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3.1 In the first Organic Annual Report the Scottish Executive recognised that sustainable growth in the organic sector must be market led. The Soil Association Market Report for 2006 estimated that retail sales of organic products in the UK were approximately £1.6 billion. This is an increase of over 30% on the previous year, compared to the annual current growth for all UK food and drink sales of around 3%. The report also shows that while approximately 66% of organic primary produce was sold through multiple retailers, retail sales through producer owned outlets increased by about 11% to £125 million. With the UK organic market now valued at over £1 billion the opportunities for Scottish producers and processors are clear.

3.2 The Soil Association Market Report also highlighted that nearly two in three consumers are knowingly buying organic food, compared with half of consumers three years ago. Consumers also demonstrated a preference for local non-organic produce, rather than imported organic produce, and over 40% of organic shoppers liked to buy distinctive organic brands. This shows an increase in demand for not only organic food, but also local food, and highlights the opportunities available to Scottish producers.

3.3 The Organic Stakeholders Marketing Group ( OSMG) was established in January 2005. Since its inception the OMSG have met nine times and the overall role and remit of the OSMG is to implement practical, market-based solutions which reflect (and influence) Organic Stakeholders Group policy. The key benefits of the group are collaboration, ideas exchange, co-ordination of support and identification of other potential support and funding streams.

3.4 The OSMG have discussed and supported a number of project proposals, and then continued to monitor and support them through their lifespan. This has helped to ensure that the projects are co-ordinated, targeted and all sources of potential funding have been identified . The projects have helped to develop the supply chain, encourage collaborative working and developed routes to market. In particular these projects have included:

• Organic Opportunities Project
• Organic Market Link Project
• The development of Caledonian Organics
• A number of producer events

3.5 In addition to liaising and supporting projects, the OSMG have also discussed research, in particular analysing recommendations for future research and actions to see which ones should be taken forward, and how this can best be done. The group have also invited a number of guests to discuss either their area of work, or a specific project that they have been involved in. This has allowed the group to network with stakeholders outwith the immediate organic industry, for example Quality Meat Scotland.

3.6 To help strengthen the position of Scotland's organic food processors and, in turn, its organic farmers, the Executive's Processing and Marketing Grant Schemes ( PMGS) and Market Development Scheme ( MDS) give priority to projects which strengthen the organic food chain.

3.7 Since May 2001, over £10.5 million in grant assistance has been awarded to 64 Scotland-wide projects under these schemes for the processing and marketing of organic produce. The majority of these are part of a combined facility although there are a number of organic stand-alone processing units. The grant awards have supported almost £56 million of investment in the food industry and range from under £1,000 for marketing costs to over £1.2 million for processing facilities. Fifty-one of the awards were made in Lowland Scotland and 13 awards were given to companies in the Highlands & Islands. The majority of the awards were given towards projects involving meat processing (20), followed by milk and milk products (18), fruit and vegetables (13), eggs and poultry (6), potatoes (4) and then cereals (3). These projects triggered additional new investment and helped companies, with investment in buildings and equipment, to develop added value processing of organic produce. Other projects help develop a more co-ordinated organic marketing chain and quality assurance and certification for the organic sector.

3.8 Scottish Enterprise supports the continued development of the organic sector in Scotland through a range of initiatives. Through the premium market development project, Scottish Enterprise has worked with retailers, both speciality retailers and the major multiples, to help develop their knowledge of Scottish organic suppliers which are keen to use these routes to market. Three organic suppliers participated in 'Meet the Buyer' events with Waitrose prior to the launch of their new stores in Scotland, resulting in new product listings.

3.9 On the supply side, Scottish Enterprise is actively engaged in supporting the development of collaborative groups of small organic producers to enable them to pool resources and to be in a position to offer a consistent, reliable supply of fresh organic products to the market ( e.g. Caledonian Organics - see paragraph 3.23).

3.10 The continued success of Scottish companies producing high quality organic produce for today's demanding markets in retail and foodservice was recognised at the Scottish Food and Drink Excellence Awards 2006. Organic products picked up the top prize in eight of the 15 categories and went on to win the overall supreme award with Johnson Seafarms' 'No Catch' Organic Cod. The number of awards across a variety of sectors covered shows the diversity of the organic industry in Scotland and the demand for a wide range of products. The organic businesses which picked up awards were:

• Johnson Seafarms won the supreme award and the Retail - Fish and Seafood and the Food Service - Savoury categories with their 'No Catch' Organic Cod.
• The Craigmyle Cheese Company won the Retail - Dairy, Confectionery and Snacking category with their organic Wummle Cheese.
• Island Bakery Organics, based on Mull, won both the Retail - Bakery and Cereal Product category and the Food Service - Sweet category with their range of Sweet Organic Biscuits.
• Scottishorganiclamb.com won the Direct Marketing Development category for their high quality organic lamb.
• Acme Organics picked up the top prize in the Healthy Eating - Marketing Promotion in Retail of Food Service category for their work with NHS Borders in promoting organic fruit and vegetables to registered nurseries and playgroups.

