The Scottish Government

Cabinet Secretary for Rural Affairs Richard Lochhead MSP

Scotland Food & Drink International Conference

Hopetoun House, South Queensferry

February 11, 2009

Ladies and Gentleman, it is a great pleasure for me to be here today, at this the first ever Scotland Food and Drink International Conference. - and what a fantastic location - Hopetoun House - a magnificent example of the great Scottish architects Sir William Bruce and William Adam, themselves famous exports - not nearly as famous as some of the exports your companies are responsible for.

I am here today to tell you why I believe 2009 has the potential to be a landmark year for Scottish Food and Drink. And why I believe there will be many opportunities for each company represented in this room.

But given the economic backdrop to this conference, we are all acutely aware that there will certainly be challenges as well.

Before I launch into all the positive and proactive things that are happening in Scottish Food and Drink, I should first acknowledge some of the factors affecting Scottish business right across the board.

We would be negligent to pretend that absolutely everything was upbeat and rosy. Scotland and none of our sectors including food and drink are immune from the current turbulence in the global economy and I want to reassure you all, that this Government is well aware of difficulties facing all sectors of the economy. We know for instance that the industry is finding it difficult to gain access to credit and capital investment funding, and that there is weakening demand for premium and luxury products.

This Scottish Government's central purpose is to increase sustainable economic growth and that it is clear that our goal has never been more important.

And it commits us to supporting an economy that respects our environment and natural resources and plays to our key strengths, AND the Scottish Government sees Food and Drink as a major strength and sector that can continue to deliver success for Scotland.

Today, we are laying the foundations for future economic success by investing in Scotland's key sectors and our world leading skills base for a sustainable future.

This Conference is all about encouraging Scottish businesses to seek new international markets.

But to trade internationally the financial markets have to be operating effectively - and I know that export trading credit insurance and guarantees are in short supply. This is ultimately going to make exporting a lot more challenging. We are trying very hard to improve this situation - talking directly to the banks and urging the UK Government to speed up their efforts to resolve this issue.

In addition to addressing immediate issues such as influencing the financial sector to free up more working capital, we are continuing to develop our first national food and drink policy.

A policy aimed at celebrating and safeguarding Scotland's reputation for the finest, freshest produce and to enhance our reputation for quality, healthy, affordable and environmentally sustainable products at home - And ABROAD!

And there are many examples of how these efforts are starting to pay off.

One major retailer's two most successful premium products are based exclusively on Scottish salmon and Scotch beef, and add to that the fact that Gourmet's Choice from Portsoy has just won the Food From Britain small and medium enterprise (SME) exporter of the year - and we have two examples, from a host of many, that amounts to a resounding vote of confidence in Scottish produce. We must build on and exploit that confidence.

This Government is committed to nurturing that growing confidence by ensuring that we take pride in a strong, fair and inclusive national identity. Our national food and drink is a key part of our identity. It is one of the things that defines Scotland's uniqueness and we are determined to promote and market Scotland's food and drink as a way of driving improvements in our international image and reputation.

If we look to the most recent economic indicators there are good reasons why Scottish food and drink producers should remain reasonably confident:

• Food and drink manufacturing exports are holding up - they increased by 7 per cent between quarters 2 and 3 in 2008
• Food and Drink manufacturing output increased by 3.1 per cent for the year to quarter 3 in 2008
• Scottish food and drink manufacturing is still outperforming the industry in the UK as whole

And another story the trends tell us, is that consumers are changing their behaviours as a result of higher prices. There has been a 34 per cent rise in sales of supermarkets own brand products and a 2 per cent decline in sales of premium brands over the last year, and this does create pressures on branded premium Scottish produce. I noted that, Speaking in January about the 65 per cent increase in Tesco's value and discounted ranges, Sir Terry Leahy said:

"Consumers' underlying values, fears and aspirations do not change in a recession. Their wish to protect the environment, to have a healthy diet, and to eat fresh, local produce has not diminished. They simply want more help in meeting their aspirations ".

