The Scottish government wants the organic sector to be a key driver in its ambitious plans
to grow food and drink sales. But that’s only half the story, as Virginia Matthews reports
Ambitious, yes, but achievable? In its recently unveiled Organic Action Plan, the Scottish government said it expected the organic sector to play a key role in helping the country's food and drink industry hit its five-year target of £12.5bn sales by 2017.
Given that the sector is currently worth just £55m, according to the government, it sounds like a tall order especially in the current economic climate, but Paul McLaughlin, chief executive of the government-backed Scotland Food and Drink, believes organic's growth prospects have been underestimated.
"It's all about opening up consumer choice and providing options a helping hand for the 600 Scottish producers already engaged in organic production and a way of encouraging other producers who have yet to put a toe in the water," he says. "But to those who say organics are no longer front-of-mind for consumers, I recognise that we do need to reduce some of the complexities that surround the industry and define precisely what it is and isn't."
Remove such obstacles, however, and the sector still has plenty of untapped potential, he believes, and it's not the only one. Indeed, says McLaughlin, organic dovetails perfectly with the issues of provenance and premium, which, alongside health, comprise the three key prongs of the government's growth plan.
So could organic become as much of a selling point for producers as their premium, Scottish and health credentials? Or is the government just doing its best to talk up a struggling sector?
The statistics paint a mixed picture of the sector's fortunes over the past few years. There have been notable losers in the Scottish organic sector of late fresh meat sales, for example, have slumped 25% in the past two years, according to figures from the Scottish Organic Producers Association (SOPA).
However, 86% of Scottish households bought an organic product in 2010, it says, citing a Soil Association report, and there have been gains for organic babyfood sales (16%) and for dairy (1%) over the past two years.
Despite less than spectacular growth shown by dairy, Graham's The Family Dairy, which last year launched the UK's first 1% fat organic milk (see p56), remains committed to the cause. "Whether it's milk, butter, ice cream or cream, we believe there continues to be huge potential in the Scottish and wider UK market for offering discerning consumers tasty, high-quality organic dairy products," says director Carol Graham.
Martyn Gray, marketing director at Nairn's, the UK's number one oatcake brand, is not so sure. The company believes the government's case for organic expansion has yet to be proved, and is reluctant to fully jump on the organic bandwagon. "Ten per cent of our business is organic, but we don't have plans to extend that figure dramatically until we know for sure that consumers want us to," he says.
For now, the company is focusing its attention on producing healthy, yet indulgent products. Last year, it moved into the cereals market with gluten-free muesli and porridge and it is currently rolling out new oat biscuit packaging, which for the first time stresses the biscuits' premium and indulgence credentials while subtly reinforcing their health benefits.
Other manufacturers who remain to be convinced of organic's merits argue that even if they were, the red tape involved presents a massive barrier to entry. McLaughlin agrees that many producers are deterred from going down the organic route by the bureaucracy involved. "A sizeable number of our members are already involved in both conventional and organic production, but don't go as far as official certification because they see it as too much hassle," he says.
He also acknowledges that some consumers think organic is too expensive and that this too is putting suppliers off. They should reconsider, he says. "We don't want to force producers, retailers and consumers to go organic, but we believe that if the messaging is persuasive and ticks all the relevant added-value and premium boxes, many consumers will be happy to pay the extra." With 80% of all EU organic food sales taking place in Germany, France, Italy and the UK [EU data], the export possibilities for Scottish organic producers could be attractive, he adds.
As far as the UK goes, McLaughlin notes that many retailers "are already seeing an upswing in premium, a trend that once again fits in perfectly with organic expansion". If only the multiples could employ less dubious tactics, says Deborah Roberts, development officer at SOPA.
"There are all too many examples of retailers burying competitively priced organic meat products on top shelves while trumpeting the higher-priced, non-organic own-label items," she says. "While we all understand the commercial realities of multiple retailing, we believe the big chains need to do more to provide greater consumer choice.
