed.
Moreover, we would like to focus not only on solving internal
market problems, but also to explore global opportunities for the
EU food industry. We need to promote conditions enabling our
industry is able to compete with our global competitors on a level
playing field, without sacrificing its values. We wil work with al
participants in the chain, including FoodDrinkEurope to get
concrete ideas on how to help our biggest manufacturing sector to
thrive.
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Background information
Name of the Director who has cleared the briefing: Carlo Pettinelli
BASIS request ID: Basis (GROW/6731)
Room, time: tbc, 12 June 2019, 15:00
Participants: DG Timo Pesonen,
Name of main contact person:
Telephone number:
Directorate/Unit:
General information about food supply chain
The food supply chain involves the stages and operators from primary producers to final
consumers, including processing and packaging (e.g. canning). The food and drinks
industry is the largest manufacturing sector in Europe, both in terms of turnover and
employment
Over the last years tensions between stakeholders in the food supply chain increased,
due to various factors.
Farmers are having a difficult time adjusting to the economic transformation happening
in their sector: modernisation, climate challenges and progressive reduction of CAP
funding has left them particularly vulnerable. Many European farmers are small
operators and are not organised wel enough; therefore they are frequently left with
small profit margins and low bargaining power.
Processors in the food supply chain come in various shapes and sizes. There are plenty
of SMEs (98% of food enterprises), however there are also large multinationals such as
Nestlé, Coca-Cola and Mars. FoodDrinkEurope represents the interests of large
processors and SMEs alike: it has a threefold membership: national federations, sector
organisations (e.g. dairy, spirits, pasta, coffee, confectionery, meat processing, sugar,
pet food, etc.), and a number of large individual companies.
Several of FoodDrinkEurope’s sector members (as well as other organisations
representing different stages of the food supply chain) are members of the HLF. In
reality it is often the large companies that have a predominant influence in
FoodDrinkEurope’s internal decision making. For the past years the large processors
have been reportedly enjoying the largest margins in the food supply chain. However,
recently they are being chal enged by the emergence of retailer’s own brands (private
labels).
Distributors/retailers are an important stakeholder in the food sector, and they are used
to making profit on low margins. However, recently brick and mortar retail is being
challenged by various factors (emergence of online platforms selling food such as
Amazon, decreasing economic viability of small and medium retail, slow digitalisation,
price wars). Still big retail chains are seen by farmers as consolidated giants with high
bargaining power, often imposing unfair practices.
In recent years, consumer preferences when choosing food have shifted and become
more complex. While remaining significant, the importance of price in purchasing
decisions has decreased due to the emergence of factors such as nutritional value,
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health impact, origin, environmental footprint, animal welfare standards and social
fairness. This has had a significant impact on business models, as industry is trying to
cater for those needs.
The High Level Forum for a Better Functioning Food Supply Chain
The High Level Forum for a Better Functioning Food Supply Chain (HLF) is a formal
expert group of the Commission which gathers stakeholders representing the entire
food supply chain and al Member States (50 members in total ). The HLF worked during
the period 2010-2014 and had its mandate extended for 2015-2019. It is chaired by the
Commission. Ms Bieńkowska is the lead Commissioner, Commissioners Hogan and
Jourová participated in HLF plenary meetings.
The HLF’s objective is to assist the Commission with the development of policy in the
food sector, contributing to a better functioning food supply chain. The HLF Work
Programme adopted in 2016 set 3 priority areas of work: better trading practices (in
relations among actors in the chain), food chain competitiveness and price
transparency. The issue of dual quality of food was added in 2017 on the initiative of the
Commission with the endorsement of the European Council. It has been, together with
Unfair Trading Practices (UTPs), the most politically sensitive issue discussed in the HLF.
The work of the HLF has been organised at different levels: an annual plenary meeting
at Commissioner/Ministerial level (giving political guidance and validating the work),
Sherpa group meetings (preparing the plenary discussions) and several expert groups.
The expert groups focused on the fol owing matters; 1) Barriers in the internal market
for food 2) Digitalisation in the food chain 3) Food price indicators (FoodEuro) 4) Dual
quality of food 5) Private labels. Each of the groups developed a set of
recommendations and deliverables.
The HLF has made a significant contribution in all its areas of work, acting as the only
EU-wide platform involving the entire food chain. It has been designated as the primary
forum for dialogue on two sensitive issues: unfair trading practices and dual food
quality.