I thought this was a significant statement and one that chimes very much with our overall vision for our Food and Drink, and signals to me that our efforts to build a constructive and strategic relationship with the major retailers remains of paramount importance. You may recall that late last year the First Minister and myself hosted the first Supermarket Summit where we agreed to set up a retailers' forum and I am pleased to confirm that its first meeting will take place next month.

Returning to exports, I guess the sceptics amongst us might be thinking - everywhere is in recession, even the previously promising Chinese and Russian economies are not immune from the credit crunch - so why should I risk looking for new markets. Let me give you some reasons why….

First, the weak pound MUST present new opportunities. Scottish premium high quality produce must now have a comparative price advantage both at home and overseas. And we should use this opportunity to capture new markets or return to former markets.

Not only will this provide new business for the industry when it is desperately needed but will help us be better placed for when we emerge from recession.

Second - 2009 is a very significant year for us as a nation. You all know that we are much loved the world over, for our culture, warmth and ingenuity - only three Sundays ago, people in every major city in the world were tucking into haggis, neeps and tatties, and enjoying a wee dram toasting the great man himself. This might sound like a digression, or even an excuse to remind you all that that 2009 is Homecoming year in Scotland, our year of celebrations inspired by the 250th anniversary of the birth of Robert Burns.

But actually it's not a digression, because food, drink, farming and crofting are at the very centre of our culture. When people across the world celebrate Burns night every year, they do it through food and drink as well as through poetry.

So for Scotland, more so than for other parts of the UK, food and drink and farming are central to our identity and our culture. That makes Scotland distinct, and that's why, it is important for Scottish businesses to capitalise on the homecoming generic promotion of Scotland the nation. Our profile as a nation is heightened this year, and that provides new opportunities for our food and drink sector.

And our developing food and drink policy is also about making the most of the opportunities for the people of Scotland and our many food and drink businesses.

Last summer, I set out my Aims for a National Food and Drink Policy promoting Scotland's sustainable economic growth by ensuring the focus of all food and drink-related activity by Government offers quality, health and wellbeing and sustainability, whilst recognising the need for access to affordable food for all. In carrying forward this vision, I set up the Food and Drink Leadership Forum and asked them to lead on five distinct themes of work.

Today's event brings together some of the work carried out so far on Workstream One - Sustainable Economic growth, and Workstream Three - enhancing Scotland's reputation as "Land of Food and Drink"

The motivation to launch Scotland's First Ever National Food and Drink policy was largely to provide a much more coherent and consistent approach to Food and Drink and its many facets. We recognised early on that across government, there are many public and quasi public agencies supporting various parts of industry, and that support and advice was perhaps disjointed and inconsistent.

We set up Scotland Food and Drink as an industry leadership body to provide an overarching conduit for business to engage with Government and agencies, and for Government to engage with business across sectors. For that reason, all the support and enhancements in public service delivery are now branded as "Scotland Food and Drink".

This does not mean the resource and support comes directly from that body, support for business into export markets will still come from Scottish Development International dedicated teams, and likewise for domestic support, this will still come from Scottish Enterprise Account Managers and specialist teams. Over time, it is our aim to ensure that support to the specific sectors for example through QMS and Seafood Scotland and the Scottish Agricultural Organisation Society (SAOS) will all be branded as Scotland Food and Drink.

At the start of this speech, I said that 2009 would be an exceptional year for Scotland's Food and Drink Sector. Having set out our vision for food and drink in 2008, we now setting about putting plans into action to provide support:

Support to help businesses access International markets :

• For the first time, SCOTLAND FOOD AND DRINK' branding will be flying the saltire at all international events to achieve a higher profile with customers and deliver a more consistent promotion of the sector internationally
• We are looking for a whole new International presence through the delivery of an enhanced programme of trade delegations and 'Scotland Food and Drink' pavilions with at least 12 events planned over the next 12 months providing support to companies with international ambitions and the capability for substantial growth

We will provide dedicated support to over 100 companies during the next 12 months. It is estimated, based on feedback from previous attendance at previous events, that this activity will deliver £60 million in sales with the Scottish Pavilion at the European Seafood Show providing the greatest level of contribution. Following the European Seafood Show in 2008, exhibitors estimated sales generated in excess of £17 million.

