SECTORAL STRATEGY: FOOD AND DRINK Overview This strategy outlines HIE s ambitions, growth targets and key areas of focus for the Food and Drink sector in the Highlands and Islands of Scotland. Food and Drink is one of six key sectors offering significant potential for future economic growth, as detailed in the Government Economic Strategy for Scotland (GES). Scotland s National Food and Drink Policy is underpinned by five work streams: Supporting sustainable economic growth of the food and drink industry Food choices (healthy eating / diet and nutrition) Enhancing Scotland s reputation as a land of food and drink Walking the talk (essentially public sector food procurement) Affordability, Access and Security Supporting the sustainable economic growth of the food and drink industry is the main focus of interest for HIE and Scottish Enterprise. HIE s 2010/13 Operating plan highlights the following challenges and opportunities in the sector:- Within the Highlands and Islands, food and drink is a significant economic driver, generating a turnover in excess of 1bn per annum. The sector comprises over 1,900 businesses operating across value-adding processing and primary producing, notably aquaculture, fisheries and agriculture. The diverse range of produce generated within the region includes whisky, fish and shellfish, meat, bottled water, jams and preserves, dairy, biscuits and confectionery. Equally diverse is the profile of producers, ranging from world renowned businesses, such as Baxters and Walkers, to small innovative producers successfully supplying niche markets and who have growth potential. Working closely with partners and the industry, HIE s Food & Drink approach has two main strands, firstly to support account managed businesses and social enterprises, and secondly to deliver programmes that address identified needs and opportunities at a sector level with a focus on premium, provenance and health HIE has an overall ambition to help the region achieve 525m additional turnover by 2017, and annual growth rate of 5%. The sector in Scotland The sector currently generates nearly 11bn turnover per year, with a 1B growth in Turnover between 2007 and 2008. 8bn comes from around 1200 food & drink manufacturing companies, with primary production (agriculture, aquaculture and fishcatching) contributing 3bn. Food and drink sector manufacturing is the largest manufacturing employer with 21% of all manufacturing jobs. The GVA contribution of the sector to the Scottish economy was 4.4bn in 2008. The sector is very diverse with some elements of food production being very mature in the region while others such as nutritional foods are genuinely cutting edge. The sector cuts across many other areas of life in Scotland including health, education, public procurement, land use and low carbon.
Scotland s reputation for quality produce, especially whisky, beef and salmon is world renowned. Scotch Whisky, Scotch Beef and Scottish Salmon, cheese and oat products are globally recognised brands. Scotland is the 2 nd largest Salmon producer in the world. Scotland lands 70% of Uk fish catch, has 40% soft fruit production and 23% of beef herd. Increasingly, Scotland is also capitalising on niche opportunities in speciality foods and health enhancing products. Global trends towards the role of food in healthy lifestyles, food safety, sustainability, provenance and ethical production present numerous opportunities for Scotland to build on existing strong brand awareness and its reputation for quality produce. The aim for the sector is for a sustainable and profitable food and drink industry that is consumer focussed, market led, and internationally competitive. Attention is focussed, through Scotland Food and Drink as the leadership body, on achieving a 12.5bn industry by 2017. The sector in the Highlands and Islands The industry in the Highlands and Islands has a turnover in excess of 1bn and employs 35,000 people (with many more engaged on a self employed basis). The diverse range of produce in our region ranges from world renowned businesses to small innovative producers successfully supplying niche markets and with growth potential. Fishing and aquaculture is more important to the Highlands and Islands than the rest of Scotland, while whisky is a major component of the sector although there also has been growth recently in micro breweries, bottled water and speciality products. As HIE has moved to a more targeted approach focussed on growth, we will no longer support businesses with limited growth potential such as food producers serving purely local markets. HIE has managed an exit process from local food producer networks, food apprenticeships and a number of other activities around more basis skills and local markets. HIE continues to invest in company growth and currently working a wide range of firms including: bakeries; fish farms; egg producers; distilleries; fruit growers & wholesalers; micro breweries; seafood processors and food marketing groups, red meat producers and range of ambient and speciality producers. HIE will take forward our remit around Crofting and our work with 'Crofting Connection' is an important part of the regions story around provenance, authenticity and experience. Scale of Sector Number of business units in the Highlands and Islands 1900 Number of employees (excluding self employed) 35,000 Turnover 1.1bn Partners HIE s key partner in developing the sector is Scotland Food and Drink, the National Industry body that delivers marketing, product development, market intelligence and business development services. At the Highlands and Islands level the Food Forum is a local partner. Scottish Government and Scottish Enterprise and important public partners in our work as are SDI.
