Examination of witness (Questions 528
- 539)
WEDNESDAY 28 FEBRUARY 2001
MR JONATHAN
TAIT
Chairman
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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