Select Committee on Scottish Affairs Minutes of Evidence

Examination of witness (Questions 540 - 563)



  540. Yes?
  (Mr Tait) I think one of the issues has to be how one can communicate and influence at the level that one has to communicate and influence because that may well be outwith Scotland or, indeed, the shores of the United Kingdom itself. However, I still think that, paradoxically, as the importance of globalisation increases in the world, so does the importance of local distinctiveness. Where globalisation does impact on elements of the drinks industry in Scotland, the reason we are here is not to make us the same as everyone else; it is because we offer a different, unique, compelling proposition which they can add to their global armoury. So I think it does make it more difficult because one has to find who it is that one has to communicate and influence.

  Chairman: Perhaps we could move on to branding. Sir Robert Smith.

Sir Robert Smith

  541. One particular aspect of global competition is in relation to branding and competition. Mr Barr emphasised to us that it can take very many years to develop a profitable brand. Is it realistic to expect that a significant number of small Scottish companies will be able to compete against the brands developed by the big multinational companies?
  (Mr Tait) No, to be quite honest.

  542. You were talking about companies being innovative?
  (Mr Tait) I am giving you the blunt, short answer and then I will give you the longer, slightly more complicated one. The last figure that I have heard was that if one is seriously talking about a branded proposition within the multiple retail base, then one has to have a war chest of at least £1 million. That is more indicative in terms of what we are really talking about here. For Scottish companies, we have to think about creating ways that we can get round this. Are there ways that companies can come together, not necessarily in terms of merging but in terms of collaborative activities underneath an umbrella brand? Are there ways that we can seek to exploit the Scottishness brand itself because that does carry weight and import both in the UK and overseas. But it does not get round the very heart of the problem which is that it costs money to play in the branded game.

  543. You were saying earlier that to have influence in this globalisation, we need to be able to influence things outwith our borders?
  (Mr Tait) On occasions, yes, or to understand a lot more. I do not think that necessarily causes me concern because I think the analysis has to start in terms of where the consumers and customers' stake in work is. From that, one can begin to understand and inform back up any given supply chain.

  544. Moving on to some other aspects of policy, the whisky industry has described itself as a "prime example of an industrial cluster . . . which the Government seeks to foster". On the other hand, the Scottish Enterprise memorandum argued that the industry was global and sophisticated and public sector intervention was inappropriate. Why do you draw that conclusion?
  (Mr Tait) One is about clusters and one is about public sector intervention. There is absolutely no argument whatsoever that whisky is a cluster, a very powerful cluster in its own right. Within food and drink, we have sought to try and understand how we can build on the cluster which is there already but, again, one has to start off from the level of what actually unites, not that which causes differentiation between parts of the sub-sector. We have always recognised, and we have had some early conversations and we certainly intend to have more with the whisky industry, in terms of understanding how the whisky industry can connect in because there has to be an offer, a proposition, there which is compelling to both sides. One recognises that in terms of public sector intervention directly into the mainstream whisky industry, there is very little that Scottish Enterprise can do itself. I suspect that the whisky industry is one of the principal causes of the image that Scotland has internationally. It must pump hundreds of millions into maintaining and growing the image there. So there is a piggy-backing issue. There is also an issue to do with global distribution logistics. There is a lot that the food and drink industry can learn from the whisky industry. We have to understand what is in it for the whisky industry. That is the conversation we have to have. When I talk about the whisky industry, I am talking about majors here. Through the Scottish Enterprise network, small independents in terms of whisky, in terms of breweries, in terms of soft drinks, receive and are deemed appropriate for public sector intervention.

  545. Do you have a role in reverse? Do you have a monitoring role to ensure that there is not negative intervention by other branches? Do you have a watching brief. Are you able to say that there is an enterprise consequence of that decision?
  (Mr Tait) Yes, we are informally involved in conversations around other policy matters and if there are issues which we believe have negative implications, we will raise them but only raise them. It is not our place to determine policy matters but merely to suggest what may be the consequences of it.

Mr Sarwar

  546. I just want to go back to branding. Branding costs a lot of money on advertising and so on and it was a very good suggestion that smaller companies should come together. Are there any practical moves towards this? Is something happening? Is there any discussion that companies can set advertising budgets together?
  (Mr Tait) Although we have had the conversation with some, we have not actually seen that happen yet. We have seen joint branding happen, which is interesting. One example, and it is a food example rather than a drink example, is where Baxters and Walkers and Mackies ice cream cross-branded products. That is another way of trying to extend the influence of a brand. I accept that Baxters and Walkers are both at the top end of the branding league in Scotland. But it is examples like that. Scottish Enterprise has always been very honest about that. We do not have the answers here. The industry has to come up with the answers itself. Maybe our future is not so much in those branded products but looking more and more at areas where companies can collaborate effectively. We look at the example of New Zealand where eleven companies, in both food and drink, came together to make a joint proposition to Japanese Airlines and won a contract which none of them would have been able do themselves. It is thinking always creatively to try to generate market muscle to achieve a market, be it in branded products or otherwise.