Key challenges and opportunities There are three main opportunities highlighted in the Scotland Food & Drink strategy. These are strong internationally competitive premium brands; growth markets around healthy foods; and making more of provenance. In addition the following issues are important for growth of the sector: Scale Globally, food & drink is dominated by major brands (PepsiCo, Nestle, Kraft, Unilever etc) yet in Scotland there are few major brands. Three-quarters of businesses employ ten or less employees. There are very few (around 30) food and drink companies in Scotland turning over more than 50m. Creating an industry of scale in the global market place is a challenge and opportunities to create scale through supply chains and virtual collaboration should be pursued. Innovation - Relatively low levels on investment in training and in R&D, currently at around 1% turnover can limit our ability to innovate and to drive up productivity. Yet innovation will be central to a successful industry in the future. Exports - The Scotland Food & Drink strategy sets out a 1.4bn growth potential from international sales. Scotch Whisky and Salmon lead the way in terms of exports and we need more focus on increasing export capability across a wider range of food produce. Objectives for the sector HIE s strategy for the development of the food and drink sector is aligned with GES and is influenced by the national food policy. The key objectives for the Highlands & Islands region are: to increase the food and drink contribution to the Highlands and Islands by 525m by 2017; to develop globally ambitious companies with world class leaders; to extend the reach of the sector to our more remote communities, and areas with employment deficient and develop community Crofting; Our priorities To achieve the regional objective of growing the sector s turnover by 525m in the next eight years in particular, our priorities are: to generate growth from 80-100 account managed businesses; to deliver specialist programmes focussed on the issues of scale (leadership, ambition, productivity and market information), innovation and internationalisation, and a focus on premium, health and provenance; to align wider HIE support around research and innovation in support of sectoral growth; to influence sectoral and public policy at the national level. Much of our activity is delivered in partnership with the industry through Scotland Food and Drink, ensuring clarity of message to businesses and consistency across a wide range of interventions.
Implementing the strategy A collaborative approach is required to support our growth ambitions. In practice, this means account teams in place for key projects and a two way flow of intelligence across HIE to ensure actions are well informed by our customers needs and focussed on projects with the largest growth potential. We pilot and develop tools to support business growth focussing on account managed companies and potential account managed companies, where there is clear need from industry and input from area staff. Support for account managed companies, social enterprises and community groups HIE supports sectoral growth directly through the development and implementation of growth plans to create high growth businesses; through working in partnership with Scottish Development International (SDI) to attract inward investment and support companies to trade internationally; and the promotion of innovation, entrepreneurship and leadership. Whilst it is through the area team, and the account management process that most Food and Drink companies will be interacting with HIE, the Food and Drink team will support area team s growth plan activities with sector specific expertise, market information, pilot projects and industry connections. The Food and Drink team will also participate in key account teams. A central theme in this area is intelligence and innovation. HIE partners with Scotland Food & Drink and Scottish Enterprise to manage our collective research interests and communicate market intelligence and business opportunities to the industry. This is delivered under the Scotland Food & Drink Insights banner. A wide range of business guides and resources are available at www.scotlandfoodanddrink.org. HIE business growth resources such as Entrepreneurial Development and Growth Programmes are well suited to the Food and drink industry and their use should be encouraged. Key actions Ensure that area teams have full awareness and access to the suite of business support products through effective communication, case conferencing etc Ensure support tools revised to meet identified needs Develop process to improve support from partner organisations for account management Maximise opportunities for collaboration across account managed companies and the wider sector Support for sector growth It remains challenging for our companies to enter new markets and maximise revenues from existing ones. HIE provide specific market development opportunities such as buyer briefings, supplier development programmes, and capacity building through our partnership with Scotland Food & Drink. Increasingly these programmes are becoming more bespoke tailored to our region. There are also opportunities to help build capacity, expertise and confidence in our companies to help them enter new markets. A Growth Programme was piloted to address this in 2009/10 across Caithness and Lochaber Skye and Wester Ross focussing on innovation, sales and
