Collaboration across the supply chain is key to continuing the success story for Scotland’s food and drink sector

The Financial Times recently ran a feature that suggested that Scotland’s food and drink sector was punching above its weight. This success was attributed to a country with a clear focus on growing the sector and which had made food part of the ‘political narrative’.

So is it all plain sailing for the Scottish food and drink industry? Our reporter asks retailers, suppliers and key players in the industry what’s driving growth and what the future holds for Scottish food?

In 2007 the newly established industry body, Scotland Food and Drink, set the target of increasing sales of Scottish food and drink to £10bn by 2017. It was an ambitious target but one which helped focus the industry. Since then the sector has enjoyed strong growth with the Scottish Cabinet Secretary Richard Lochhead MSP announcing in September 2011 that sales had passed the £10bn target and reached a new high of £11.9bn. The target now sits at £12.5bn. Meanwhile exports reached an all time high of £5.4bn this year.

That’s a strong performance in tough economic conditions not just in the UK but across the world and particularly in Europe.

According to Scotland’s second largest supermarket, that’s a performance which is being driven by strong and growing consumer demand demonstrated by a 20 per cent increase in sales through the supermarket’s dedicated Local Buying Team last year.

David Paterson, Head of Regional Affairs for Asda, explains: “We recently completed a major research project which continues to show that customers in Scotland are more interested in provenance and local sourcing than customers in the rest of UK. Price remains the most important factor for customers, but we know that Scottish customers definitely put a value on buying Scottish. Sometimes that means they want to see genuinely local lines – specific to one part of Scotland – but often they are most interested in buying quality Scottish lines and brands. That’s why we have a local sourcing policy that allows suppliers to supply one, a handful or all of our Scottish stores.” So does the FT’s analysis ring true with Asda?

According to Paterson, the key players in the sector are certainly more aligned than they’ve ever been: “Through the Grocery Retailers Forum with the Scottish Government, the work of Scotland Food and Drink, and a lot of hard work by retailers, it feels increasingly like there is more of a common purpose in the industry which is benefitting customers, retailers, suppliers and local communities. We are passionate about local sourcing and this strategy is supported at the very highest level of our business.” Scotland Food and Drink’s Chief Executive, James Withers, joined the organisation last year and is a passionate advocate for the sector. He sees collaboration across the supply chain as vital and says there are encouraging signs for the future.

“In 2011 we worked with the Scottish Government and Asda to create the Asda Supplier Development Programme. The aim was to take a range of small and medium suppliers that had been identified as having real potential to grow and help them to take the next steps to growth. At the end of the ninemonth programme, sales for the ten suppliers across Asda alone had risen by 36 per cent year on year.

That’s stunning growth and shows a real return on investment for all concerned.” The programme certainly seems to have delivered real results. At the 2012 Scotland Food and Drink Excellence Awards in Dublane, two of the participant companies picked up prestigious awards: Borders Biscuits won ‘Business of the Year’ and ‘Profiting Through Skills Development’, while VC2 Brands won the ‘Drink’ category award with its innovative Double Espresso Premium Caffe Beer.

Borders Biscuits believes that greater collaboration with retailers has helped deliver real growth for the business. Louise Creevy, from Borders Biscuits, said: “Taking part in the Supplier Development Programme enabled us to become much closer to the Asda team and, as a result, we have built a very strong relationship with them. We learnt a great deal from taking part in the programme – from how the supply chain works both at the depot and in-store, to marketing and product development opportunities, thanks to time spent in Asda House.

“The course covered every aspect required to be a supplier to Asda and, as a result of taking part, it has helped us increase our distribution of our Dark Chocolate Gingers & Deliciously Different Strawberry & Cream Shortbread from 160 stores to 340 stores and our Oatrageously Tasty biscuits, which was previously only ranged to Scotland, are now available in England which, in turn, led to us growing our business by 24 per cent yoy [year on year].” The success of the Asda Supplier Development Programme means that Scotland Food and Drink is continuing to develop a range of programmes to improve collaboration between retailers and suppliers. Chief Executive James Withers is hopeful that a new improved programme will soon be launched with Asda to reach even more businesses.

Asda’s David Paterson says the retailer can’t wait to launch its next programme. “We found the process was beneficial for everyone. Our sales increased as a result but importantly, we also learned much more about the barriers that need to be cleared if the sector’s going to keep growing in the future.” Paterson says that Asda remain optimistic for the future for local and Scottish sourcing and has set a target of a further 15 per cent year on year growth through its local buying team for 2012. However, the retailer also believes there are opportunities and challenges ahead. Paterson lists two major challenges for the industry: how Scotland moves from being focused on primary produce, to being famous for quality food manufacture; and what can be done to upskill Scottish businesses.

According to Paterson: “Scotland has a deserved reputation for its primary produce, but there are still huge opportunities to build a much stronger food manufacture base and drive new innovation to bring added value into the supply chain. The other challenge is how government and industry can support small companies to upskill. We see huge variations in the supply base with some small and medium-sized companies lacking the fundamentals they need to take them from a good small business to market leaders. Business planning, marketing plans, category management, technical and compliance, and new product development are all areas that need more investment if the industry is to flourish.” As the food and drink industry converges on Ingliston for this year’s Royal Highland Show, there are real reasons for optimism from a sector which is vital to the Scottish economy.

Asda and Scottish food
Asda is Scotland’s second largest supermarket with 53 stores, two distribution centres and 19,500 colleagues. Every year Asda spends around £1bn with suppliers in Scotland. Many of these are food and drink suppliers and producers. Through Asda’s Scottish Local Sourcing Team alone, sales approached the £50m mark in 2011 with almost 1,200 local lines for sale in Scottish stores, working with around 90 Scottish suppliers.

Participating companies in the 2011 Asda Supplier Development Programme were:

• Shetland Products – smoked salmon – www.shetland-products.com
• Speyside Specialities – traditional Scottish produce – www.speysidespecialities.co.uk
• Simon Howie – meat and ready meals – www.thescottishbutcher.com
• Mathiesons – bakery – www.mathiesons.co.uk
• J.I. Smith – bakery – www.jandismithbakers.co.uk
• Porrelli’s – ice cream – www.porrelli.com
• Border Biscuits – biscuit range – www.borderbiscuits.co.uk
• Sangs / Mac B – water www.sangs.co.uk
• MacIntosh of Glendaveny – rapeseed oil – www.mackintoshofglendaveny.co.uk
• VC2 brands – premium beers and spirits – www.vc-2.com