Think again Lion!

Lion has been asked to think again about planned changes to its subscription charges.

The controversial changes include the introduction of a minimum annual levy of nearly ’10,000 ’ a move that is feared may deter some smaller operators from subscribing. The changes were agreed by a group of Lion subscribers during a meeting in May, but the changes met opposition when they were discussed at a meeting of the British Egg Industry Council in June. ’We asked them to go and look at it again and that is what they will do,’ said Charles Bourns, who is the National Farmers Union’s poultry board chairman and also the vice chairman of the BEIC council.

Under the changes new subscribers joining in 2011 will pay a minimum annual levy of ’9,750 (pro-rata to the remainder of 2011) or 11 pence per case of 360 eggs, whichever is greater. As far as we are aware this is the first time that such a minimum fee will have been introduced for Lion subscribers. Until now members have simply been charged 11 pence per case. The new minimum charge will be phased in for existing members. The minimum fee will be limited to ’5,000 for each of the next two years before subsequently increasing to the full ’9,750 level. New entrants will not benefit from this concession.

Lion is also increasing the level of the joining fee paid by new entrants. This fee will rise to 50 pence per case from the current level of 30 pence per case. The calculation is based on the previous 12 months’ Class A packing centre throughput.

The NFU has raised concerns that the new charging scheme will disadvantage smaller packers and those fears have also been expressed by the Ulster Farmers Union and the NFU Scotland. The concerns of all three organisations were voiced at a BEIC council meeting in June when Lion subscribers were asked to think again.

’The council sent it back to the subscribers with a number of recommendations,’ said John McLenaghan, chairman of the poultry committee of the Ulster Farmers’ Union. ’The consensus view on the council was that we were not happy with it as it was proposed. We felt that the subscribers should revisit it, although they will not be able to do that until October,’ he said.

’We do not want to see the introduction of anything that disadvantages anyone in the industry. We see the Lion mark as a quality mark, a successful scheme, and we are very much supportive of it and what it has achieved for the industry, but we would not like to see a situation where the cost of membership becomes prohibitive to smaller members.’

Peter Loggie, pigs and poultry policy manager of NFU Scotland said his organisation was concerned that the charges may dissuade people from joining.

Mark Williams had previously told the Ranger that the new rates had been calculated by adding together the BEIC’s basic operating costs and dividing the figure by the number of current subscribers. Peter Loggie said, ’We did not think that was consistent with trying to get the smaller end to join. As a membership organisation we go through the exact same turmoils to decide what a fair and reasonable level of charges is to make on members and how best to divide up the costs of the organisation. It would not be the position of any of the farming unions that they would have a proportion that was calculated on such a flat rate system.

As we reported last month, the new Lion subscription structure will significantly increase cost-per-case fees for smaller packers. An operator with control of 24,000 birds will pay the equivalent of 55 pence per case under the new pricing, which equates to 1.8 pence per dozen.

A 48,000 bird operator will pay 27.6 pence per case (0.92 pence per dozen), a packer with 72,000 birds will pay 18.4 pence per case (0.61 pence per dozen), someone with 96,000 birds will be charged 13.8 pence per case (0.46 pence per dozen) and a packer with 120,000 birds at his disposal will pay the equivalent of 11 pence per case (0.36 pence per dozen).

Under the current structure, without a minimum fee, a total of 24,000 birds would result in an annual levy of ’2,000, 48,000 birds would attract a ’4,000 charge, 72,000 birds would result in a ’6,000 levy, 96,000 birds an ’8,000 levy and 120,000 birds an annual charge of ’10,000.

Peter Loggie said, ’We said to them that the bigger people are getting more benefit from the organisation. It would be sensible to have some sort of tiering so you did not have such big increases coming on these people at the bottom.’

Charles Bourns said that most people at the BEIC council meeting were unhappy with the planned changes and that is why the subscribers had been asked to go away and take another look at them.

However, any new entrants joining the scheme before the review takes place will be required to pay the increased rate. Charges for existing subscribers will not be due again until after the rates have been reconsidered.

’I put the NFU’s view forward and was backed by the NFUS, the Ulster Farmers Union and most people around the table basically,’ said Charles. ’Everyone was singing from the same hymn sheet, although we can’t actually change it. It has to go back to the subscribers to change it.’

The NFU says it believes there should be no commercial barriers to joining an industry assurance scheme providing that the required standards are met. It is calling for more tiers within the subscription fees and for the fees to be based on farm or production size.

It is warning that by making the Lion scheme too costly smaller operators may look at developing other industry assurance schemes, which could undermine the Lion scheme and split the industry. It says the NFU is currently looking into the SALSA (Safe and Local Supplier Approval) scheme to see whether this would be a credible and affordable alternative for smaller packers who may be concerned about the cost of joining Lion.

A similar warning has already been issued by the British Retail Consortium. Some supermarkets have been sourcing some of their egg supplies from smaller packers as part of regional branding strategies and BRC food director Andrew Opie told the Ranger that some retailers may switch to other accreditation schemes if they felt that small operators were being adversely affected by the changes within Lion.

He told us, ’Lion does a good job for the suppliers who produce most of the eggs sold by our members. Small operators are responsible for a very modest proportion of their egg sales but the major food retailers are keen to work with them and wouldn’t want to see them disadvantaged.

’Lion is a good assurance scheme but, if it ceases to be appropriate, retailers could look at other ways of achieving that assurance - as they already have for some food products through the BRC’s Safe and Local Supplier Approval Scheme.’

SALSA is a non-profit making joint venture between the NFU, the Food and Drink Federation (FDF), the British Hospitality Association (BHA) and the BRC. SALSA was developed specifically for smaller food producers who need to demonstrate that they operate to standards that are recognised and accepted across the industry and exceed the minimum standards expected by enforcement authorities.

We understand that SALSA currently accredits two egg packers. One of them is Birchgrove Eggs, run by Gwen and Tony Burgess. Tony is highly critical of the changes to the Lion subscriptions. He said the new charges would prevent smaller producers and packers gaining entrance into certain retail and catering sectors.

’We have to ask the question as to why BEIC deem it necessary to increase charges so dramatically. It is, after all, a non-profit-making organisation and I understand its present income is already more than sufficient for its overheads and marketing strategies. I have admired much of BEIC’s work over the years, and I try not to be cynical as I get older, but this current proposal will clearly restrict the market place and for whose benefit?’

Tony said, ’I must implore retailers and caterers to consider their stance on Lion eggs and how this will restrict supply choice in the future. If they are as concerned as me, I suggest they give BEIC a call or even consider other accreditation schemes.’

He said that if the new charges went ahead, producers would have limited choice of packers to sell their eggs to because smaller and new packers would not have the market for them. ’The large packers will be able to dictate terms even more stringently. We have to make even those producers currently on contract understand that this move will affect them, too, even though they are not directly paying the BEIC subscription.’

The NFU says it will continue to promote Lion, British and locally produced eggs from all legal systems. It says it will also ensure that those buying eggs outside the Lion scheme are aware that all commercial pullets are vaccinated against salmonella and all producers with over 350 hens have to meet the same salmonella testing requirements under the National Control Programmes as Lion producers (with the exception of those selling small quantities direct to the final consumer).

Many people in the egg industry fear that the changes to Lion subscriptions will force some small operators to seek assurance outside the Lion code.