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Chapter Two Survey of Local Food Producers in Ayrshire
The Survey of Food Producers
2.1 This survey formed Work Package 1 of ADAS' project plan for the evaluation of East Ayrshire Council's initiative to increase the proportion of local and fresh food served in primary schools.
2.2 ADAS interviewed 52 Ayrshire-based producers in November and December 2005, and this total forms the basis of the analysis set out in this chapter 5. Every interview was conducted over the telephone with a member of staff at each producer who had a good overview of their overall production and marketing process. The interviews lasted 15 minutes on average, with the questionnaire content having been tested and refined during an initial pilot stage conducted by ADAS.
Characteristics of the Local Food Companies Surveyed
2.3 There was some overlap in the types of businesses surveyed (self-defined by the respondent)
- 69% were 'producers'
- 40% were 'distributors'
- 27% were 'processors'
- 25% were 'wholesalers'
2.4 These local producers generally had modest amounts of business. Their turnovers ranged from £4,000 up to £30,000,000.
- 34% up to £100K
- 41% >£100K, up to £2 million
- 24% >£2 million
2.5 These local producers also tended to be quite small in terms of number of staff employed. Their total numbers of employees ranged from 1 to 300, but most employed 5 staff or fewer.
- 18% employed only 1
- 41% employed 2 to 5
- 16% employed 6-10 staff
- 10% employed 11-25 staff
- 16% employed >25 staff
Types of Food Produced, and Where Sold
2.6 Table 2.1 below summarises the types of food that these producers produced, and what proportion of this was either locally produced, environmentally accredited ( e.g. organic or conservation grade), supplied fresh (rather than frozen), and unprocessed. The final column in the table also shows the mean % of revenue that each food type provided to the supplied.
Table 2.1: Details of types of food produced
Produce | ? Of which, how much was …? |
|---|
Local | Environmentally accredited? | Fresh? | Unprocessed? | Mean % of revenue |
|---|
Red meat | 21% | 91% | 18% | 100% | 91% | 72% |
|---|
Fruit & veg | 33% | 82% | 35% | 94% | 94% | 79% |
|---|
Cows' milk & products | 19% | 90% | 20% | 90% | 70% | 74% |
|---|
Cheese | 12% | 83% | 33% | 100% | 83% | 67% |
|---|
Hens' eggs | 17% | 78% | 33% | 100% | 89% | 32% |
|---|
Fish | 21% | 73% | 9% | 82% | 91% | 51% |
|---|
Poultry | 19% | 70% | 30% | 80% | 90% | 11% |
|---|
Dry goods | 10% | 60% | 20% | 60% | 60% | 42% |
|---|
Bakery | 21% | 82% | 18% | 91% | 82% | 56% |
|---|
Other | 32% | - | - | - | - | - |
|---|
2.7 Table 2.1 sets out food types, in the left-hand column. The types mirror the 9 categories actually used by East Ayrshire Council in the tendering process, i.e. they were the 9 separate tendered lots.
2.8 Although fruit and vegetables were marginally the most frequently mentioned food type to be produced, significant proportions also produced each of the other 8 lots, and a third of the producers (32%) also produced some type of food outside of the strict definitions set out in the lots
2.9 The majority of each food type was locally produced, with dry goods being least likely to be seen as local
2.10 Only a minority of each food type was environmentally accredited, most likely in the cases of fruit and vegetables, cheese, hens' eggs and poultry
2.11 The vast majority of each food type was supplied fresh. Dried goods were least likely to be so, though still 60% were supplied fresh. Results for both fish and poultry suggest that around 20% of each type are normally supplied frozen.
2.12 Most of each type was also supplied unprocessed, though about 30% of dairy products (other than cheese) were thought to be unprocessed
2.13 In terms of contribution to revenue, red meat, fruit and vegetables, dairy products and cheese were the most significant contributors
2.14 Table 2.2 provides further information in terms of the main type(s) of outlet where each of the 9 types of produce are sold.