To compliment this activity overseas, we are providing an enhanced provision of international advisory services to companies in Scotland including an additional 3 international trade advisors to provide dedicated support to companies.

SDI will also provide increased access to specialist international food and drink advisors based in key international markets which will include France, Belgium, Spain, Italy, France, Netherlands, Germany USA and Canada. We currently invest £1.6 million in providing international support to the Scottish food and drink industry. Additional support of £250,000 will be provided over the next 12 months to support companies to exploit new international opportunities.

A new International Access to Markets programme, focused on delivering increased sales in sectors with significant growth potential, includes engagement with European and North American food retailers and foodservice companies and a dedicated programme of support to help companies identify opportunities, meet with customers and build sales. The programme will include support with market information, market visits, facilitated meetings with buyers and technical advice.

Recently in Lyon, at the largest international hotel catering and food trade exposition SIRHA, I'm delighted to hear that for the first time a number of key companies were present on the Scotland Food & Drink stand. As well as using Scotch Beef at the prestigious Bocuse D'Or culinary competition, this allowed us to meet chefs and buyers from around the world and showcase a range of Scottish produce.

Back home, we have also enhanced our support to Scottish business to access UK markets through a new Supplier Development Programme with a major retailer.

Scotland Food and Drink are taking 12 companies through a 6 month supplier development programme. This £90,000 initiative, is part-funded by the Scottish Government, and will deliver detailed insight into how a major retailer operates and how suppliers can better align themselves to match supermarket's requirements. We know that previous programmes of this type have delivered £5m direct benefits to participating companies within the first year, and he have high hopes of this new project.

And we are continuing to deliver direct financial assistance to help fund the expansion of food businesses.

To date, we have committed £12m to 37 companies in the first year of our new Processing, Marketing and Co- operation grant scheme, providing a greater range of support to the Scottish food sector than has been previously seen. Our support to date will result in investment of over £54m in the Scottish food sector, helping companies deliver greater efficiencies in their processes, develop and supply new markets and enhance collaboration which will deliver benefits throughout the supply chain. For example:

• £75,000 was awarded to Scotherbs to put in place a new efficient integrated business control systems and processing equipment
• 16,000 is going to the Orkney Cheese Company to look at the options for the profitable further treatment of whey, currently a waste product
• £267,000 has also been awarded to Simon Howie Butchers to upgrade facilities and purchase of new processing equipment to allow the production of new ranges for Tesco, Sainsbury's and Morrisons

I look forward to announcing the next set of grant awards next week.

And Scotland Food & Drink are providing a realignment of support for Scottish business to Access Markets - they are currently providing direct support for around 200 companies, including meet the buyer, meet the niche buyer events, training events, buyer's briefing, and exhibitions, between now and September 2009. An evaluation of the 2008 programme won't be completed until March, but the consultant has confirmed at least 65 listings, and intimated that the final number is likely to be much higher than this.

Although previously announced, through the Supply chain collaboration project in partnership with Scotland Food & Drink, and supported by £1m from the Scottish Government, SAOS are delivering a three year programme for over two hundred companies to support the delivery of more efficient and effective supply chains, leading to large scale projects on "Lean and Green" practices that will be disseminated throughout the industry.

And returning to the theme of the current economic climate, we will be hosting a "Surviving the economic downturn" conference with legal, financial and human resources help and support for 60-80 companies, complemented by detailed category reports to demonstrate how the marketplace is evolving and practical support to help them deal with these changes.

And we need to help companies identify technical issues and develop solutions that will give them a competitive advantage in a competitive market. We are doing this with £513,000 of funding from Scottish Enterprise to support the Scotland Food and Drink Innovation Service which provides expert advice and support to 70 companies on a one-to-one basis, helping them too.

