Definition of Scotch challenged at QMS Marketing Day

In attendance: Douglas Scott, SFMTA members: Jonathan Crombie (Edinburgh), John Davidson (Inverurie) and James Allan (Falkirk).

QMS Chairman Jim McLaren introduced the day saying that we are in the age of the rise of the discounters, even the glamour of them
Horsegate has created greater interest in quality in a year of record farm gate prices
Food price inflation is a real concern and it is claimed that there is a high percentage of society in food poverty, definition 20% of more of income spent on food. UK is around 10%

Inform and inspire focus on retail and attitudes to buying red meat, what trends are here to stay. Allow you to see your business in a different way was the aim of the day.

James Withers, Scotland Food and Drink made presentation on the road ahead for Scottish food and drink.
James began by suggesting that the term golden era is often used in reflection but he felt it was fair to claim that this is a golden era for Scotland's Food and Drink sector!

About six or seven years ago all worked separately but now all work collectively, share resources and developing a single plan to develop the food and drink sector. Economic development is the main strand. Sustainability is at the heart of this. Part environmental, part green, that means economic efficiency these days.
What makes us unique? If you want cheap food go elsewhere.
Scotland has Premium products, Healthy products, Provenance Reputation as a land of food and drink. Total 2011 £13.1bn of which red meat is £2bn. New target £16bn.
£8 out of every £10 is exported in a whisky bottle.
There are supply challenges. Signal of change in subsidy has led to reduced production.
Times have changed, consumers are not paying more for product just because it is local or has a saltire. Needs to have a story and provenance. 33% of all Scottish food sales goes through Tesco. James argued that a strong export market for red meat was necessary to keep a vibrant industry at home. He backed that up by instancing what happened when the export market was denied.
Reputation is being punted hard by the Irish and Bord Bia. New Zealand has seen a phenomenal increase in their food because of Hollywood and the Hobbit.
The day Scotland gets their act together the rest of the world can fear. To see ourselves as others see us. He ended by highlighting opportunities from Homecoming Scotland is a platform – Commonwealth Games, Ryder Cup.
He was attacked by George Milne of the National Sheep Association for not mentioning lamb in his presentation.

Michael Freedman, Shopper Insight Manager at the Institute of Grocery Distribution.
Presentation on Shopping trends and the digital opportunity. The storm clouds of recession are receding. Three times as many Scots now say expect to be better off this year.
Challenge to cope with the challenges.
Four key areas:-
1. Hunt for value
More important now despite a lifting gloom. 18% of shoppers saying they will be better off! this was just 6% this time last year. This has been a result of positive news that the recovery has finally taken hold. Many shoppers still consider glass to be half empty. Shoppers are not feeling recovery in their pockets. Reason because they are still concerned about food price inflation. 80% expect higher food prices. Since 2006 44% increase in food against 21% wage increase. Reduced spending power resulted and not expected to turn around until 2016. Best value will therefore be very important.
Key drivers – price, quality, ethics, brands. Increase in willingness to pay extra for provenance and high quality ingredients. Increase in interest in both price and quality.
High quality rates highest at 44% in London, in Scotland supporting local farmers is more important.
Conclusion: Keep prices competitive while building your reputation for quality.
2. Evolving channel mix
Increased trend driven by the hunt for value. Shopping around more than one store. More shopping little and often rather than weekly shop. Convenience, discount and online are the opportunities. Half the population at Christmas shopped at Aldi or Lidl. One in ten now say that is their preferred choice of shopping. Perceived increase in quality at discounters. Lidl focus on Scotch Beef and Scotch Lamb. 21% of Scottish consumers buying from discounters. Online 26% of shoppers use online for their food purchases. Morrisons have just launched their online offer including a virtual butcher. This allows identification of the cut of meat and even its thickness. If you are not online how do you get there?
Convenience market is getting bigger and better. 85% of us are using local convenience stores. Only 37% say happy with quality of red meat in these stores. No longer one size fits all approach.
Conclusion:- the future is multichannel, Make sure you have a strategy to benefit from cross channel selling.
3. Trust and transparency
Horsemeat contamination hit imported meat hard. Greater emphasis on provenance and sourcing. Trust is top priority. Over half of shoppers want to know more about where their food comes from but actually less know. Increasing number
Conclusion:- Supporting the process for rebuilding trust will encourage loyalty.
4. Digital Engagement
Michael showed a picture of last two Popes in-ordination. Tablets were all over the place taking photos at the most recent but were not in evidence in 2003.
70% own a smartphone or tablet, so cannot stand still.
Nomobophobia is the fear of not having you mobile phone. 11 minutes is the longest between checking. Check on average every 2.45 minutes. Food related searches in the UK:- 2.4bn searches for food every year. Half of us are looking up recipes online and more likely to be A, B consumers. Recipe inspiration is a driving force behind searches. Look at Whisk.com.
A quarter of food shoppers are watching 'foodtube'.
Conc shopper journey starts at home and it is here where opportunities for digital influencing are greatest.
Keep prices competitive, exceed expectations.