Table 2.2: Main type of outlet for sales
| Own shop | Farmers market | Direct to shops | Direct to caterers | Schools | Hospitals | Whole-salers | Multiples |
|---|
Red meat | 45% | 27% | 36% | 45% | 9% | - | 9% | - |
|---|
Fruit & veg | 65% | - | 24% | 18% | 12% | - | 29% | 12% |
|---|
Cows' milk & products | 20% | 10% | 40% | 30% | 10% | 10% | 20% | 20% |
|---|
Cheese | 33% | 33% | 50% | 33% | 17% | 17% | 17% | - |
|---|
Hens' eggs | 67% | 11% | 44% | 33% | - | - | 22% | - |
|---|
Fish | 55% | 9% | 27% | 45% | 9% | 9% | 27% | 18% |
|---|
Poultry | 70% | 10% | 40% | 50% | 10% | 10% | 20% | 10% |
|---|
Dry goods | 40% | 20% | 20% | 40% | - | - | - | - |
|---|
Bakery | 55% | 9% | 27% | 55% | 9% | 9% | 27% | 9% |
|---|
2.15 Clearly a substantial proportion of these local producers operate their own shop - the majority sell some of their hens' eggs, poultry, fruit and vegetables, fish or bakery produce in this way
2.16 Direct sales to shops and caterers are also made by many of the producers. Sales to multiples or wholesalers are less important
2.17 Sales to the public sector, here represented by schools and hospitals, were found to be rare. In each case, only a small minority of producers (typically only 2 or 3 in number given the small size of the sample) considered this to be one of their main outlets - and some of these would of course have been supplying East Ayrshire schools already.
2.18 Producers were also asked to state whether they sold most produce in Ayrshire, Scotland, the UK, or internationally. As Figure 2.1 shows, almost stated that they sold most produce in Ayrshire.
Figure 2.1: Where is most of produce sold?
Support for Producers' Businesses
2.19 Just under half of the producers interviewed (44%) stated that they currently took part in produce assurance schemes
- 17% took part in Farm Assured Produce schemes, 10% in QMS, 6% FABBL, 6% BRC, and 6% in local Ayrshire schemes
2.20 35% of the producers interviewed stated that they received financial support for their food business, most of which seemed to come through the Scottish Executive
- Among those who did receive support, 50% claimed that they had received this from the Scottish Executive, a further 22% from Scottish Enterprise, and 22% from their local Business Gateway
Distribution of Produce to Customers
2.21 When asked how produce was delivered to customers, most stated that they used their own van, predominantly ambient though many owned a chilled van.
2.22 Just over a quarter (27%) stated that their customers collected their purchase - presumably referring both to on-farm direct sales and situations where a wholesaler or other customers picks up produce from the farm. These results are summarised in Figure 2.2 below.
2.23 Of those who used their own van (numbering 42 producers), 31% said that they could use it to distribute others' produce, but 45% said that they would not do so.
Figure 2.2: Transport of produce to customers
Awareness of and Involvement in Tendering
2.24 East Ayrshire Council's tendering process for the supply of food to primary schools followed all relevant EU procurement guidelines. The tender notice was placed in the EU tender bulletin and in local press in July 2005. Compliance with this tendering procedure is a prerequisite in this type of public tendering, and this evaluation recognises that any effort to source foods locally must be subject to the relevant rules.
Figure 2.3: Awareness of the July 2005 tender notice
2.25 Nearly 1 in 3 (31%) of the sample of producers claimed to be aware of the East Ayrshire Council schools supply tender
2.26 69% were not aware of the tender
- 33% said that they were not aware of the tender but would have responded had they seen a notice (the proportion rises to 47% looking only at those unaware of the tender). Their preferred place for such a notice was the local press (by half of those who would have responded) or the non-farming trade press.
- Reasons why some would not have responded anyway were varied:
- Half of those who would not have responded anyway (9 producers) said that their produce was not appropriate or that they did not perceive schools to be a suitable target for them, for example, "Because we only supply luxury items"
- Others did not supply direct, or were not convinced that a bid would be worthwhile. For example "I don't feel our products would come into the council's budget"
- Several based outside East Ayrshire commented that the distance would simply be too great
2.27 Focusing on those 16 suppliers who had seen the July 2005 notice:
- 8 were notified direct by EA Council. All were suppliers to the original successful single primary school pilot
- 4 saw it in a local paper
- 4 heard through word of mouth
- 3 heard from another source
2.28 All 9 of those who actually responded were later invited to submit a formal tender
- Company size was a factor in the decision of whether to respond. Of the 9 suppliers who responded to the notice, 4 had >10 staff and 5 had 10 staff or fewer. But all 7 of those who did not respond employed 5 people or fewer.