The final report of the HLF, reflecting its work and achievements, was presented to the
HLF plenary meeting in November 2018. While gathering a high level of support for the
majority of issues, some sensitive matters such as dual food quality were contested by
certain members.
On dual food quality, a compromise text was carefully crafted in close cooperation
especial y with the most concerned MSs (SK, CZ, HU). The set of recommendations
reflected a balanced, pro-consumer approach without prejudice to the on-going
trilogues on dual quality in the 'New Deal for Consumers'. Despite the Commission's
mediation efforts, the final wording proved unacceptable for SK ('deliverables not
ambitious enough, not working towards the abolition of the phenomenon' –
surprisingly, given that we specifical y accepted al the comments SK sent us) and AT (for
the opposite reasons, wording too far-reaching). Furthermore The EU Association of
Food and Drink Industries (FoodDrinkEurope) and its members Clitravi and PFP did not
endorse the report on the grounds that “the discussions and the resulting report neither
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promote nor enhance the competitiveness of the food industry” (possibly linked to their
dissatisfaction on sensitive issues such as territorial supply constraints and dual quality).
In conclusion, the work of the HLF has provided a valuable contribution to tangible
deliverables, such as the 'FoodEuro project', the testing methodology for composition
differences (dual quality), pioneer EU level exchanges on digitalising the food chain,
sustainability and more. The only holistic place for dialogue on charged issues of
immediate political importance, the HLF promoted better understanding among
stakeholders, The report was endorsed by a majority of its members (45 out of 50).
Dual quality of food
Consumers from a number of EU countries have expressed their concerns regarding
differences in the composition and sensory profile of several food products when
compared to products sold under the same brand in other Member States. Several
studies carried out at national level confirmed that in the Single Market there are
products with a similar or identical brand, which are sold with a slightly or significantly
different composition. This issue has gained prominence on the political agenda of the
Commission.
The conclusions of the European Council of 9 March 2017 mention that: "The European
Council welcomes the decision of the Commission to address the issue of dual quality of
foodstuffs in the Internal Market in the High Level Forum for a better functioning food
supply chain."
In his 2017 State of the Union Address, President Juncker explicitly referred to the issue
of dual food quality and stated that “
in a Union of equals, there can be no second-class
consumers. I cannot accept that in some parts of Europe, people are sold food of lower
quality than in other countries, despite the packaging and branding being identical”.
Responding to this call for action, on 11 April 2018 the Commission (DG JUST) adopted a
proposal for an amendment of the Unfair Commercial Practices Directive (UCPD) made
under the New Deal for Consumers initiative. This amendments makes explicit that
marketing products as identical, while they have significantly different composition,
may constitute a misleading commercial practice.
The HLF promoted a bridge-building dialogue between Member States, stakeholders
and consumer representatives on this issue. Dual food quality was on the agenda of one
plenary meeting in 2017, five Sherpa meetings and two expert group meetings. The
discussions in the Forum have contributed to increasing a shared understanding of the
issue. The Commission used the Forum as a primary platform to interact with
stakeholders and Member States about its actions aimed a tackling dual food quality.
The Forum developed a set of recommendations, which are incorporated in the final
report. They are designed to advise stakeholders in the food supply chain on the best
ways to approach differences in composition and characteristics of identically branded
food products (including private labels) in the Single Market.
DG GROW works closely with JRC and DG JUST on various projects that intend to bring
clarity and knowledge on the phenomenon of dual quality and propose ways to address
this issue.
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Territorial Supply Constraints
Territorial supply constraints (TSCs) are practices set by private operators which may
limit retailers' possibilities to purchase products from whom and where they wish
within the Single Market. There are growing indications that territorial supply
constraints may drive market segmentation, limit competition and likely cause
discrepancies between wholesale and consumer prices or the choice of products
offered to consumers across the EU. Nevertheless, more hard evidence is needed to
confirm this. TSCs can take different forms:
- Buyers based in one Member State dealing with a multi-national supplier are not
given the choice to decide from which national entity of the suppliers the goods
should preferably be sourced and are instead referred to a specific national
subsidiary, making parallel imports impossible.
- Buyers may face restrictions on quantities provided by suppliers to avoid them
supplying their own subsidiaries in other Member States.
- Suppliers engage deliberately in other types of obstacles that hamper parallel
trading of products (e.g. unjustified modifications of product recipes, different
label ing or packing sizes and restricting the range of products that may be
available in a Member State).
