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Food and Drink sector needs more ingredients to grow

The North-east’s food and drink sector is performing well, despite the current economic climate, according to a survey published by Aberdeen & Grampian Chamber of Commerce.

The survey, supported by Grampian Food Forum, was carried out among businesses involved in the food and drink sector across Aberdeen City and Shire who were asked about current business performance, activity levels, employment trends, training and development, and future plans. The overall results show the North-east’s food and drink sector remains buoyant as a result of increased efficiencies and improved management of internal factors.

However, the main challenges faced by the sector are increasing costs and low confidence in the ability to manage them, as well as difficulty accessing new markets and finance. This has resulted in a squeeze on profits which are down 17% year on year.

Key findings from the report include:

• Overall, the sector appears to be performing well in the current economic climate, although this may be attributable to caution and increased efficiency;

• While the overall economic environment appears to have had a harsh effect on the sector, factors that are within reasonable control of businesses appear to be well managed;

• The largest population of firms in the sector is that of micro and small businesses although the majority of the jobs in the sector are in larger companies with more than 249 employees;

• Overall employment in the sector has dropped by 2%. The main reason noted for staff reduction (nearly 65%) was improved efficiencies in running the business. 19% reported staff reductions as a result of reduced demand;

• 65% of businesses reported a growing product range. 50% reported an increase in research spend as well as productivity. 47% have reported an increase in turnover;

• The main challenges faced by the sector are increasing costs and low confidence in the ability to manage them, access to markets, and adequate access to finance. This has resulted in a squeeze on profits down approximately 17%;

• There is significant latent capacity in the sector. 50% of businesses are not currently operating at full capacity;

• The use of social media is popular within this sector and rivals traditional advertising as a preferred means of marketing and promoting the business. In this regard, businesses in this sector seem to have kept up with this particular technological innovation and appear keen to fully exploit its potential;

• Current export rates are low. Only 29% of those who provided feedback actually export, while more than 67% say that they do not currently export. About 4% and 10% currently plan to start exporting in the next 12 months and beyond the next 12 months respectively.

The food and drink sector in North-east Scotland is an important economic and commercial contributor to the overall Scottish economy, returning about a fifth of the total sales value of the industry in Scotland. The aim of this survey was to highlight the importance of the sector and to evaluate its performance against the targets and objectives set out by national partnership Scotland Food and Drink.

Bob Collier, Chief Executive of AGCC said: “We are pleased to publish the third of a series of surveys to provide sector specific research on businesses in North-east Scotland. The food and drink sector is very important to the region and has performed well in what are very challenging times for business.

“In spite of this relevant success, the sector appears to be operating below overall capacity. This means there is potential for growth, which could lead to increased jobs, profitability and overall prosperity for the sector. The industry can only utilise full capacity where the resources required are available. A lack of access to finance and suitable government policy remains as a barrier to growth and needs to be addressed.”

The full Food and Drink Sector Report 2011 will be available online on Wednesday, November 30 at http://www.agcc.co.uk/food-a-drink and a copy is attached to this email. Paper copies are also available on request by contacting Seona Shand at seona.shand@agcc.co.uk.

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