2.29 The reasons given for not responding to the tender notice showed that some saw it an irrelevance to them, and others perceive themselves to be too small or simply unlikely to succeed. For example:
"I know how the system works, it's unlikely we would have been successful."
"I aim at the top end of the market who are willing to pay extra for quality. I don't think schools can afford to pay this top end amount."
Outcome of the Tendering Process
2.30 The tendering process that East Ayrshire Council set out can be summarised as shown previously in the Introduction section (Table 1.2 of Chapter 1)
2.31 Only 1 of the 9 suppliers invited to submit a tender decided not to do so, commenting:
"We saw it in a local paper. When we received the tender document, we thought the questions were not applicable to us. We felt our business was too small to apply. Plus we did not have the time to sit down and complete a detailed application form."
2.32 Only 1 of the 8 who submitted a tender received any external support, apparently from East Ayrshire Council itself at the advertised meeting to clarify how producers could enter the tender process
- They rated the support as "Very valuable" because the explanation of the tender provided made it much simpler to understand (hence highlighting the value of this type of direct support)
2.33 6 of the 8 within this interviewed sample who submitted a tender were successful, i.e. were awarded a contract
- Perceived reasons for winning the contract were varied, but related mainly to quality and/or freshness of produce, and ability to deliver the produce as and when required.
- 4 mentioned " high quality", 3 mentioned " price", 3 said " we can meet delivery requirements", and 3 mentioned " we're local" 6. 1 producer apiece said that " our produce is healthy" and " we're organic"
- In terms of to what extent winning the contract could benefit their business, 4 felt that this would amount to much financially, though 2 said that it would simply increase their revenue. 1 also felt that it would make deliveries more cost-effective. 2 saw the contract as complementing their other business, and 2 turned the question around slightly by commenting that they would be benefiting the schools.
- Only 2 of the 6 claimed that any extra local staff would be employed, 1 saying that this be 2 part-time staff, and another that it would be "1 or 2 maximum"
2.34 The two unsuccessful tenderers gave different reasons for their failure:
"Could not deliver at the times they needed us to."
"Because we could only provide fruit and vegetables."
- Neither felt that winning the tender would have made a huge impact on their business:
"Not very much, we only offered the tenders as a gesture of supporting local schools. We would not have needed to increase staff, we're only a small company."
"It would have increased financially by giving me the 12 schools (to provide). No extra staff (would have been required), we are fully covered with staff."
Interest in Supplying Ingredients for School Meals
2.35 All producers were asked how interested they would be in supplying ingredients for school meals. About half overall stated that they would be "Very" or "Quite interested" in doing so, though 35% stated that would be "Not very" or " Not at all interested".
2.36 Figure 2.4 below demonstrates (albeit with low numbers of producers providing responses) that it is the larger producers who have most interest in providing for this market.
Figure 2.4: Level of interest in supplying ingredients for school meals
2.37 When asked what problems they might face in supplying ingredients for school meals, the key responses that emerged, as spontaneously given by producers, were:
- low profit margin, for example:
"Scale of our business is too small. We don't wish to supply to a price-sensitive market (but we would supply gluten-free produce if it was needed)."
- perceived lack of interest in their specific produce, for example:
"I don't think our duck and smoked salmon would be favoured in schools."
- a number of problems related to logistics, supply chain and meeting demand, for example:
"We can't supply schools direct, it needs to go through the wholesalers first, from a legal point of view. We would need our own processing plant."
2.38 Figure 2.5 lists the key responses given.
Figure 2.5: Problems faced in supplying ingredients for school meals
Previous Tendering and Attitudes to Future Tendering
2.39 Only 13% of the sample (7 producers in total) had actually submitted tenders previously
2.40 Of these, 3 of the 7 claimed to have done so for schools (one claimed to have done so 34 times)
2.41 Sources of previous tenders to schools were split evenly between those seen in a tender notice and those following a direct request from a customer
2.42 Only 2 had experienced any previous success with tenders
2.43 Several explained why they had not been successful (2 were still waiting to hear):
"Our price was too high and logistics added costs."
