Select Committee on Scottish Affairs Minutes of Evidence

Examination of witness (Questions 528 - 539)




  528. Good morning, Mr Tait. For the purposes of the record, would you introduce yourself to the Committee?
  (Mr Tait) Certainly. I am Jonathan Tait and I am the director of Food and Drink, Scottish Enterprise for the Scottish Enterprise Network.

  529. Thank you. At this stage of the proceedings, would you like to make any brief opening submissions to us, but not ones that would pre-empt the rather structured agenda that we have?
  (Mr Tait) I do not think so. I think I would be happier to just take the questions and then you can take the focus where you wish to take it.

  530. In that case, could I begin by asking you a couple of questions about policy targets and achievements and specifically, when were the targets for growth in the food and drink sector in Scotland, referred to in your memorandum, set?
  (Mr Tait) They were set and launched in June 1999.

  531. Could you give any indication of progress towards achieving these targets, particularly with regard to the drinks sector?
  (Mr Tait) I am afraid that I actually cannot. The difficulty with all these targets when they are aggregated at the macro level is that one is actually operating with statistics and data which are lagging behind the time you are in so that the 1998 figure relates to the 1997 export figures, for example. Obviously, we shall be collating those figures as we move through the strategy but we have nothing that shows absolute progress against those four targets. What we do have within much of the project activity which is under way is evidence that we are progressing satisfactorily against many of those targets with the exception of exports where we are aware that the weakness of the euro has impacted significantly on the export competitiveness of both food and drink in Scotland.

  532. As has, presumably, also, the high pound?
  (Mr Tait) Which is the other side of the same equation, is it not?

  533. Can you tell us whether you have been able to identify any specific gaps in Scotland's ability to compete in the food and drink sector?
  (Mr Tait) I think that "gaps" may be too strong a word but certainly there are significant areas where we could see improvement. One of the very clear lessons that we took out of the work with industry in the development of the strategy is that as we move much more towards a global economy and as we see that globalisation impacting on the food and drink industry in Scotland, it is clear that with very few exceptions, we must be a high value and niche producer of food and drink. As a consequence, various implications flow from that. We must be much more customer-facing and customer-responsive. We must understand our markets and where our markets are going much more clearly than many of the players in the industry do at present, which is something they acknowledge themselves. We must be more innovative. We must use technology and exploit technology much more to have innovation both in products but also in the entire business process as well. Clearly, the last and always the most significant thing is that you must have the right people with the right skills to deliver all this for the benefit of the food and drink industry in Scotland.

  534. The targets that you did set for the year 2010 were to have an annual rate of sales of 6 per cent, exports to treble and employment to grow by 12 per cent. Are those not very ambitious, perhaps over-ambitious, targets or are they realistic ones that can actually be achieved?
  (Mr Tait) With the exception of the export target, which is the subject of discussion by the industry group at its next meeting, and given the difficulties that there have been with export markets over the past two or three years, I think the industry believed that those targets were very stretching but were ones that they wanted to set themselves as an industry because if they kept on taking it back in and comparing it with the targets that they set for themselves as companies, they felt that they were stretching but appropriate, particularly in the areas of value-add because what we have to do is not just drive sales up per se but to ensure that we get a lot more value-add into the products which we offer as an industry in Scotland.

  535. The employment target in particular, was that mainly in food, because the indications that we have been getting is that in drinks, employment has in fact been reducing over the years?
  (Mr Tait) That is exactly the same trend that we see in food as well. What we are really saying is that the industry's view on this is that although productivity would drive a lot of the additional sales out of the food and drink industry, one would have to have more people employed, however smart one gets in terms of efficiency and productivity, to achieve the kind of sales growth that is suggested there. So the proposition was not overly ambitious there but was both trying to arrest the trend in employment and move it slightly upwards over the 10-year period of the strategy.

Sir Robert Smith

  536. As regards exports, how have you seen exports growing in the non-Euro zone?
  (Mr Tait) If one looks at Scotland's exports, the principal market, if one can count that as an export market, we do not for the purposes of the strategy, is the rest of the UK. The next most important market for Scottish food and drink is Europe itself. When one actually looks at the percentage of exports for the rest of the world, it only accounts for a small percentage of Scottish food and drink exports. Yes, there has been an element of uplift there but not significant in terms of overall export performance.

  The Chairman: We will move on to global competition. Mohammad Sarwar?

Mr Sarwar

  537. At present, the brewing industry and the soft drinks industry is dominated by a very small number of large companies and small companies are under pressure because of global competition and because of pressures from the bigger companies. Since 1945, many small business have gone out of business. To what extent does globalisation hamper the ability of small Scottish companies to compete against the industry majors?
  (Mr Tait) I think the answer is that in 1945, when one actually looks at what the Scottish food and drinks industry manufactured, we were a less globalised industry and therefore, the demands of global efficiency, which are now very much to the fore for commodity products, are critical for multiple retailers and the food service industry. What that suggests for Scotland, to me, is that we have very little future, with a few exceptions, in commodity products. What we have to have is something which is distinctive, which is differentiated, which has added value because we have to be able to adopt effective market niche positions within any given industry. As I say, that is with one or two exceptions, and whisky is the most obvious one. But that apart, for beer and soft drinks, we have to ask what is the unique Scottish proposition behind any given product. It is only in that way that we can effectively compete because if all we seek to do is to provide the same Coca Cola drink as Coca Cola itself, then Coca Cola will always be able to do it better and more efficiently than us. So we have to ask where the unique propositions are. We have to be very innovative and creative about where those unique, innovative, creative propositions are going to come from because it may not necessarily be in ways that we have thought about before. It might be in terms of functionality, the health-enhancing attributes of the product.

  538. I understand that but the smaller companies have very few resources to establish something of that nature. They do not have enormous sums of money available to them that they can spend on research. How can the Government help this part of industry?
  (Mr Tait) Certainly, in terms of the Government, in terms of Scottish Enterprise and the Highlands and Island Enterprise, much one-to-one business development work happens with small and medium-sized companies in the food and drink industry with exactly this in mind. There is a small drinks company in Scotland, Bouvrage, which makes a drink out of raspberries which has found a very interesting, high-value niche for a berry-based drink, which has specific health-enhancing properties for which they can charge a significant margin. I accept that it helps if one can have a department of 20 people but I think paradoxically, the other thing we have noticed in the States is that innovation and creativity tends to exist much more in small and medium-sized companies than in large ones. Large companies tend to become much more obsessed and focused on efficiency. What you see in America is quite a lot of joint ventures and collaborations happening between large and small companies now because that is where the innovation rests. I accept that it is easier to say than to solve when one talks about innovation but it is still the future of the industry.

  539. What problems does that cause for Scottish policy-makers?
  (Mr Tait) Globalisation?

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