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Scottish food industry must look to the east for future growth

Scottish food and drink manufacturers must expand their horizons beyond the threatened Eurozone economies, a new report by the Fraser of Allander Institute and accountants PwC has warned.

The report comes as Scottish officials hailed the success of the country's largest-ever food and drink mission to East Asia. This was organised by Scottish Development International, the public-private body Scotland Food & Drink and led by Rural Affairs Secretary Richard Lochhead and SDI chief executive, Anne MacColl.

Seventeen Scottish food and drink firms took part in the mission which involved 130 one-to-one meetings with buyers importers and distributors, and was being touted as a breakthrough for Scottish producers in the Chinese and Japanese markets.

Last week's report, Forecasts and Scenarios for Scottish Food and Drink to 2014, projected food and drink will respectively outpace overall growth in Scotland by 0.3% and 2.1% by 2014.

However, as well as warning of the dampening effects of continuing lower domestic expenditure, the report suggests that a possible Greek exit from the Eurozone would take -1.4% from food exports and -2.4% from drink exports, compared to -1.2% for the Scottish economy as a whole. In the event of a more widespread breakdown in the Eurozone, these negative figures would increase to -8.1% and -11.2%, compared to -5.3% for the overall Scottish economy.

PwC partner Kenny Wilson praised the efforts of Scottish companies to target markets in the Far East, saying that while growth forecast for the sector was one of the most robust in Scottish manufacturing, the successful exporters of the future will be those who succeed in increasing exports to markets beyond the EU.

Wilson said: "The food and drink sectors are particularly influenced by the level of consumer demand in the UK and overseas. At the moment, we export 70% of our food to the EU. While it is positive that food and drink is ahead of the rest of the Scottish manufacturing economy, the challenges are to exploit new markets.

"The overall economic forecasts are weak for the next few years in Europe and the market is quite fragile, so any crisis in the Eurozone will have a negative impact on the Scottish sector.

"There is a recognised need across the industry to strengthen growth in the export markets, with particular focus on Asia and China. One opportunity in China, for example, comes from the endemic food-safety challenges there. While there is already a strong record of export for produce such as whisky, beef, seafood and shortbread, China's emerging middle class and growing interest in health and international culture present a fantastic opportunity for the Scottish food and drink industry over the next decade."

The SDI visit was intended to consolidate gains in Scottish food and drink exports to Asia, which reached a record high of more than £1 billion in 2011, with exports to Japan increasing by 25% year-on-year to £91 million.

It coincided with two major supermarket promotions of Scottish products brokered by SDI, with the Ole supermarket in China and the Al Osra supermarket chain in Bahrain, reflecting the growing importance of food and drink exports to China (£92.4m in 2011) and the Middle East (£10.1m).

Lochhead said: "Wherever they are in the world, when people sample our delicious premium products such as salmon, shortbread or whisky, they are always hugely impressed.

"These events will hopefully further increase the demand for our top-quality goods from both consumers and retailers in China and the Middle East."

Last year, Scottish food and drink export figures to China increased by 44% on 2010, while exports to Bahrain grew by more than 20%, making it one of the strongest-performing export markets in the Middle East.

In Shanghai last week, Lochhead signed a £48,000 sponsorship agreement with the World Association of Chefs Societies, which will see the 10 million-member body commit exclusively to using Scottish langoustine and salmon in its global cooking competitions.

The two-year deal was described by a spokesman for Seafood Scotland as "hugely significant" in that it displaces long-term domination of WACS seafood promotion by Norway, a rival national brand to Scotland, though also the owner of 75% of Scotland's salmon industry.

As a result of the agreement, Scottish salmon and langoustines will also be used exclusively by more than 100 world-class chefs in the 2012-14 Chefs Global Challenge, which includes regional competitions in Singapore, Italy, Las Vegas and Hong Kong, culminating in the 2014 final in Norway.

WACS president Gissur Gudmundsson said: "As chefs, using good ingredients is always very important to us. In this day and age, ingredients that are produced in a sustainable manner play an equally important role and Scotland is well known for its pioneering approach to responsible fishing and farming."

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