3.11 From 1 January 2006, SFQC has been undertaking additional work for SOPA as part of a project funded by the Marketing Development Scheme. It is a three-year project, and the purpose is to help develop better links between organic and artisan producers in Scotland and the Scottish catering sector. Research is currently being completed by SFQC into the supply/demand situation for organic/artisan produce in Scotland. Plans are also being prepared for 'meet the buyer' type events, development of small business food safety advisory packages and certification, supplier directory development and better communications within the sector.

3.12 Soil Association Scotland has organised a number of high-profile events to stimulate public awareness and lobby policy makers. The Royal Botanic Garden in Edinburgh hosted both a public lecture on the theme ' Can organic farming feed the world?' and the world's first Organic Burns Supper in January 2006. Both events were attended by around 100 people and the Burns Supper attracted widespread media attention, including coverage by BBC Scotland Landward.

3.13 During the Organic Week 2005, Soil Association Scotland ran a stand at Edinburgh Farmer's Market and supported community events such as shop tastings and on-farm events. The Highlands and Islands Organic Association ran a stall at Inverness Farmer's Market. Organic Week was increased to Organic Fortnight in September 2006 and events included open days, farm walks and demonstrations, along with again running a stand at Edinburgh's Farmers Market which included cookery demonstrations.

3.14 More than four-and-a-half-thousand people visited Soil Association's first-ever Organic Food Festival north of the border, which was held at The Old Fruitmarket, City Halls in Glasgow on 4 and 5 November 2006. Exhibitors included over 60 wholesalers, retailers and primary producers with Scottish producers well represented with a good cross section of producers. The event was a resounding success and plans are well underway for next year, including developing business to business networking events which was seen as a major benefit of the event.

SAC Organic Market Link Project

3.15 The objective of the SAC Organic Market Link Project, funded by SEERAD through the advisory activity programme, is to improve the flow of supply and demand information in the Scottish organic sector, particularly for the most commonly produced commodities, red meat and grain. An annual survey of Scottish organic producers is carried out to estimate the supply of organic beef, lamb and grain from Scotland. Supply information from this survey is circulated to all meat and grain traders and processors, and regular contact between the trade and the Market Link Coordinator has provided useful information to feed back to all producers via quarterly Market Link Producer Newsletters. The Market Link Newsletters are particularly highly valued by producers, as they provide up-to-date information on prices, market demand, and processor information. An Organic EmailSales bulletin of sales and wants is being piloted, in collaboration with the certification bodies and Caledonian Organics, in a further attempt to facilitate trading between farmers. Approximately 300 producers are currently on the EmailSales distribution list.

3.16 This improved flow of information has facilitated a greater degree of farmer-to-farmer trading in feed grain and store stock, and has given traders and processors confidence in the availability of Scottish supplies of grain and meat. For example, information from the Organic Market Link project has encouraged two major Scottish meat processors to commence regular weekly slaughtering of organic beef. The Organic Market Link Project has contributed in a major way to the current improvement in the market situation for organic red meat and grain in Scotland.

3.17 During 2005, the SAC Organic Market Link Coordinator provided a considerable level of support during the establishment of the organic red meat marketing group Caledonian Organics, a producer-led group which was initiated following two SAC producer meetings in May 2005. This group is now marketing finished beef and lamb on behalf of its members on an ongoing basis and has recently appointed a Marketing and Development Manager. The SAC Organic Market Link Coordinator also continues to liaise regularly with producers, traders, processors and other key players in the organic sector, and serves on the OSMG.

Supply Chain Development

3.18 Scottish Food and Drink funded Soil Association Scotland to run two major supply chain development programmes. The first, the Organic Opportunities project, was focussed on developing the organic poultry and egg sector to meet an unfulfilled demand. The aims were to promote collaborative supply chain development, facilitate access to appropriate training and develop the enterprise skills of organic businesses. This was achieved through a business directory and a programme of events underpinned by supply chain development work.

