FOOD and drink are a very important part of the Grampian economy, although the industry has been overshadowed by oil and gas for many years.
The Scottish population has increased substantially in recent years so the domestic demand for food and drink has also risen.
Some sectors have also done well in export markets, notably Scottish whisky.
The local industry can be subdivided into agriculture, fishing, food processing, fish processing, whisky distilling and other drinks.
I shall comment briefly on each of these sectors.
The fishing industry is undoubtedly the most important and the local ports account for about 45% of the total value of landings in Scotland.
Peterhead is the largest fishing port in Europe and Fraserburgh the third largest in Scotland.
Only a small proportion of the fish landed here is processed locally, however.
There is a basic choice between processing close to landings or close to markets, and there has been a definite shift in favour of the latter recently.
One of the main reasons for that is the high cost of operating – labour, accommodation and other costs - in the Grampian region, because of the impact of the oil industry.
Agriculture currently accounts for about 5% of regional economic output (GDP), which is more than treble the Scottish average.
The sector has a healthy mix of livestock, cereals and other crops, and has survived the recession and the impact of oil much better than I expected.
It is clear that many local people still choose farming as their way of life.
Nevertheless, the latest official statistics show an 18% fall in farm incomes last year, with potatoes and cereals being particularly badly hit.
The local chicken industry has also gone through a difficult period.
The Grampian food processing industry sector also has an encouraging variety of products.
However, the fish processing industry has contracted in recent years, in terms of both output and employment, and I do not see that decline being reversed.
The meat processing sector has also struggled, so the recent announcement of investment in a new abattoir at Thainstone is very welcome.
An outstanding example of diversification is Mackies of Rothienorman, which now produces both ice cream and potato crisps.
There are eight whisky distilleries in the area and I recently read a very interesting publication from Aberdeenshire Council which also shows eight “lost” distilleries which have closed, albeit some many years ago.
The whisky industry has recently gone through a boom period, with increased output, expanded and new distilleries.
However, I suspect that the boom is coming to an end, mainly because of increased competition from foreign whisky distilleries in Japan and elsewhere.
Other drinks production, notably beer and gin, in the region is currently on a very small scale.
However, BrewDog in Ellon seems to be doing very well and generating a lot of publicity.
The two main challenges for the Grampian food and drink industry, in my opinion, are:
- future European Union membership and reform of the Common Agricultural Policy and Common Fisheries Policy
- adapting to the decline of the oil and gas industry
Renegotiating EU membership is a high priority of the new UK Conservative Government but unfortunately the CAP and CFP do not appear to be important issues for them, in contrast with immigration.
On the other hand, the reduction in cost pressures from the oil industry should benefit local food and drink businesses.