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2. Destination and Origin Purchases of Processors

This section provides an overview of sales and purchases of Scottish primary food produce based on the Scottish Input-Output tables for 2004 published by the Scottish Government in November 2007. It also provides a comparison with results from last year. It then goes onto analyse processor purchases of primary produce in each food and drink sub-sector and sales of processed product by geographical destination. Finally, the section compares Scottish primary production with processing output over the past ten years.

2.1 Destination of sales of Scottish primary produce

The main destinations of Scottish primary produce sales are shown in Figure 2.1. The largest purchaser groups of food and drink produced in Scotland are outlined in the following table.

Table 2.1 Main Purchasers of Scottish primary produce 2004 compared to 2003

Source: Scottish Government, 2004 Scottish Input-Output Tables, adapted by DTZ

The immediate finding of note is that non-Scottish purchasers appear to have increased their share of purchases at the expense of Scottish purchasers.

Whilst the percentage share purchased by Scottish processors has declined by 2%, in absolute terms there is an increase in purchases to £0.79 billion. Scottish processors may be importing more primary produce but it is not possible to tell from these data. 23% of Scottish primary produce was bought by households without any further processing, either directly or through wholesale and retail. These two groups together accounted for half of the total primary produce sales in Scotland in 2003, while a year later they form only 47% of a larger total. Primary producers bought 16% of the total, down from 18% in the previous year.

A larger proportion of Scottish primary food produce was exported to the rest of the UK or to the rest of world in 2004 (30%) compared with 2003 (26%). Four fifths (80%) of Scottish primary produce exports were made to the UK compared with just 76% in 2003, the rest was sold to processors, primary producers and households outside the UK.

Figure 2.1 Destination of Scottish primary produce sales

Source: Scottish Government, 2004 Scottish Input-Output Tables, adapted by DTZ

The areas outside the main circle in Figure 2.1 show the proportion of primary produce purchases by each buyer group bought outside Scotland. Therefore the pie shows total primary produce purchases by each group from all origins.

For example, Figure 2.1 shows that Scottish households buy 66% of their primary produce from Scottish sources, and 34% from non-Scottish sources. Table 2.2 summarises changes in the proportion of primary produce purchases originated in Scotland for each buyer group:

Table 2.2 Share of Scottish primary produce bought from Scottish sources 2004 compared to 2003

Source: Scottish Government, 2004 Scottish Input-Output Tables, adapted by DTZ

The main finding is that the Scottish hotels and catering sector bought a significantly higher proportion of primary produce from Scottish sources in 2004. In other words, provenance is of increasing importance to this sector. There were no other significant changes between the two years, though processors and households bought slightly less in percentage terms, but more in absolute terms. The data suggest that in 2004 provenance was not having a marked effect on consumer purchasing behaviour.

DTZ has also updated the 2004 Input-Output table to 2007, the updated diagram and the methodology can be found in the Appendices.

2.2 Origin of purchases of primary produce by processing sector

A detailed analysis of processing sub-sectors was undertaken, again using Scottish Input-Output Tables. This analysis explores the proportion of Scottish primary produce (as a share of all primary produce) processed by Scottish processors.

Figures 2.2 and 2.3 outline the food and drink sub-sectors' respective purchases of Scottish and non-Scottish primary produce in 2004.

Within the food and drink processing sector, most primary produce is bought by the fish and fruit processing sectors. In total, this sector bought £460 million worth of primary produce in 2004, 74% from Scottish origin, which is the highest rate of Scottish sourcing among the processing sub-sectors.

Figure 2.2 Food processing sectors' purchases of primary produce

Source: Scottish Government, 2004 Scottish Input-Output Tables, adapted by DTZ

Food sectors:

Note: fish and fruit processing are included in the Input-Output Tables as a single sector. In Scotland, fruit processing has a significantly lower value than fish processing and this category is therefore likely to reflect the split of purchases by the fish processing sector.

Figure 2.3 Drink processing sectors' purchases of primary produce

Source: Scottish Government, 2004 Scottish Input-Output Tables, adapted by DTZ

Drink sectors:

Note: the value of primary produce purchased by the drink processing sector is low because much of the produce purchased has received some processing (e.g. the whisky industry purchases significantly from the grain milling and starch processing sector)

The rest of the food and drink sub-sectors all source about 65-66% of their primary produce inputs from Scotland, with the exception of spirits and wines and soft drinks, as almost 100% of the primary produce they purchase is Scottish.

The 2004 picture is very much the same as 2003. Absolute values have increased but the proportions sourced from Scotland remain almost the same. Investigations by DTZ last year found that purchase information on the major sectors, such as fish and meat are accurate, but for more minor sub-sectors, a 'technology assumption' is made by the Scottish Government, distributing imports across processing sectors reflecting the overall consumption of primary produce, regardless of origin.

For this reason, in the case of smaller sub-sectors, while the total value of purchases is accurate, information on how much is imported should be considered indicative.

2.3 Destination of sales and output of Scottish-processed food and drink

Table 2.3 shows all sales from Scottish food and drink processors split by destination for 2004, the latest year with available data. Data on processors includes primary and secondary processing and takes account of first purchasers only. It is acknowledged that there will be further purchases, processing and exports from UK processors, so the table does not necessarily identify all sales or exports.