"The location - we only used to tender for our area but now it is not a problem as we can cover all of the areas."
2.44 When all were asked to say, spontaneously, what put them off applying for more tenders, a number of key barriers emerged, as shown in Figure 2.6 below. The two main barriers were the paperwork and administration involved and the need to actually meet the demand of the client.
Figure 2.6: What puts you off submitting more tenders?
2.45 Just 15% of suppliers (8 in total) actively look for invitations to tender. 3 of these relied on "word of mouth", 3 relied on the press, 1 subscribed to "Tenders Direct", and 1 looked at restaurants/hotels.
2.46 Given the low level of awareness and interest in tendering, the levels of awareness of the "healthy/fresh food" schemes operating in Scotland were more encouraging.
- 60% were aware of the Hungry For Success initiative (rising to 79% of those with >10 staff)
- 48% were aware of Food For Life (no significant difference existed between companies of different sizes)
Potential for Tendering to Ayrshire Schools in the Future
2.47 When asked whether they foresaw an opportunity to supply the public sector in Ayrshire in the future, smaller producers with 10 or fewer staff were evenly split, with 45% saying "Yes" and the same proportion saying "No". Reactions among larger producers with >10 staff were more positive, with 71% saying "Yes".
- In each group, producers were much more likely to see the opportunity as being to supply schools direct rather than via a third party
2.48 When asked what would be the major incentives to supplying produce to Ayrshire schools, drawing from a list of suggested incentives given in the interview, reliable payment emerged as the biggest 'pull' factor (see Figure 2.7). This was followed by steady, year round business, and, perhaps influenced by publicity on the subject, a greater focus on healthy eating in schools.
2.49 The latter point suggests that some producers believe that their 'quality' products will compete better with cheaper processed products.
Figure 2.7: Incentives to supply produce to Ayrshire schools
2.50 Conversely, producers also agreed that a number of barriers existed to their supplying produce to the schools market in East Ayrshire. These are summarised in Figure 2.8 overleaf.
2.51 Chief among these are the burden and bureaucracy of tendering, the perceived focus on price not quality and concerns over distribution.
Figure 2.8: Barriers to supply produce to Ayrshire schools
2.52 As each of the main concerns will need to be tackled to ensure a successful future tendering process, we look at comments made on perceived price and distribution in more detail below.
2.53 Burden and bureaucracy of tendering drew few follow-up comments from respondents but is clearly their greatest perceived barrier to their being willing to enter the tendering process .
2.54 Price - 37% of all producers interviewed thought that price is a major barrier to their supplying Schools, in that tenders are evaluated on cheapest price rather than on quality and other non-price criteria.
- The majority of these views on price are based on perception rather than experience as the majority have never supplied the Public Sector.
2.55 Comments given include:
"If the margin was there then I would be extremely interested as I supply a high quality product."
"They need to be using Scottish beef. They will need to pay the going price for quality - local rather than foreign. It may be possible to supply the public sector."
2.56 Distribution - Overall 13% of producers thought that distribution to schools was a major barrier. This is not a great proportion, but it is quite a difficult barrier to overcome for that subgroup (especially among smaller producers). We have already noted that a central distribution hub might provide a major incentive for some to supply schools. Comments included:
"Logistics of delivery, we could only deliver pork and bacon in justifiable quantities."
"Ayrshire food network are going to use software called 'larder bytes' 7 to consolidate orders."
Summary
2.57 The survey showed that there are some very real barriers for some of the producers who may be willing to supply schools if drawn in to the tendering process. There are also, however, some perceived barriers that seem to be misconceptions founded in old procurement practice.
2.58 The survey has shown that there may be quick wins to be gained in breaking these perceptions of what it means to supply schools, and other quick wins in the areas of advertising and of support in completing tender documents.
2.59 The survey has also shown that those involved in School Meal procurement could increase the success of any future tendering by accommodating some of these producers who have only limited distribution capability or a limited portfolio of products. However, the public sector must ultimately purchase through competitive tender in an open and competitive marketplace, in compliance with EU procurement rules. This precludes any advantage being offered to local suppliers, e.g. through overt 'matchmaking' with local distributors.
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