Roberts would like to see the multiples, which account for 75% of organic food and drink sales in the UK [Organic Action Plan], adopt a more constructive attitude towards home-grown organic. "If they were to take a more proactive role in meeting what we see as a growing appetite for organics, they could really make a difference to Scottish producers," she argues.
Although the government has not disclosed specific growth targets in the Organic Action Plan, the sector is poised to enjoy significant growth over the next few years, Roberts adds. "SOPA fully supports the Organic Trade Board's aim to increase organic sales in Scotland by 15% between now and 2014 and we certainly believe that such a level of growth is sustainable."
Growth will have to be managed carefully, though, warns Roberts. "What we don't want to do is to raise demand to such an extent that it can't be met by our own producers and needs an imports boost in order to cope. The last thing we want to do is add to the mounting pressure on producers." If demand does increase, Scotland will need a steady stream of new conversions to meet it, she adds. "As a producer, you must decide whether to become organic or remain non-organic. There can be no half-measures."
Some producers see a third way, however. Shoppers are not as purist as Roberts believes, says Christina Wild, general manager of award-winning pie-maker Simple Simon's, whose weekly production of 1,800 individual meat, fish and sweet pies has helped build a £250,000-plus turnover as well as a Waitrose listing.
"Consumers often like the idea of organic, but many of them end up buying bog-standard," she says. "I believe that if your meat is grass-fed, and receives the minimum of injections, you should be considered at least semi-organic.
"Although our vegetables and our pastry aren't organic, we continue to offer a premium product that contains organic meat simply because it is excellent, rather than because the government wants us to."
The company is now looking to develop a range of pies for Tesco, with which it has already held talks. It would like to introduce one of its more adventurous recipes, such as beef with Islay malt, pancetta and mushrooms, or one of the Highland beef with Highland ale pies currently under development, but at £5 a throw, the premium price is prohibitive, says Wild.
"In order to build our brand and our values without too much compromise, we may look at introducing a snack range of pies," she says. "Although they would have traditional fillings, the lower ticket would be better suited to Tesco's price point."
Times may be hard for shoppers, but that doesn't preclude the need for a spot of indulgence from time to time and, like Nairn's, many Scottish brands are now positioning their products as an indulgent but not necessarily unhealthy treat.
One is independent confectionery manufacturer Lees of Scotland, whose latest product, Mallow Dreams, is just 59 calories per cake and contains no artificial colouring or preservatives. Available at stores throughout the UK, the cakes combine "the best bits of our mallow snowballs and jam teacakes", claims sales director Bert Croll,
Other brands find it much easier to flag up their healthy attributes, of course.Highland Spring, the UK's biggest bottled water brand, is currently busy spreading its 'healthy hydration' message via its New Balls for Britain multi-channel marketing campaign, which, with a budget of £500,000, represents the company's largest sales promotion to date.
The distribution of branded sports balls via 42 million specially branded packs will, says the company, "drive bottled water sales over the lucrative summer period". According to Paul Condron, head of brand marketing, "Highland Spring is most definitely viewed as a premium product by the consumer, but we are careful to make sure it remains affordable and accessible. Achieving quality at a reasonable price is very important to the brand's future."
Highland Spring makes a big play of its Scottish origins in its branding and packaging, as does the patriotically named Scottish Pride, recently ranked as the country's favourite Cheddar [Kantar Worldpanel 52w/e March 20 2011].
"Packaging represents the consumer's crucial first impression of the brand," says Claire Irvine, brand manager. "Our research showed consumers wanted to see more Scottish emphasis on the pack, and we have now added the Saltire the national flag of Scotland and have amended the colours of the tartan so the pack is bolder and more confident."
For star products such as whisky and salmon, unashamed Scottishness remains a vital differentiator, especially when it comes to export markets.
Some brands, such as Nairn's, are moving away from such overt references, however. "We do have a tartan on our packaging, but we believe that it's all about light-touch Scottishness nowadays, not about being in your face with bagpipes as brands might have been in the past," says marketing director Martyn Gray.