  Chairman: We move on now to questions of ownership and image advantages. Bill Tynan.

Mr Tynan

  547. At the present time, especially in the whisky industry, the companies' headquarters and chief decision-makers are outside of Scotland. How does that affect the policy-makers when they are setting policy targets? How big an effect does it have? Is there a need to have discussion in order to develop the policy that you want to see developed?
  (Mr Tait) If one is talking about Scottish Enterprise, this is an issue which is much broader than drink itself and it extends to all sectors of the Scottish economy. There is a very clear policy of aftercare, of trying to maintain communications with those companies where it is deemed appropriate to be having conversations. One can only manage a few of them. Local enterprise companies tend to work very much with the local manifestation of a national or international company. If, through those conversations, it is deemed necessary or appropriate that conversations have to happen at corporate HQ, then they will happen. I am thinking in economic development terms. As I said before, there is not much of a conflict of interest because those international players are there to seek to optimise, to maximise the revenue that they can generate from the Scottish whisky industry. They are there to build and grow as much as anyone else. So it is not as if we have any real conflict of interest between what they seek to do and what we would seek them to do as well. Not in the whisky industry but I know that in other industries, we have had conversations and we have found companies very amenable to having those conversations.

  548. Are your policy decisions guided by the fact that companies are developing a certain policy and you run with that or is it you saying to the company, "Look, we have an idea here whereby we believe this could improve your business", and if so, do they listen to what you say or do they say, "Look, this is our business. We are running it"?
  (Mr Tait) There is a whole spectrum of potentials here. It depends how much autonomy the local organisation, the local manifestation has. If it is solely a branch plant and just manufacturing to order, then there is very little we can do. If however, and it is quite often the case, there is an element of autonomy, we can work with them to ensure that the Scottish offering and what is happening in Scotland is optimised and maximised from the Scottish end. The whisky industry is quite different and quite unique in food and drink because it is, to such a great extent, owned outwith Scotland. So the whisky industry is one area where this is most acute. I do not think it really causes any significant issues in terms of policy-making.

  549. Okay, could I move on to image advantages. The Scottish Enterprise memorandum argued that "Scotland enjoys a world-wide reputation disproportionate to its size" and stated that it has begun to tap this potential image advantage. What steps have you taken in Scottish Enterprise to tap into that potential image advantage that Scotland seems to enjoy?
  (Mr Tait) We do this in many ways. The first and the most obvious one, I suppose, is Scotland the Brand itself, which has been set up as an umbrella organisation to promote the provenance of Scottish goods and services, both within Scotland nationally and internationally. That then combines with the activities of food and drink. In terms of Scottish food and drink international, we have the exhibition at the Scottish pavilion which goes to all the key international food and drink shows. That seeks to ensure that everyone is identified under a common umbrella of Scottishness. That then flows through to specific assistance on a one-to-one basis for companies which seek to enter and grow in export markets as well. There is a raft of activity from the very general in terms of Scotland the brand and moving that all the way through to very specific one-to-one assistance for companies. We also have, which will continue to grow, what we are doing in terms of assisting companies. The one thing that is not mentioned in my memorandum is the whole issue of electronic e-business and website technology. That is clearly something where we do have the opportunity, through the Scottish food and drink website and through promotional activity there, to promote in a very cost-effective way the Scottish food and drink industry itself.

  550. Are there any barriers that you see which prevent the Scottish image being exploited to the full and which prevent you taking advantage of that?
  (Mr Tait) The key barrier for any Scottish drink product, particularly overseas, is one of the economics of distribution. People suggest that if there is an ex-pat community of x thousand in some part of Canada, then surely that is a market for Scottish food and drinks products. Well, it is not enough because that is not enough given the structures of the marketplace and the various intermediaries. So the principal one is the economics of distribution. The other thing, and I think this takes it right back into the Scottish context, is the extent to which we ensure the provenance of the products that we actually sell in Scotland. I mentioned the water when I came into the room. I have been in Scottish restaurants which have offered me the choice of French or Italian mineral waters. There is something very self-sustaining about ensuring that local Scottish suppliers are actually supplying Scottish products.