The three destinations for sales from Scottish food and drink processors are defined as:

• Scotland
• Rest of UK
• Outside the UK

The largest destination for sales is highlighted for each subsector.

Table 2.3 Scottish food and drink processors' sales by geographical destination, 2004

Source: Scottish Government, 2004 Scottish Input-Output Tables, adapted by DTZ

In comparison with results drawn from the previous (2003) Input-Output table, the following conclusions can be made:

• While it was identified in the previous section that Scotland has a high level of primary produce exports, the table highlights that Scotland also exports a high proportion of its processed food and drink products, with the exception of dairy and soft drink products.
• However, a larger proportion of processed Scottish food and drink is sold within Scotland (24%) compared with the previous year (21%). In addition, a larger proportion is sold within the rest of UK (45%) compared with results from 2003 (42%). At the same time, lower levels are exported outside the UK, both in proportional and in absolute terms. This finding is despite the declining share of purchases of primary produce by Scottish processors (Table.2.1).
• The vast majority of spirit and wines sales are exported outside the UK reflecting the dominance of Scotch whisky. However, this proportion is significantly lower than last year (73% compared with 89% in 2003), and much more is sold within the rest of the UK (25% versus 10% in 2003), and more within Scotland (3% versus 1% in 2003).
• This finding does not necessarily mean a drop in whisky exports, but could reflect a change in company operations between the two years, e.g. a new bottling plant in England for onward sale to export markets outside the UK.
• Significantly more processed meat is sold within Scotland than in the previous year (45% compared with 35%), and the amount sold in the rest of the UK is now similar to that sold within Scotland.
• The level of processed fish and fruit sold within Scotland has tripled in a year. This result is primarily due to an increase in fish processing within Scotland. Data does not permit separate analysis of vegetable processing, which would have a high level of sales within Scotland, though a relatively low value in comparison to most other sectors.
• Other sectors that increased the rate of output sold in Scotland significantly include animal feeding stuffs (increased by 17 percentage points), confectionary (increased by 21 percentage points) and soft drinks (increased by13 percentage points). At the same time, more beer, grain milling & starch and oils and fats are exported than before.

Table 2.4 breaks down the level of sales of processing sub-sectors within Scotland. The table shows that the vast majority of processed food sales are to the retail and food services sectors rather than to the processing sector. Exceptions are oils and fats, grain milling and starch, where the majority of sales go to other processing subsectors. In addition, spirits and wines, beer brewing and miscellaneous foods also see high levels of intra-processor trade.

Although spirits and wines is still the only sector selling significantly to itself (due to the production of mixed drinks), both meat and fish and fruit processing has seen significant increases (13 and 5 percentage points respectively) in sales to the same subsector between 2003 and 2004.

Table 2.4 Scottish food and drink processors' sales within Scotland

Source: Scottish Government, 2004 Scottish Input-Output Tables, adapted by DTZ

Table 2.5 breaks down Scottish food processors' sales to the rest of the UK. The table shows that most sales are into the 'Other' category which includes retail and food service, rather than to other food processors. There is little change to the figures from last year with the highest sales onto processors being in the oils & fats and grain milling & starch sectors.

Table 2.5 Scottish food processors' sales to the rest of the UK

Source: Scottish Government, 2004 Scottish Input-Output Tables, ONS, 2004 UK Input-Output Tables, adapted by DTZ

2.4 Input-Output Summary

• The analysis of primary produce data for 2004 can be compared with the analysis of 2003 data undertaken last year.
• The value of primary produce has increased by around 10% between 2003 and 2004 to £3.3Bn.
• Non-Scottish purchasers have increased their share of purchases at the expense of Scottish purchasers.
• The percentage share of Scottish processors has declined by 2%, though in absolute terms there is a slight increase in purchases to £0.79 billion.
• Total exports rose to 30% compared to 26% in 2003. Four fifths of these exports were to the rest of the UK (80%), up from 76% in 2003.
• In terms of where the different purchasing groups buy their primary produce from, there is little change between the two years. However, the Scottish hotels and catering sector bought a significantly higher proportion of primary produce from Scottish sources in 2004 (74% compared to 69% in 2003). In other words, provenance is of increasing importance to this sector.
• In summary, the figures highlight the increased dominance of the UK supermarkets buying Scottish primary produce for onward sale while Scottish indigenous processors are standing still.
• Within the food and drink processing sector, most primary produce is bought by the fish and fruit processing sectors at £460 million in 2004, 74% from Scottish origin. These sectors, had the highest rate of Scottish sourcing amongst sub-sectors.
• A larger proportion of processed Scottish food and drink is sold within Scotland (24%) than 2003 (21%). In particular, meat processed and sold in Scotland has increased from 35% to 45%. A larger proportion of processed food and drink is sold within the rest of UK (45%) compared to 42% in 2003. At the same time, lower levels are exported outside the UK, both in proportional and in absolute terms.
• The vast majority of processed food sales are to the retail and food services sectors rather than to the processing sector, reflecting the fact that most are processed to final product stage.

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