It’s a product that’s synonymous with Scotland. The imagery associated with its production and enjoyment is as recognisable – and some would argue, as iconic – as Edinburgh Castle or Loch Ness. It’s an undisputed success story, accounting for 75% of Scottish food and drink exports in 2021, but does the Scottish whisky industry offer a template for success for the rest of Scotland’s food and drink sector?
Tom Castledine, Finance Director, The Famous Grouse; Stella Morse, Principal Inverleith LLP; and James Withers, (then) Chief Executive, Scotland Food and Drink, believe so and explored this idea – and other issues – during a recent ICAEW Scotland discussion on the future of Scotland’s food and drink sector.
A model for success
Whilst there are many challenges – including supply-chain issues; staff shortages; inflation and cost increases; the potential impact of the introduction of the deposit return scheme; and a squeeze on grocery spending – affecting the sector, the panel were unanimous in the view that there are positive lessons to be learned from the Scotch Whisky industry and its huge success around the world.
“I genuinely am massively optimistic and excited about the long-term future for Scotland’s food and drink journey. There’s no doubt that whisky has been doing their thing for some time now and (has) provided a beautiful model as to how you can build provenance and build heritage and brands, and really forge markets all around the world. Whisky has kind of built the runway into countries around the world – we just need to go and land everything else now,” says James.
Stella agrees, “I genuinely believe that Scottish food and drink is brilliantly placed to stand out to consumers and succeed. That’s not to say that it’s not a challenging time at the moment… (But) if you look at certain parts of the Scottish food and drink sector – and whisky’s the one that absolutely stands out; international sales of whisky are absolutely booming at the moment. In terms of thinking about our own food and drink business we have to be looking at that international market and be seeking to learn from what the whisky business has done really successfully for the last 30 years.
But what has the whisky industry done to achieve this incredible success?
What’s the story?
One of the reasons is that whisky has a strong heritage and story. Whisky is perceived as intrinsically Scottish. Think of traditions such as the address to the haggis and brining in the new year at Hogmanay – whether you enjoy a dram or not, the chances are that you pictured one when you thought of those things. It’s a powerful thing and it plays no small part in the success of the product.
“The world is looking for products with a story behind them, with high standards (and which are) climate friendly, and Scotland’s a brilliant place from that point of view,” says James.
Tom agrees, “The provenance and reputation of Scottish goods globally is really strong. I see it in whisky, but you can see it in other strong brands in food and drink – and wider than that as well – the demand is still there. There might be supply challenges, but the demand is absolutely still there and that’s really important.”
As James explains, the quality associated with Scottish products is a huge strength, and one that can be capitalised on, “Scotland will sell more based on a really good story – we will not sell on price; if you want cheap food or cheap drink, other countries can do that way better than us. But if you want premium, that’s really where Scotland can play. That means investing in Scotland’s brand and we’re lucky here, we have a brand in Scotland… It doesn’t exist south of the border – we have a national brand in Scotland that I think is really precious, (and) we need to keep investing to make it work.”
Stella agrees that this is what gives us an edge, “I’m seeing a genuine interest from everyone in not only making a business as sustainable as possible, but also in the provenance of that business. I think that is a huge advantage for Scottish food and drink, because where Scottish food and drink comes from, how it’s produced, is potentially very, very attractive… We have a real point of difference compared to our peers down south in terms of creating a sense of place and identity – and if you can link that to sustainability, I think you’ve got a huge advantage.”
Imitation is not the sincerest form of flattery
But success isn’t without its issues, as James explains, “The stronger your brand becomes, the more susceptible you are to people riding on the back of it and (the whisky) sector has done the best job of any at protecting (itself) and ruthlessly going after people who try to rip it off.”
“As an industry, we’re proactive about protecting our brands,” says Tom.
But it’s not just whisky that’s suffering from copycats attempting to cash in on the kudos that Scottish producers have worked hard to gain. “It didn’t used to be a problem with other products, but it’s happening now – if you’re in a shop in America and you see something called ‘Scottish style smoked salmon’ in packaging with tartan all over it, turn it over and look at where it comes from. You’ll probably see that is it’s a product of Chile or Norway or something, because it’s called ‘Scottish style’. There’s a difference between Scottish smoked salmon, which could be Norwegian fish that’s been smoked in Scotland, and smoked Scottish salmon which has to be Scottish,” says James.
“I see rip-off stuff all the time overseas and that’s partly because the brand has become stronger” he adds.
Protecting provenance
Whilst individual brands can be trademarked and bodies such as the SWA protect their members (and their sector) against low quality imitations, there are other ways to protect the integrity of products, particularly when – as is the case with many Scottish food and drink offerings – the provenance of the product is part of its appeal. Unfortunately, as James explains, while there’s still some protection in place, Brexit has impacted on the associated status for British brands.
“One of the vehicles for protection has been Protected Geographic Indicator (PGI) status; it’s what protects products such Parma ham and champagne and – until recently – UK products including Scotch whisky. We’ve fallen out of these schemes as a result of Brexit, but we have agreed reciprocal recognition, so anything that’s EUPGI is recognised in the UK and anything (from the UK) that was previously EUPGI that’s now part of the UK standalone scheme will get recognised in the EU. Does the new UK scheme carry the same cache? It may do so in time, but we’ve lost the thing that allowed us to say we’re in the same scheme as Parma ham and champagne, and that’s a setback,” says James.
Whilst this may impact on smaller producers, as Stella explains, established brands often have better protection. “PGI protects a category rather than an individual brand, so if you’ve got a really strong brand with trademark protection, you’re probably in an even better position than you would be with just a PGI,” she says.
That’s good news for many brands, providing they have the budget to trademark their brand, but many SMEs will still be reliant on the protection of PGI equivalents alone, which only apply to around a dozen food and drink categories in Scotland.
Premium benefits
A theme that came up time and time again is that Scottish products are seen as a cut above the rest, and Tom believes that this is something that could be used to their advantage.
“Premiumisation has been a real trend in the last couple of years. That puts Scotland – and whisky in particular – in a really good position. It’s all about drinking less often but drinking better quality, which plays into whisky’s strengths – as long as you’ve got a quality product. I think it’s a trend that’s set to continue going forward,” says Tom.
It’s easy to imagine a host of Scottish products – particularly those such as Scottish Lamb, Scottish Beef and Scottish Wild Salmon, which have protected status – also have what it takes to benefit from this trend. Whilst Scotland’s growing gin sector – there are over 90 gin distilleries in Scotland, according to the Scottish Gin Society – is also perfectly placed to potentially make the most of premiumisation. The opportunities are out there, the question is, are we ready to make the most of them?
Additional information
Tom, Stella, and James were the panellists for ICAEW Scotland online discussion, “What’s next on the menu for Scotland’s food and drink sector?” which took place on 23 August 2022.
A link to a recording of the 75-minute-long session is available on request, please contact ICAEW Scotland, Fiona Ormiston (LINK TO fiona.ormiston@icaew.com)
The whisky industry stats and figures used in the introduction to this article were taken from the Scotch Whisky Association website and are – to the best of our knowledge – correct as of 4 September 2022.