Sir Robert Smith

  551. Is there any danger, though, as people latch on to the idea that if you stick "Scottish" on it, it may add a premium, that Scottish will be stuck on to things that people do not like and therefore, they will lose that premium?
  (Mr Tait) Yes, I suppose so. However, I do not think that that is sustainable, even in the medium term, because the marketplace is so ruthlessly competitive now. Whether you are a niche player or not, the days of saying, "I have a niche product and so I can be inefficient and charge what I feel like" are long gone. If the product is not up to it then it is not going to sell. Yes, there is always the danger with something as broad and generic as Scottish that some people could step in there to spoil the party for those who are taking it very seriously. That is why it has to be quality and it has to be different. Quality will win out.

  Chairman: We will move on to policy design. Eric Clarke.

Mr Clarke

  552. Good morning, Mr Tait. You will be pleased to hear I am the last to ask you questions. You have covered this subject but I will go over it again. The cluster approach developed by Scottish Enterprise emphasises the benefits of co-operation by companies, particularly in developing information and innovations. How does the cluster policy deal with the possibility that a company could use commonly developed information in an uncompetitive manner?
  (Mr Tait) I am not too sure how it could. When we look at examples of what happens elsewhere in any industry, we cannot tell any industry whether or not to share information. Where any company chooses to determine that certain information is confidential and very much proprietary to themselves, then so be it. What we are aware of, however, is that there is information out there which we can share. If we look at market intelligence, most Scottish companies, be they food or drink, and I am excluding whisky, cannot afford the sophistication of a really truly functioning marketing department. If we can enable that to happen through web technology and other sources to provide market intelligence and to provide information on consumer trends and so on, one cannot use that information in an anti-competitive way. It is providing everyone with the same level of information. What it is trying to do is to provide small and medium-sized companies in Scotland with the same type of market intelligence necessary for them to compete against larger companies within the UK and overseas. That is just one example. We are also looking at areas where learning and innovation can be shared. Again, this goes back to the comments which we made earlier about how do people pool resources to enable them to do things which they could not do themselves. That may well come through trying to develop some smart packaging technology over a group of non-competitive businesses. Again, the industry always has to find the way that it is going to do that. What we are doing is merely trying to provide the suggestions and the infrastructure and the facilities to allow that sharing of information and collaboration to happen. The industry has to determine how they do that themselves. Does that answer your question?

  553. Yes, you are half way there. Can you identify, in a more general sense, the advantages and disadvantages of the cluster strategy? Is it one that is worthwhile?
  (Mr Tait) As to whether I think the cluster approach is worthwhile, I absolutely do. This does not come from any great academic theory which I hold dear to my heart. When we actually explain what this is to businesses, they say, "But that is how we run our business". That is why it is a much more compelling way to look at business rather than just to look at the sector itself because it has to take in the supply chain and it has to take in those other businesses and organisations which sustain and drive the competitiveness of that whole industry. So it recognises the connectedness of various disparate industries which together drive the competitiveness of the whole. So I absolutely think that the cluster approach is the right one. To be fair, this is not a Scottish Enterprise strategy. I have said that before but I want to be absolutely clear about it. This is an industry strategy which Scottish Enterprise and the Highlands and Islands Enterprise, and above us, the Scottish Executive, support and seek to provide the appropriate response and support to that strategy. It is very much led by the industry. In terms of whether Scottish Enterprise sees itself as a catalyst, we absolutely do. We do that in many different ways. We have held workshops where we have talked to people about the joys of joint venture and collaboration and brought along other industry examples of where that has happened to the bottom line benefit of the businesses involved. So again, we are not coming at this from a theoretical proposition. It is what actually makes tangible benefits for the businesses involved. We do it through web technology as well. We are using the website. We are using consumer market intelligence and other things which allow new ways of sharing information cost-effectively which could have happened before the advent of information technology. We have brought together the learning institutions in Scotland for food and drink. It is a way that all colleges and universities can actually collaborate and provide a much more dynamic and effective offering than they do individually and that is something which the learning industry has bought into. We are doing that in terms of innovation as well. Where we can see the opportunity to more effectively do something together, we seek to try and bring the industry and the appropriate organisations together to do that.

  554. There are some good examples of that in electronics?
  (Mr Tait) Yes.

  555. And also the biochemistry, in Midlothian, they are all clusters?
  (Mr Tait) Very much so. We have much to learn from each other. That is the other thing. As industries converge, in another 10 years time, it will be interesting to see what the distinctions are between biotechnology and food. It will also be interesting to see what the distinctions are between food and drink because the boundaries between those have become very muddy just now in terms of how and what people consume. So yes, we have a lot to learn from each other. I am absolutely in favour of the cluster approach, not in terms of its theory but in terms of the very compelling actions which the industry are driving out of it.