This service is intended to lead to the implementation of 25 new products and processes with an estimated impacted of £5.8m increased gross value added. So far, the service has supported 48 companies resulting in 19 current company projects. It has also supported the launch of 5 new collaborative projects attracting £2.5m of public sector investment in business research and development.

I mentioned earlier that the Homecoming offers opportunities for the industry. For Food and Drink in Homecoming 2009 we are building Scotland's reputation as a Land of Food and Drink through a variety of initiatives,

We are providing £60,000 to directly support the integral delivery of the very best of Scottish food and drink within the Homecoming programme. Scottish small and Medium Enterprises will be supported in attending the Gathering event in Edinburgh in July this year, providing opportunities for those visiting Scotland for the first time, to taste the fantastic range of produce available, and for Scots to marvel at the food on their doorstep.

Through Scotland Food & Drink, resources will also be available to not only ensure that the best of local produce is on show at all possible opportunities, but also that there are chefs available to demonstrate how best local, fresh and seasonal produce can be enjoyed. This targeted activity will not only enhance the Homecoming programme but also ensure that Scottish Food & Drink has the opportunity to enhance the positive image it already holds and use this to develop new consumers and new markets.

And to further develop the link between tourism and food and drink, VisitScotland is developing a Taste of Scotland accreditation to reward those EatScotland quality assured businesses that are identified as using and promoting quality local and Scottish produce. There is potential to expand this accreditation beyond the restaurant sector, to Scottish producers and manufacturers.

VisitScotland have also launched a Growth Fund of £1 million for well researched, new collaborative marketing projects which will assist the tourism industry in reaching the ambitious 50% tourism revenue growth target by 2015.

All these investments are aligning our focus on food and drink manufacturing and I believe illustrate our commitment to taking your industry forward. It also important to recognise that supporting your industry also means that we need a joined up policies and in my role as Cabinet Secretary for Rural Affairs and the Environment, I see it as my responsibility to work with colleagues to join up all our policy areas to support your industry.

So to give some examples when it comes to:

• Fisheries - Maximising Quota for key commercial species and promoting sustainable healthy consumption of fish.
• Climate Change - investing in renewables technology and supply chain efficiencies
• Agriculture - ensuring food production is the primary purpose of agriculture and preparing our farmers to be in a position of strength in a new market driven era
• Tourism - capitalising on Scotland's visitor appeal through investment in our standards and quality of visitor services and attractions

And the Scottish Government is taking a range of other measures right across the board to support business in Scotland.

I hope you all recognise that a hallmark of this Government has been a determination to see Scotland progress and become more confident - despite the current economic conditions.

We are determined to use our economic levers to maximise Scottish resilience at a time of global economic challenges. The recently agreed budget gave approval for our spending plans for 2009-10 and which includes fast-tracked investment designed to encourage and support key areas of the Scottish economy: full implementation of the small business bonus scheme; record investment in our transport infrastructure; and increased resources to local government - all areas that can benefit food and drink businesses. And we are ensuring all our agencies such as SEPA are taking steps to help business at this time.

Despite the economic climate I believe there are significant opportunities towards the growth of Scotland's food and drink industry to reach £10 billion by 2017 from the previous level of £7.5 billion.

I believe 2009 is exactly the right time for Scottish Food and Drink businesses to become much more confident of Scotland's reputation as a world class producer and manufacturer of food and drink, and to make sure we remain vigilant to every opportunity that comes our way.

The Scottish Government has recognised from the start of this journey that alone, it cannot bring about a change in attitudes and culture around food and drink -

Winning over the hearts and minds of the people of Scotland is key to continuing improvement in quality, health and wellbeing, and environmental sustainability.

Putting together clear, successful policies for the future will need genuine engagement, by governments and stakeholders. In the past 20 months, we have devoted a great deal of effort to making that happen and we will continue to do so in the years ahead.

In Scotland, where food and drink matters so much to the nation, we have a responsibility to support your industry given your crucial economic role, particularly in these challenging times, and given your contribution to the health and wellbeing of our people.

And I close my remarks by urging you to take make the most of the opportunities before us in the months and years ahead. The Scottish Government will do all it can to support you on your journey.