3.19 Immediate outcomes from the programme of work have included:

• two current producers planning up-scaled production and two non-producers setting up new operations;
• one non-organic producer planning a new organic egg operation;
• new supply routes established for two producers and one wholesaler, and three businesses focusing on new marketing channels;
• a group of table bird producers working towards producing collaboratively; and
• a group of egg producers working towards establishing a buying co-operative.

3.20 It is expected that the longer term benefits of the project will include:

• expansion plans that require capital investment, and therefore grant applications;
• joint supply initiatives - involving both horizontal and vertical integration; and

• increased local and organic supply to public procurement initiatives.

3.21 The second supply chain development programme is currently underway, also funded by Scottish Food and Drink. It aims to drive growth in the Scottish organic fruit and vegetable sector, which has been identified as an area at risk of supply chain failure. The project is helping both producers and processors to exploit Scottish market opportunities and develop collaborative working practices in the sector. This is being achieved through a programme of skill and knowledge development activities, including tailored events, learning trips, one-to-one support and written briefing papers.

3.22 The activities that have taken place for this project are:

• Development of a web-based resource, designed particularly to help new farmers and growers in Scotland prepare themselves to meet growing demand.
• Three producer events have been held on Organic Fruit Production, Getting Started in Horticulture and Growing for a Local Market. Feedback has indicated that these events have allowed participants to gain useful knowledge on the topics.
• Ten companies are being supported on a one-to-one basis by providing information and contacts in response to their specific needs. Further companies are being identified who will benefit from this assistance.
• After a presentation by a speaker from Growing with Nature, which is based in Lancashire, there was strong participant interest in visiting the operation and a learning visit is being planned for March 2007.
• Further events are being organised which will be tailored from feedback given from previous events. This will ensure that the project continues to have a targeted approach.

Caledonian Organics

3.23 Caledonian Organics is a producer group established by Scotland's organic beef and lamb farmers to better market their produce. As part of the wider Organic Stakeholders Marketing Group, SE Food and Drink funded a feasibility study and consultancy support to assess the viability of Caledonian Organics and help it through its initial stages of development. This support ran from October 2005 to March 2006 and was designed to act as 'pump-priming' to enable this new organisation to get established and better understand its own growth opportunities.

3.24 The project has received assistance from SAC, funded initially from SAC's Scottish Executive-funded advisory activity, and then later by Scottish Enterprise. SAOS and SOMPA were also involved in developing the group and the OSMG have monitored and supported the group since its inception. This project is a good example of the organic industry working in collaboration, with both the producers themselves, and the wider industry, working together to ensure a coordinated approach.

3.25 The project has been successful. The group, launched in September 2005, now has over 70 members and is still growing. It aims to tackle one of the biggest problems in the organic sector which was a lack of co-ordination in the supply chain and fragmented marketing of products. By bringing organic red meat producers together into a single marketing group, Caledonian Organics is able to negotiate larger contracts with processors and multiple retailers with a greater confidence that it can manage potential supply side fluctuations.

3.26 Caledonian Organics is now regularly consigning organic cattle and sheep to UK-wide processors. These consignments enable processors to meet the rapidly growing demand for organic red meat from major UK retailers. Caledonian Organics receives a commission on the value of stock consigned and generates income through membership fees, thus giving it the ability to become self-sustaining in due course. Members will seek to gain the security of stronger commercial contracts and forward prices for their organic stock.

3.27 With the support of a Scottish Executive Marketing Development Scheme grant Caledonian Organics has appointed Jenny Cuthbert as its Procurement and Market Development Manager to drive forward the continued growth of the business. A website is being established and work is underway to establish links with feed and seed companies to try and source cheaper inputs for the group.

3.28 Caledonian Organics is developing a future for itself and strengthening the negotiating power of organic farmers. There has already been a positive impact on the price, and as more members join they will be in a position to negotiate even better price deals. By balancing out supply and improving quality, the group provides benefits for processors, which in turn further strengthens Caledonian Organic's negotiating position in the market. Their aim is to bring real structure and stability to the organic beef and sheep markets and, therefore, allow producers to plan ahead.

Local Food and Education

3.29 In 2004, building on the Scottish Executive's school meals programme, Hungry for Success, East Ayrshire Council subsequently adopted Soil Association's Food for Life scheme. The project began in one pilot school, before extending to a further 10 schools, and aimed to provide fresh, local food and local organic foods. The scheme proved so successful that it expanded to 12 and in the third phase it is intended to expand it to 25 schools.