The key, says McLaughlin, is authenticity. "While some firms choose to talk up their Scottishness to great effect, others forget the flag-waving and still have a fantastically authentic offer," he says. "Good quality Scottish products are recognised everywhere, but patriotism needs to be sensitive and well-executed."
To Flora McLean, director of the Scottish Food and Drink Federation, the ability to fly the flag for Scottish trophy products such as Scotch whisky, meat, smoked salmon, confectionery or dairy items is an important marketing weapon, but she stresses that to hit the government's £12.5bn sales target, the industry has to look beyond provenance.
"Some parts of the industry are, like the government, very much in favour of organic expansion, for example, but we don't see it as a tremendous route to growth," she says. "We are far keener to focus on innovation, health, skills and careers and indeed economic growth as a whole.
"Food and drink is the biggest manufacturing industry in Scotland (more than 113,000 people across some 54,000 businesses, say recent government figures) and we need a skilled workforce of people who want to build long-term careers in it."
McLean believes that while skills are a headache, the modest 0.2% of total turnover currently spent by Scottish food and drink companies on research and development will become an increasingly hot topic as the five-year strategy takes shape. She reels off a list of companies that have "prospered by taking the decision to come out of their comfort zone" ice cream turned crisps maker Mackies and Macsween with its microwaveable haggis slices among them but concedes that it will be "a challenge" to meet the official 0.5% research and development target laid down for 2017.
"Scottish businesses have been accused of being innovation-averse, but I don't think that is necessarily fair," she says. "It is possibly the case that we don't shout quite as much about our innovation triumphs as we should do."
Highland Spring certainly wouldn't describe itself as innovation-averse. "As our sector's biggest brand, we're playing a leading role in developing new ideas," claims Paul Condron, head of brand marketing, citing the March 2011 launch of Hydr8 for the cash and carry sector.
Others agree that strong NPD is crucial in the current market. While B2B baking ingredients firm Macphie has, with the launch of its DeviliShh ready-to-mix desserts range, proved that rethinking business models can reap rewards, another Scottish company Robert Wiseman Dairies has benefited by sticking to what it does best.
This March, The Grocer reported that sales of Wiseman's iconic Black and White milk brand had jumped by a fifth, an achievement largely thanks to the decision to extend regional branding of cartons to Wales and Scotland.
That helped make it the fastest-growing top brand in Britain, according to the annual 100 Biggest Brands survey. "By offering milk that clearly identifies its source, but without adding cost to our customers, we are adding value that can be passed on to consumers," says a spokesman for the East Kilbride-based dairy.
Provenance is not just a powerful selling point in the UK market, of course and thanks to the power of the Scottish brand, exports of old stalwarts such as whisky and salmon are thriving. Earlier this year, the Scottish Salmon Producers' Association announced the official opening up of the Chinese market to Scottish salmon. Already one of the world's largest seafood markets, China imported 217,000 tonnes, equivalent to 150% of total annual Scottish production, from around the world in 2009.
"If even one per cent of the Chinese population opt to buy Scottish salmon, production north of the border will need to double," says the SSPA.
McLean argues that other Scottish food and drink producers should be considering the export market too. "Salmon, meat and langoustines are already developing new markets for top-quality produce, but we need other producers to follow suit, not just relying on established markets, but moving further into developing worlds too," she says.
Further exploration is already on the cards for Highland Spring, which generates 5% of its sales through exports. "We are keen to expand our export presence beyond our current focus on the Middle East, the Far East and the Caribbean," says Condron.
"We are well aware that there is an opportunity to take our brand to a wider consumer base and look beyond established ex-pat communities."
First Milk is equally excited about the export opportunity. In February, it signed a export deal with international dairy supplier Eilers and Wheeler, under which E&W is First Milk's preferred partner for export sales of cheese and packet butter.
Suppliers are clearly gearing up to make the most of the export potential, but the organic debate won't go away.
As to whether winning accreditation makes sound business sense, particularly where smaller suppliers are concerned, the proof of this organic pudding will be in the eating.
