Homemade produce getting us out of a jam

It's food and drink, not science or technology, that are driving Scotland's export growth. Our reporter looks at the bread and butter of homegrown success

PAUL Grant has travelled the world in his quest to make marmalade one of Scotland's iconic exports. As a result, Mackays, the small Arbroath firm he bought in 1995, now sells its traditional produce in more than 50 countries, accounting for about 40 per cent of its 11 million turnover.

"Ever since I bought the company we recognised that exporting was an opportunity we could build the business on," he said.

Although Scottish food has endured an unfashionable image and even mockery at home, its popularity in the rest of the world is at unprecedented levels.

Despite the drive by the Scottish Government and enterprise agencies to develop Scotland as a hub for electronics firms, life sciences and games companies, the country's oldest industries - food and drink - are now driving export growth.

Figures released last week by Scottish Development International (SDI) showed exports of food alone topped 1 billion for the first time last year, while the Scotch whisky industry affirmed its role as a key foreign earner by growing exports by 10 per cent over 12 months to reach 3.45bn in overseas sales.

One of Scotland's most recent stock market flotations involved a farming group, Produce Investments, which supplies potatoes to the likes of Tesco and Sainsbury's, and employs about 200 people at its operations in Duns, Berwickshire, and Perthshire.

And the success is expected to continue, particularly as global food prices are set to double over the next 20 years, according to a recent report from Oxfam.

In the case of Scottish food exports, SDI says its figures are probably even understated because they don't take into account Scottish products exported via English ports and airports.

Ewen Cameron, head of food and drink at SDI, said Scottish producers are making good progress towards a target of 5.1bn of overseas sales by 2017.

When that goal was set as part of a growth strategy in 2007, food and drink exports, including whisky, stood at 3.7bn. Since then, SDI has worked with Scots firms to identify the markets with the highest potential for growth and to help them gain a foothold there.

The US and Canada are among those singled out, and SDI recently took a group of companies to its stand at the Boston Seafood Show, the biggest such trade event in North America.

Seafood accounted for more than half of last year's food exports, thanks to high demand for Scottish salmon for which buyers were prepared to pay premium prices.At the moment, it seems as though the world can't get enough Scottish salmon, but Cameron warned that the exports must be sustainable, and there are factors constraining the amount of fish which can be produced.

He said the salmon industry is trying to grow sustainably at 4 per cent a year, while many other species of fish are limited by quotas. "We could sell more salmon if we had more," he said. Instead, growth in all food and drinks categories will be focused around premium products, marketed on health values and provenance.

One example Cameron cites is Mackie's, the family-owned farm in Aberdeenshire that began making ice cream in 1986 as a way of using up surplus cream. Now 70 staff and 500 cows help make a brand which is recognised from South Korea to the United Arab Emirates and India.

When Mackie's launched a range of crisps in June 2009 in partnership with the Taylor family and their Perthshire-based Taypack potato company, there was always a plan to eventually export the product, but it has ended up happening much more quickly than expected because the Scottish-themed flavours such as haggis, and Aberdeen Angus were such a hit abroad.

Kirstin Mackie, managing director of the crisps operation, said the company was planning a big launch in the US as soon as the season's potatoes are ready, after displaying at a food fair and conducting further market research.

She said the company's agents in the US were predicting $1.8m (1.2m) worth of sales in the first 12 months, equivalent to about a fifth of the company's total crisp sales.

Mackie's has marketed its environmental credentials and rural Scottish setting both at home and abroad.

Mackie said: "People see Scotland as a beautiful place with clean air and they relate lovely things with Scotland."

For Grant and Mackays, selling marmalade overseas was also based on trading on tradition. "We basically followed the Walkers shortbread model, because what they did with shortbread applies to marmalade," he said. "It is a Scottish heritage product which has a good shelf life and is suitable for exporting."

Once he was certain that marmalade was still widely acknowledged as a heritage product, Grant started attending international exhibitions and trade shows, and went on a series of trade missions abroad.

He said: "The more you get seen, the more you get involved, it becomes a two-way process. We find people and people come to us."

Mackays' largest foreign market is Japan, where the company also exports on a "private label" basis, to be sold by such well-known UK brands as Harrods. It has also enjoyed strong sales in the US and Europe.

"It's more to do with core established markets where the product is known and understood than the new emerging markets," Grant said.

Even so, he's been to India twice in the past three years to ensure Mackays can take advantage of growing opportunities there.

He said: "There's this great British link (in India], the product is clearly understood, there's no language issues, but the great challenge is distribution. It's like the UK 50 years ago but moving very fast, and when the infrastructure begins to modernise, we will be in a great place."

Grant sees exports accounting for half of his sales within three years, driving further employment at the Arbroath factory.

Trade body Scotland Food & Drink, which hopes to grow the industry from 10bn to 12.5bn by 2017, sees exporting Scottishness as increasingly important. Paul McLaughlin, chief executive, said: "Worldwide consumers want to know about where a product is coming from, the provenance and history, and the more you can tell about that and create an engaging narrative, the more people will want to be involved with that brand."

The Scotch whisky industry, still by far the biggest exporter in the sector, knows a thing or two about building brands. It has had to fight to protect its empire from counterfeiters trying to cash in on the popularity and prestige of the name.

It has also had to do battle with bureaucrats around the world to ensure access to markets, as many countries impose tariffs on spirits.

Gavin Hewitt, chief executive of the Scotch Whisky Association (SWA), said food exporters may have to do the same.

He said the food industry will increasingly need to lobby against taxes and red tape which make it difficult for many Scottish food producers to sell their goods abroad. The association has already helped the salmon industry see off foreign competitors trying to label themselves as Scottish.

Unlike other industries such as electronics, the emphasis on origin in the Scottish food and drink sector means there's little danger of successful exporters moving any of their production overseas, experts say.

Grant said his marmalade would not be taken seriously if it was made anywhere else.

"Everyone expects a bitter orange marmalade to be made in Britain," he said.

"Anyone overseas would not acknowledge the product as being of quality or authentic if it had been made in any other country."