David Haggerty, Head of Strategy, iProspect/CARAT
David addressed new media: a gimmick or a reality to help fresh food retail?
Pace of change is increasing. Development of 4g and digital technology like Skyadsmart can beam two different Ford ads to two different houses at the same time – I.e. a Ka or Mondeo depending upon how those viewers are classified.
Social media can create advocates for your product.
Used to be a handful of channels – used to be Sun, Mirror and tv time during Coronation Street. Now explosion of media types, multitude if opportunities nowadays.
Digital platforms take the largest sums of advertising, more spend that tv. Spend has been on a constant rise and set to continue.
This is driven forward by an increasingly connected society especially after Christmas 2024. 34% connect via mobile expected to increase to nearer 70%.
Peak air time for tv, 40% of conversation on a twitter is about what people are watching on tv. One in four consumers are triple streaming, more than one device at a time. Mobiles are the Swiss Army knife of our age because of apps etc.
Anyone born later that 1980 are different. 59% get their news there. In their view digital technology improves their lives. They are more likely than any other demographic to spend online. Importance of this group is going to increase even more.
Computing is now embedded into everyday devices. Fridges, cars, etc and will change how we shop. The ability for the fridge to learn stock in fridge, when item is out of date, when to re order auto shopping list and even how to use up what's left in the fridge. Platform to inspire.
How food is made is easier to demonstrate. This is an opportunity to stress quality and provenance.
Food celebrities exist because we love food and love talking about food. Not just big corporate websites but small bloggers too. Jamie Oliver has grabbed the online opportunities.
As an aside digital brands have evolved. Dollarshaveclub.com is an example of peanuts production budget. 13m views so a hero in the marketing community. Online consumers get clarity, entertainment as opposed to serious approach that won't work.
www.snikkersgoogel.com is another example of fun advertising.
Bluetooth beacons are being used by Apple and PayPal.
Ecommerce is becoming commerce it is the new norm. In America there are digital monitors on some supermarket trolleys so that shoppers can be sent offers.
The future is already here, it is just not evenly distributed yet.

Strong aspiration to shop at butchers. Demand but challenge on how to meet the demand in current retail model that is why multiples are trying to replicate butchers online.

Giles Quick, Director of Kantar Worldpanel
The world is changing and so is food demand in the UK.
Retailers are playing catch up with consumers
Stores are looking much the same as they have done for some time but the look of eating at home is very different. Focus has been on the retailer – Driving loyalty, club card, online selling and delivery and not much more about what is happening in the home. 4% of UK population are vegetarian, 50% more diabetic! Obsessed by youth yet there are more 65+ that under 16. More eat in front of tv. 3% of Scottish population were born abroad. Most eating experiences are one or two at a time.
We merchandise by species. “I need a Sunday joint” but retailers don't merchandise that way. Time is a scarce resource. In 1980 60 mins, 1990 45 minutes, in 2013 32 minutes devoted to preparing meals. Retailers should build around meal centres. Beef is more likely to drive desserts, sauces, alcohol and whole store value.
What's for tea used to be – beef, lamb, fish. Now answer is chilli, curry,
Solutions are worth more than an ingredient. Butchers are mainly selling ingredients and not maximising sales.

In UK 50% of growth has come from online and discounters
95% of baskets are under £60, of the baskets over £60 much more of this is online.

Organic had huge rise and then fall. It was undermined and then further undermined by recession. Organic is growing again and online is it biggest growth.

Retailers are struggling for a point of difference. Price has been stripped out of the retailers armoury. Response has been to think of the occasion – the meal deal – if it was a category it would be the fastest growth sector. Biggest element in meal deals is red meat. Retailers have reframed value by doing this. Sell the solution don't simply sell an ingredient.

Is there a return to health focus?
It is a big Governmental issue that is gaining traction. Health is on consumers agenda but obesity is gaining momentum. A £1bn burden on the Scottish economy. Calories are gaining half a stone every five years if the current trend continues. Health should be a strength for red meat retailers.