Focus On Scotland
Ambitious, yes, but achievable? In its recently unveiled Organic Action Plan, the Scottish government said it expected the organic sector to play a key role in helping the country's food and drink industry hit its five-year target of £12.5bn sales by 2017.
Given that the sector is currently worth just £55m, according to the government, it sounds like a tall order especially in the current economic climate, but Paul McLaughlin, chief executive of the government-backed Scotland Food and Drink, believes organic's growth prospects have been underestimated.
"It's all about opening up consumer choice and providing options a helping hand for the 600 Scottish producers already engaged in organic production and a way of encouraging other producers who have yet to put a toe in the water," he says. "But to those who say organics are no longer front-of-mind for consumers, I recognise that we do need to reduce some of the complexities that surround the industry and define precisely what it is and isn't."
Remove such obstacles, however, and the sector still has plenty of untapped potential, he believes, and it's not the only one. Indeed, says McLaughlin, organic dovetails perfectly with the issues of provenance and premium, which, alongside health, comprise the three key prongs of the government's growth plan.
So could organic become as much of a selling point for producers as their premium, Scottish and health credentials? Or is the government just doing its best to talk up a struggling sector?
The statistics paint a mixed picture of the sector's fortunes over the past few years. There have been notable losers in the Scottish organic sector of late fresh meat sales, for example, have slumped 25% in the past two years, according to figures from the Scottish Organic Producers Association (SOPA).
However, 86% of Scottish households bought an organic product in 2010, it says, citing a Soil Association report, and there have been gains for organic babyfood sales (16%) and for dairy (1%) over the past two years.
Despite less than spectacular growth shown by dairy, Graham's The Family Dairy, which last year launched the UK's first 1% fat organic milk (see p56), remains committed to the cause. "Whether it's milk, butter, ice cream or cream, we believe there continues to be huge potential in the Scottish and wider UK market for offering discerning consumers tasty, high-quality organic dairy products," says director Carol Graham.
Martyn Gray, marketing director at Nairn's, the UK's number one oatcake brand, is not so sure. The company believes the government's case for organic expansion has yet to be proved, and is reluctant to fully jump on the organic bandwagon. "Ten per cent of our business is organic, but we don't have plans to extend that figure dramatically until we know for sure that consumers want us to," he says.
For now, the company is focusing its attention on producing healthy, yet indulgent products. Last year, it moved into the cereals market with gluten-free muesli and porridge and it is currently rolling out new oat biscuit packaging, which for the first time stresses the biscuits' premium and indulgence credentials while subtly reinforcing their health benefits.
Other manufacturers who remain to be convinced of organic's merits argue that even if they were, the red tape involved presents a massive barrier to entry. McLaughlin agrees that many producers are deterred from going down the organic route by the bureaucracy involved. "A sizeable number of our members are already involved in both conventional and organic production, but don't go as far as official certification because they see it as too much hassle," he says.
He also acknowledges that some consumers think organic is too expensive and that this too is putting suppliers off. They should reconsider, he says. "We don't want to force producers, retailers and consumers to go organic, but we believe that if the messaging is persuasive and ticks all the relevant added-value and premium boxes, many consumers will be happy to pay the extra." With 80% of all EU organic food sales taking place in Germany, France, Italy and the UK [EU data], the export possibilities for Scottish organic producers could be attractive, he adds.
As far as the UK goes, McLaughlin notes that many retailers "are already seeing an upswing in premium, a trend that once again fits in perfectly with organic expansion". If only the multiples could employ less dubious tactics, says Deborah Roberts, development officer at SOPA.
"There are all too many examples of retailers burying competitively priced organic meat products on top shelves while trumpeting the higher-priced, non-organic own-label items," she says. "While we all understand the commercial realities of multiple retailing, we believe the big chains need to do more to provide greater consumer choice.