3.30 The initiative has had enthusiastic support from school caterers, parents and pupils and has resulted in an uptake of school meals, which are regarded as better quality and fresher. The Council buys fresh organic food where possible, and where they cannot obtain that they buy locally, and organic dried ingredients are bought where possible. The scheme resulted in approximately 50% of the food being organic, 70% local and 90% unprocessed. There are also associated positive environmental factors in using locally sourced ingredients in the reduction of food miles and packaging.

3.31 An independent evaluation of the pilot was commissioned by the Scottish Executive Environment and Rural Affairs Department and more information is given on this research at paragraph 4.9.

3.32 Food for Life is a Soil Association programme which supports schools in taking the next steps beyond Hungry for Success. Its top line targets are that the ingredients for school meals should be 75% fresh/unprocessed, 50% locally produced and 30% organic. To achieve these targets local authorities work upstream - with local suppliers - and downstream - with the children and their parents. Sourcing locally helps reduce food miles and stimulates the local economy. Encouraging children to appreciate the new menus and running workshops for parents teaching them to cook similar meals at home promotes healthy eating in the wider community. Food for Life is currently in dialogue with 12 local authorities, three of which are actively engaged in the initiative. The most notable is East Ayrshire, where 11 schools are now serving Food for Life meals and the programme is now to be extended to 25 schools. All seven schools on Arran (North Ayrshire) are now also embarking on the programme, as are many other individual schools.

Fig 5. HRH Prince Charles and Camilla, the Duchess of Rothesay, visiting Hurlford School

3.33 In June 2005 HRH Prince Charles and Camilla, the Duchess of Rothesay, visited Hurlford School in East Ayrshire. They sampled a Food for Life school meal alongside some of the children and met suppliers to the school. The visit was co-ordinated by Soil Association Scotland and widely covered in the press.

3.34 Soil Association Scotland's education project is supported by the Heritage Lottery Fund, Scottish Natural Heritage and the Scottish Executive and works closely with the Royal Highland Education Trust. So far, it has allowed over 120 classroom workshops to be conducted with more than 2000 school children. Classroom workshops help children understand more about where their food comes from, and how their food choices can affect the environment. Sixteen school groups, involving 400 children have visited organic farms. Nine organic farms are now hosting visits from school children and a further four are keen to participate in the future. There has been particular interest in the education project from schools involved in the Food for Life school meals programme, and those working towards Health Promoting Schools and Eco Schools targets. Many schools have requested workshops during their health week, and the project links well to the Health and Wellbeing and Biodiversity modules of EcoSchools targets. The project has also run community education programs, training events for teachers and workshops at public events.

Scottish Environment Week

3.35 As part of Environment Week in February 2006, the Deputy Environment and Rural Development Minister, Rhona Brankin, visited Cairns Farm in West Lothian. The Minister enjoyed the opportunity to have a tour of the livestock farm and processing facilities, run by Caroline and Graham Hamilton, and to hear of their experiences first hand. The farm has identified a niche market and supplies customers with quality organic beef and lamb direct through farmers markets in central Scotland under the name 'Mrs Hamilton's Beef and Lamb'. They received Scottish Executive funding through the Processing and Marketing Grant Scheme for an on-farm cutting plant which opened in December 2005. The farm has been in the Organic Aid Scheme since 1998, first with support over 5 years for conversion and they now have a further 5-year maintenance agreement. The business has also won a West Lothian Environmental Award due to the environmentally-friendly manner in which it has been developed.

Fig 6. Rhona Brankin visiting Cairns Farm

3.36 Soil Association Scotland works as a full member of Scottish Environment LINK on environmental policy issues and in particular on agricultural land use issues through the Agricultural Task Force. As part of this activity two events were organised for Scottish Environment Week in the Scottish Parliament:

• An event on Food and the Environment in the Scottish Parliament. The event highlighted the fact that the most intimate association Scots have with the environment is through their food. Noted food writer Catherine Brown discussed Scotland's local food history, Deborah Long of Plantlife highlighted the opportunities of Scotland's wild larder and Hugh Raven, Director of Soil Association Scotland, outlined the challenges that lie ahead for Scotland's food and environment. Attended by press, parliamentarians and invited guests, this event is likely to be repeated.
• The LINK Agricultural Task Force, headed by Mandy Gloyer of the RSPB, organised an event that attracted the Minister for Environment and Rural Development, Ross Finnie, to launch the Scottish Rural Development Strategy consultation. It also served as the launch of LINK's commissioned work on the state of Scotland's farmed environment, undertaken by the Macaulay Institute.

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