marketing. A roll out is in development and HIE will draw in a number of partners to support this work. Seafood Scotland are also working in partnership with HIE on dedicated business growth and environmental programmes for the seafood sector. It is important that communications are streamlined across a range of support organisations and that we make sure account managers supported to make best use of available tools. HIE have created a new post to address this focussing on coordinating communications and business engagement including the Highlands and Islands Food Forum. Raising profile of the region remains a crucial element in growing the sector. We will work with the Highlands and Islands Food and Drink Awards which recognise and celebrate excellence across the region and look to encourage a business model for the awards that is less reliant on HIE funding in future years. Key Actions Ensure Access to Markets programme fully utilised across the region and monitor effectiveness Put in place plan for roll out of Growth Programme approach Internationalisation - Over two thirds of growth companies in the region are actively exporting and most of these companies export globally. Whisky dominates our exports value, but we need to encourage a wider range of companies into new export markets. HIE supports companies to develop international markets by working in partnership with SDI and Scotland Food & Drink to provide a wide range of specialist support including assisting companies to exhibit at international exhibitions (e.g. European Seafood Exhibition, International Food Exhibition, and the Speciality and Fine Food Fair). HIE will continue to work with and develop the Scotland Food and Drink branding for consumer and trade market development. Inward investment remains important and HIE will actively pursue opportunities geared around our strength in raw materials and ingredients, natural products, aquaculture, health and product development. Key actions Promote internationalisation products through SDI and targeted events. Develop Value Propositions for site specific opportunities in partnership with the Internationalisation team. Wider regional impact Fragile areas Fragile areas across the Highlands & Islands provide an important part of the food & drink offering in Scotland. Fish catching and aquaculture are vitally important to many communities and current production challenges in competitor countries present opportunities for the Highlands & Islands. A wide range of speciality products, including drinks, also offer strong prospects for our fragile areas. There are also important links to be made with the tourism industry in terms of the availability of local produce for visitors. Areas of employment deficit Food and Drink companies, particularly those involved in processing, with their locally substantial employment impact, will continue to play a major role in helping areas of the Highlands and Islands solve local unemployment problems. Working with key partners, developing sites and
processing premises, and advance skills needs in areas of employment deficit will have an important role in creating new major job opportunities Social Enterprise Social Enterprises play a niche role in the regions wider F&D supply chain. They are however locally important, particularly in the remote and fragile areas, where account managed Crofting communities play an important part of the regions story around provenance, authenticity and experience. Low Carbon In the food & drink sector low carbon falls into two themes. Reducing energy costs, reducing waste, lean manufacturing and distribution are all key issues in terms of stripping out cost and the industry is keen to make progress here. Secondly, from a consumer point of view, the trends are very much towards ethical produce such as fair trade and freedom food as well as a strong desire for traceability, local and Scottish produce and these market trends offer big opportunities for our region. Connectivity and innovation - Good connectivity is a pre-requisite for the food & drink sector and we are increasingly seeing a need for improved use of IT in companies to help streamline processes and to meet increasing demands from retail sector. Innovation in the sector is centred on new processes and products as well as creating growth through collaboration. Opportunities exist to develop more health enhancing products as well as new speciality lines. We also see sectoral intelligence as having a strong role to play and this is largely delivered through HIEs support for Scotland Food and Drink and a research partnership with IGD. Key indicators for success 2010/11 Number of Account Managed Companies 80-100 (15-20%) Additional turnover by 2017 525m Policy Interventions 2 Formal relationships with Partner Trade Organisations 1 Sectoral classification on HMS is important, as this allows accurate monitoring of sectoral growth, and market trends. The sector covers four broad areas: Agriculture producing livestock, meat products, cereals and vegetables Sea fisheries landing fish and shellfish Aquaculture supplying greater value than either of the above from farmed salmon, trout and shellfish Food & Drink processing dominated by Scotch Whisky, but including a wide range of added value processing to supply premium goods to UK and global markets HIE October 10