Roberts would like to see the multiples, which account for 75% of organic food and drink sales in the UK [Organic Action Plan], adopt a more constructive attitude towards home-grown organic. "If they were to take a more proactive role in meeting what we see as a growing appetite for organics, they could really make a difference to Scottish producers," she argues.
Although the government has not disclosed specific growth targets in the Organic Action Plan, the sector is poised to enjoy significant growth over the next few years, Roberts adds. "SOPA fully supports the Organic Trade Board's aim to increase organic sales in Scotland by 15% between now and 2014 and we certainly believe that such a level of growth is sustainable."
Growth will have to be managed carefully, though, warns Roberts. "What we don't want to do is to raise demand to such an extent that it can't be met by our own producers and needs an imports boost in order to cope. The last thing we want to do is add to the mounting pressure on producers." If demand does increase, Scotland will need a steady stream of new conversions to meet it, she adds. "As a producer, you must decide whether to become organic or remain non-organic. There can be no half-measures."
Some producers see a third way, however. Shoppers are not as purist as Roberts believes, says Christina Wild, general manager of award-winning pie-maker Simple Simon's, whose weekly production of 1,800 individual meat, fish and sweet pies has helped build a £250,000-plus turnover as well as a Waitrose listing.
"Consumers often like the idea of organic, but many of them end up buying bog-standard," she says. "I believe that if your meat is grass-fed, and receives the minimum of injections, you should be considered at least semi-organic.
"Although our vegetables and our pastry aren't organic, we continue to offer a premium product that contains organic meat simply because it is excellent, rather than because the government wants us to."
The company is now looking to develop a range of pies for Tesco, with which it has already held talks. It would like to introduce one of its more adventurous recipes, such as beef with Islay malt, pancetta and mushrooms, or one of the Highland beef with Highland ale pies currently under development, but at £5 a throw, the premium price is prohibitive, says Wild.
"In order to build our brand and our values without too much compromise, we may look at introducing a snack range of pies," she says. "Although they would have traditional fillings, the lower ticket would be better suited to Tesco's price point."
Times may be hard for shoppers, but that doesn't preclude the need for a spot of indulgence from time to time and, like Nairn's, many Scottish brands are now positioning their products as an indulgent but not necessarily unhealthy treat.
One is independent confectionery manufacturer Lees of Scotland, whose latest product, Mallow Dreams, is just 59 calories per cake and contains no artificial colouring or preservatives. Available at stores throughout the UK, the cakes combine "the best bits of our mallow snowballs and jam teacakes", claims sales director Bert Croll,
Other brands find it much easier to flag up their healthy attributes, of course.Highland Spring, the UK's biggest bottled water brand, is currently busy spreading its 'healthy hydration' message via its New Balls for Britain multi-channel marketing campaign, which, with a budget of £500,000, represents the company's largest sales promotion to date.
The distribution of branded sports balls via 42 million specially branded packs will, says the company, "drive bottled water sales over the lucrative summer period". According to Paul Condron, head of brand marketing, "Highland Spring is most definitely viewed as a premium product by the consumer, but we are careful to make sure it remains affordable and accessible. Achieving quality at a reasonable price is very important to the brand's future."
Highland Spring makes a big play of its Scottish origins in its branding and packaging, as does the patriotically named Scottish Pride, recently ranked as the country's favourite Cheddar [Kantar Worldpanel 52w/e March 20 2011].
"Packaging represents the consumer's crucial first impression of the brand," says Claire Irvine, brand manager. "Our research showed consumers wanted to see more Scottish emphasis on the pack, and we have now added the Saltire the national flag of Scotland and have amended the colours of the tartan so the pack is bolder and more confident."
For star products such as whisky and salmon, unashamed Scottishness remains a vital differentiator, especially when it comes to export markets.
Some brands, such as Nairn's, are moving away from such overt references, however. "We do have a tartan on our packaging, but we believe that it's all about light-touch Scottishness nowadays, not about being in your face with bagpipes as brands might have been in the past," says marketing director Martyn Gray.