Recently, The European Commission has fined AB InBev (beer conglomerate)
€200,409,000 for breaching EU antitrust rules. AB InBev, the world's biggest beer
company, abused its dominant position on the Belgian beer market by hindering
cheaper imports of its Jupiler beer from the Netherlands and France into Belgium, which
is an example of territorial supply constraints.
Unfortunately, not all the territorial supply constraints fall within the scope of
competition law. For this reason, DG GROW is investigating the possibility of deploying
other measures that could address this issue. DG GROW is currently conducting a study
on territorial supply constraints that was financed partial y from the budget of the High
Level Forum.
Mandatory Origin Label ing
Several Member States have recently introduced various national rules imposing
mandatory labelling requirements for the geographical origin of certain food products.
The justification given by these States is the need to inform domestic consumers about
the origin of the products and to limit the risk of consumers being misled as to the
origin of the product. They argue that there is a strong consumer interest in origin
label ing and that there is a correlation between the quality of a product and its
geographical origin. However, there are indications that those measures could have the
additional effect of boosting domestic production to the detriment of products coming
from other Member States. A 2015 Commission report concluded that mandatory origin
labelling at the EU level and even more at the level of a country is highly complex to
implement in many areas of food, leading to substantial increases of costs of
production, which ultimately would be passed on to consumers.
While consumers generally seem largely favourable towards mandatory rules on origin
labelling, the recent emergence of various, diverging national labelling schemes risks
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creating a fragmentation of the Single Market. National origin labelling rules might
therefore create a barrier to the cross-border marketing of food products.
The fragmentation of the single market rules on origin labelling remains a key concern
for DG GROW. Currently we advocate for a European solution to this issue.
Directive on unfair trading practices in the food supply chain
Unfair trading practices (UTPs) are business-to-business practices that deviate from
good commercial conduct and are contrary to good faith and fair dealing. The food
supply chain is vulnerable to UTPs due to significant imbalances between small and
large operators. Often farmers and small processors in the food supply chain do not
have sufficient bargaining power to protect their businesses from potential y unfair
practices.
Although many Member States already had different national rules on UTPs, in some
countries there is no or only ineffective specific protection against UTPs. Following
extensive discussions in the HLF (FoodDrink Europe taking an active, positve role in
them) and in the Agricultural Markets Task Forces, in April 2018 the Commission
adopted a proposal for a Directive which will, for the first time, ensure a standard level
of protection across all EU countries. The Directive was adopted in April 2019 and wil
apply in full at the latest on 1 November 2021.
Supply Chain Initiative
The Supply Chain Initiative (SCI) is a voluntary scheme developed in the context of the
HLF. Its purpose is to promote good practices in the food supply chain as a basis for fair
commercial dealings.
The SCI is designed for companies operating at any point along the food and drink
supply chain, irrespective of their size and their geographical location in the EU. When
joining the initiative, companies commit to fair trading practices by integrating the
Principles of Good Practice into their day-to-day operations and monitoring their
application. At the time of registration, companies also confirm that they comply with
their process commitments and support the application of the Principles of Good
Practice. The SCI requires that companies address disputes in a fair and transparent
manner whilst reassuring the complaining party that it wil not be subject to retaliation.
Following-up on a commitment made at the Forum in December 2016, the Governance
Group of the SCI appointed its first independent Chair. This change of the governance
structure was seen as a step to reinforce the impartiality of the decision making in the
SCI and ensure the confidential y of the dispute resolutions.
Fol owing the adoption of an EU Directive on UTPs and the existence of national
legislation in this field in most Member States, the SCI is expected to continue to play an
important role as a platform for dialogue between the sectors in the food supply chain
at the EU as well as at the national level, as the SCI also operates with national
platforms. Yet, it has not been very active in the last year do to various reasons (not
enough political drive behind it, lack of vision, refusal by COPA-COGECA to participate).
Industry4Europe Coalition
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Industry4Europe is a large coalition of organisations dedicated to campaigning for an
ambitious EU industrial strategy. With 147 member organisations – particularly industry
associations – from across the EU and spanning most sectors of the economy,
Industry4Europe is helping to set the vision for the long-term future of the EU’s
industrial and manufacturing strategy. In March it presented the Joint Cal ahead of the
European Council, which set out to convince the Heads of State and Government to
make a pledge to put industry at the top of the political agenda of the EU during the
next institutional cycle (2019-2024).
They advocate for:
- Shortlisting industry as a top priority of the next 5 years Commission Work
Programme
- Appointment of a dedicated VP for industry
- Ambitious long-term EU industrial strategy
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CVs
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