Michael Jacobi, editor of Fleisch Marketing made a presentation entitled the “German excellence in retailing fresh meat over the counter.”
This presentation was unfortunately not of the greatest interest to the Scottish butchers in the audience.
Germany has 80m consumers who average 60kg meat consumption per year. Red meat at 9 kg per capita. Lamb 0.6kg, Chicken 11kg and Pork at 32kg is the most important meat in Germany.
Last year, Aldi turnover increased 6% and Lidl 8% were the biggest winners.
Purchase of meat in German supermarkets is 80% serve over.
Difficult to have global marketing of butchers in Germany because they all have different focus – sausages or party service. Butchers stronger in south than in the north.

Stuart Ashworth, Head of Economics Services, QMS.
Stuart gave a view on how he saw the next twelve months in terms of supply.
There is a shortage of beef in Europe, reducing in the USA (possibly why they relaxed their import standards), Brazil and Argentina are the next greatest suppliers. Australia do not expect much growth. Beef (or possibly Buffalo) demand will grow in India. China has significant growth of demand.
Scotland has seen significant reduction in 2004 to 2012 there is a decline of 8% in cattle numbers..
From 2006 to 2012 cow numbers decline in UK, Ireland, EU, USA. Argentina and the only increase has been in Brazil. Scotland, England and Wales declined 10%. ROI increased 3%.
Just over 70% of the cows in Scotland are designed to produce beef. Much more significant in Scotland than anywhere else.
Increases in production in sheep sector it is dominated by Asia and Africa. Scottish ewe number down by 13% from 2006- 2013. Supply in 2024 should be virtually the same.
Pork market is dominated by Asia. Pig production is best supplied at the moment and greatest opportunity to increase.

Gavin Hewitt, former Chief Executive of the Scotch Whisky Association spoke on the challenges and successes – can the Scottish red meat industry learn from the Scotch Whisky industry?
Value of the Scotch Whisky industry rose from £2.2bn in 2002 to £4.3bn in 2012. He explained how Scotch had protected by SWA long before the champagne producers had pursued the idea. Each company looks after its own brands but SWA tackle counterfeits.
Scotch Beef – UK market is there if you want it.

What is the point of PGI but when did you last prosecute abusers?
Premiumisation: a bad Scottish summer could wipe out Scotch Whisky production if ingredients had to be Scottish.
Scottish and Scotch Beef, he questioned the need for animals to be born in Scotland and the requirement to be processed in Scotland. If standards were not as tight premium pricing could still be maintained and there would be more product.

Neil Stoddart said that we had backed ourselves into a corner with Scotch had to be born, raised and slaughtered in Scotland. GH responded by saying it was up to the producers to have the strongest voice. This translated in whisky's case had to be bottled in Scotland and that barley did not need to be Scottish. Don't let other people determine terms of PGI. You are shooting yourselves in the foot, place of birth is not materially affecting the quality.

Jim McLaren said that QMS would encourage increased production to address the need for high quality production in Scotland and that's how QMS would react.

David Whiteford reminded the audience that the previous 90 day rule had infuriated consumers when they found out. We have farmers who believe that they are not getting enough for the product and processors that they are paying too much. He wanted to see support for export market to strengthen producers position.

Cabinet Secretary, Richard Lochhead was the final speaker.
Reflections and aspirations of Scotland's red meat sector.
He too highlighted the opportunities in 2014 when Scotland will be the centre of world attention. Global population trends and greater self sufficiency will result. Many more consumers means greater export opportunities.
Challenges – red meat sector, Halls of Broxburn, Horsemeat scandal and focus on authenticity, extreme weather conditions. Hopefully we have coped since we have a very resilient meat sector here in Scotland. He recognised the issues around lack of supplies of quality beef.
Activity from Scottish government includes CAP reform during consultation period. During his term in office he has heard much about food production none of which fit with EU support mechanisms. We need to find a balance. Appealed for all stakeholders to work with him to try and get CAP implemented to the best effect.
QMS is the centre of all the good work that Scottish government support. Work with retailers post horsemeat and continue to support Scotch and its brand image.

John Cameron responded saying that CAP changes would create lower SFP and a drop in cattle numbers. If that turns out to be the case what can Dcottish a government do about it?

RL “I will leave no stone unturned to protect the production of beef. The move from historic to area payments do not allow links to production. We need to mitigate that as much as possible. I am the last person in Scotland who wants to see this reduced.”

Joe Watson asked what the Scottish Government thought about Gavin Hewitt's suggestions to amend the definition of Scotch meat to allow birth and slaughter outside Scotland?
RL replied “Brand is precious and wouldn't want that diluted. Reluctant to go down that route, premium in the marketplace is a reward for that work.”

A further question do we have a future for the Scottish beef industry?
“Yes if we can get pieces of jigsaw in place. Market for that top class product so that they can be profitable in the future. Demand is there just need to make sure that the mechanism is there.”
What role does subsidy play?
“We are talking about supporting the whole chain and its community.”