Mr Tynan

  556. On your final remark about food and drink coming closer together, Scotland always gives the impression of being pure and healthy. Do you have any concerns, particularly in relation to exports, about the effects of BSE and now the foot and mouth disease, that that may somehow affect sales particularly of food products but eventually could it make people reluctant to buy their drinks from us?
  (Mr Tait) I think the answer that it may well have that kind of impact but then again, it may not. That is the interesting thing about brands. The usual saying is that products are made in factories but brands are made in people's heads. They do not have to be that rational. It is an issue, so I am not seeking to minimise BSE or foot and mouth disease. I sincerely hope that we can contain and eradicate that very quickly because that is impacting on the entire food industry just now. But that is seen as a UK brand issue. Scotch beef is still perceived to be an absolute premium product across Europe. It has not in any significant way, as far as we can see, been tainted by BSE. UK beef has been. But that is to do with the power of brands and we have to continue to be absolutely vigilant and to maintain and grow those brands to make sure that they are underpinned by reality at all points.

  557. Does advertising not get round that? Two of the most successful recent products have been Red Bull and Sunny Delight. If you talk to people they reckon that advertising can sell anything?
  (Mr Tait) Just about anything. If you can promote and market the product, then it is easier to sell. There is no question about that. But with things like Scotch salmon, Scotch beef or Scotch whisky, yes, one has to put all the commercial strictures behind that but they are something that the world actually wants to buy.


  558. You did refer earlier to your food and drink website. How comprehensive and how successful is your website?
  (Mr Tait) I will be honest now. It is a first generation website, like an awful lot of websites out there just now and it has significant drawbacks, like many websites do out there. It is very hard to maintain something where the technology is changing as rapidly as it is. What was impossible six months ago in terms of what you could do with the site is now very possible. That technology acceleration is happening the whole time. What I am saying is that the site has its limitations. That is the negative. The highly positive, however, is that what we are trying to seek to achieve is a portal, a one-door into the Scottish food and industry which connects with every other web site related to this. People may not know the name of a specific salmon company or whatever else but they know the word "Scottish". So we have a database of all the food and drink companies in Scotland. We have various other parts of the site to do with distribution and so on. It is very hard to measure the success of a site. It is a bit like advertising: you know some of it is working but you just do not know which bit. A lot of people measure website success by the number of people who visit. I think that is largely irrelevant because people can be there for three seconds. The residence time on the Scottish food and drink website is 20 minutes on average. People are finding something to do in there and that, to me, as a real measure of success.

  559. You say you list all the food and drink companies on your website. In relation to the whisky industry, do you list all the different brands as distinct from companies?
  (Mr Tait) No, what we do is that if a company has said that it wants to be on the website, because if they do not want to be on it, we cannot put them there, we can hyperlink through to their own glorious website. The only time that someone stays on our website is just to find the name and then shoots straight through to another website altogether. The service that we offer is to provide a simple, navigable route for an enquirer to find what it is he wants to find.

  560. Do you charge companies to be on the site?
  (Mr Tait) No. I think in the future, as the sophistication of the website develops, in view of the costs incurred in maintaining and developing that site, we are going to have to find revenue generating ways of maintaining the site.

  561. You did say it was "limited". Is that cost limited or technology limited?
  (Mr Tait) It is just limited. You are not speaking to a technology expert here so I come at this from a very illiterate position. But basically, the technology with which the website was started is something which is limited in terms of its capacity to do some of the new things. It is this question of at what point do you stop, almost chuck away and start again? We are not there yet but we are saying that there will come a time over the next six months or a year where we will be looking for a more sophisticated replacement for the website. Nobody in the wide world will know it has happened. We will because of the pain we will have gone through to try and get it there. It is technology limited at the moment. The other thing that is limited, and it is something that Scottish Enterprise is doing generically across the board, not just food and drink, we have to get the willingness of small and medium-sized businesses in particular to appreciate the impact of on-line technology and the Internet and to explain how that can be used effectively for their own businesses.

  Mr Sarwar: I was talking to someone who was telling me that the worst and most boring websites are MPs websites.
  (Mr Tait) I am technologically illiterate. The positive side is that I recognise that I am. But I speak to the people that are not. We have to develop much more in terms of our own partnerships , with the private sector as well, in terms of how we develop with things moving forward in technology.


  562. Did you say how many visits your site gets?
  (Mr Tait) I could not tell you off the top of my head. I could provide you with that information by the end of the week. It is relatively significant. It is in the hundreds per week.

  563. We have exhausted our questions to you, Mr Tait. Are there any final remarks that you would like to make to the Committee?
  (Mr Tait) I do not think so.

  Chairman: Thank you very much. Our questions were short and your answers have also been relatively short. However, most importantly, what you have told us has been very important to the Committee and will be very useful when we come to compile our report. So on behalf of the Committee, thank you very much for attending this morning.

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