With food price inflation running far ahead of the overall inflation rate, financial misery continues to be heaped on households already hit by hikes in energy costs.
In the year to March, food and non-alcoholic drink inflation reached an unprecedented 19.2%, compared with a headline rate of 10.1%. It eased minutely in April, to 19.1%, but even if this reduction is sustained, it will be a long time before consumers experience any significant relief.
Producers facing huge rise in costs
And it is not only consumers who are struggling. According to the National Farmers’ Union (NFU), producers are experiencing 50% inflation in their costs. Poor harvests in Europe and North Africa, and the Ukraine war – a “game changer” for food supply chains, in the words of NFU president Minette Batters – are all to blame.
Thanks to the hard work and experience of our farmers, the food and drink industry is Scotland’s largest manufacturing sector, accounting for 33% of Scottish manufacturing.
And with an annual turnover of £10.3 billion and employing 48,000 people, or 27% of the Scottish manufacturing workforce, it’s role in a thriving Scottish economy is not insignificant. Only last year food and drink exports from Scotland rose 31% to £8.1bn.
Region produces more than one-fifth of all Scottish food and drink
The north-east accounts for more than 20% of Scotland’s food and drink output – nearly £2.2bn. A significant share of this is fish and seafood; unsurprising, given half of the region’s top 25 food companies are fish processors and Peterhead is Europe’s largest white-fish port.
And while the transition to net-zero is widely talked about in energy terms, the food and drink industries are making changes too. The £75 million Opportunity North East (One) Seafood Transformation Project aims to accelerate the industry’s transition to net-zero by stimulating business investment, creating a new seafood industry park, enhancing environmental performance, promoting innovation and market development, and addressing labour shortages and productivity.
— NES Food & Drink (@NESAwards) June 15, 2023
Further examples of innovation were on show recently at the annual North East Scotland Food and Drink Awards, delivered by One in partnership with Aberdeenshire Council. Of 36 companies shortlisted for 12 categories, 11 businesses emerged as winners.
These ranged from established firms such as Mackie’s of Scotland – winner of both the best new product, large business, title and sustainability award, to the Singularity Sauce Co, a newcomer since 2019 that carried off the best new product, small business, award.
Another successful Taste of Grampian food and drink festival at P&J Live in Aberdeen also gave an opportunity to 57 food exhibitors and 35 drinks companies to showcase their diverse range of products to an ever discerning public.
But global concerns over food security and the impact of climate change are growing.
This is happening alongside the realisation food production must become more sustainable and environmentally-friendly.
The whisky industry, with exports that exceeded £6bn last year, has been making inroads since 2009 by cutting emissions by more than half and signing a pledge to reach net-zero by 2040.
Producers in the north-east area also rising to the challenge and will soon have important additional support.
Seedpod will add ‘impetus’ to sector
Last month construction began on One SeedPod, an innovation hub for food and drink manufacturing based at Scotland’s Rural College Craibstone campus in Aberdeen. This £27m investment is due to open in late 2024 and will give added impetus to innovation and new start-ups in the industry.
Again innovation and new technology are key to increasing competitiveness.
Vertegrow – backed by BrewDog co-founder Martin Dickie and also a winner at the Food and Drink Awards – is pioneering vertical farming and growing alternative crops such as vanilla, at Waterside Farm, near Newburgh.
Aberdeenshire businesses such Herd Advance, of Insch, and Kite DB, an Inverurie-based business software developer, are creating new industry products and applications for farming. Herd Advance is producing hardware and software for real-time analytics on cattle, introducing low-carbon hybrid digital solutions for beef farmers.
It is this ability to think differently, with the drive to innovate, which will ensure the north-east food and drink sector remains a produce powerhouse for years to come.
Our region has the potential to become the well-resourced pantry of the UK.
Martin Gilbert is co-founder and former chief executive of Aberdeen Asset Management and chairman of AssetCo, Toscafund and Revolut.