The key, says McLaughlin, is authenticity. "While some firms choose to talk up their Scottishness to great effect, others forget the flag-waving and still have a fantastically authentic offer," he says. "Good quality Scottish products are recognised everywhere, but patriotism needs to be sensitive and well-executed."
To Flora McLean, director of the Scottish Food and Drink Federation, the ability to fly the flag for Scottish trophy products such as Scotch whisky, meat, smoked salmon, confectionery or dairy items is an important marketing weapon, but she stresses that to hit the government's £12.5bn sales target, the industry has to look beyond provenance.
"Some parts of the industry are, like the government, very much in favour of organic expansion, for example, but we don't see it as a tremendous route to growth," she says. "We are far keener to focus on innovation, health, skills and careers and indeed economic growth as a whole.
"Food and drink is the biggest manufacturing industry in Scotland (more than 113,000 people across some 54,000 businesses, say recent government figures) and we need a skilled workforce of people who want to build long-term careers in it."
McLean believes that while skills are a headache, the modest 0.2% of total turnover currently spent by Scottish food and drink companies on research and development will become an increasingly hot topic as the five-year strategy takes shape. She reels off a list of companies that have "prospered by taking the decision to come out of their comfort zone" ice cream turned crisps maker Mackies and Macsween with its microwaveable haggis slices among them but concedes that it will be "a challenge" to meet the official 0.5% research and development target laid down for 2017.
"Scottish businesses have been accused of being innovation-averse, but I don't think that is necessarily fair," she says. "It is possibly the case that we don't shout quite as much about our innovation triumphs as we should do."
Highland Spring certainly wouldn't describe itself as innovation-averse. "As our sector's biggest brand, we're playing a leading role in developing new ideas," claims Paul Condron, head of brand marketing, citing the March 2011 launch of Hydr8 for the cash and carry sector.
Others agree that strong NPD is crucial in the current market. While B2B baking ingredients firm Macphie has, with the launch of its DeviliShh ready-to-mix desserts range, proved that rethinking business models can reap rewards, another Scottish company Robert Wiseman Dairies has benefited by sticking to what it does best.
This March, The Grocer reported that sales of Wiseman's iconic Black and White milk brand had jumped by a fifth, an achievement largely thanks to the decision to extend regional branding of cartons to Wales and Scotland.
That helped make it the fastest-growing top brand in Britain, according to the annual 100 Biggest Brands survey. "By offering milk that clearly identifies its source, but without adding cost to our customers, we are adding value that can be passed on to consumers," says a spokesman for the East Kilbride-based dairy.
Provenance is not just a powerful selling point in the UK market, of course and thanks to the power of the Scottish brand, exports of old stalwarts such as whisky and salmon are thriving. Earlier this year, the Scottish Salmon Producers' Association announced the official opening up of the Chinese market to Scottish salmon. Already one of the world's largest seafood markets, China imported 217,000 tonnes, equivalent to 150% of total annual Scottish production, from around the world in 2009.
"If even one per cent of the Chinese population opt to buy Scottish salmon, production north of the border will need to double," says the SSPA.
McLean argues that other Scottish food and drink producers should be considering the export market too. "Salmon, meat and langoustines are already developing new markets for top-quality produce, but we need other producers to follow suit, not just relying on established markets, but moving further into developing worlds too," she says.
Further exploration is already on the cards for Highland Spring, which generates 5% of its sales through exports. "We are keen to expand our export presence beyond our current focus on the Middle East, the Far East and the Caribbean," says Condron.
"We are well aware that there is an opportunity to take our brand to a wider consumer base and look beyond established ex-pat communities."
First Milk is equally excited about the export opportunity. In February, it signed a export deal with international dairy supplier Eilers and Wheeler, under which E&W is First Milk's preferred partner for export sales of cheese and packet butter.
Suppliers are clearly gearing up to make the most of the export potential, but the organic debate won't go away.
As to whether winning accreditation makes sound business sense, particularly where smaller suppliers are concerned, the proof of this organic pudding will be in the eating.
Focus On Scotland
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