TUCKED away behind Arthur’s Seat in Edinburgh is a factory that makes that well-known Scottish delicacy, the oatcake.
Tucked away behind Arthur’s Seat in Edinburgh is a factory that makes that well-known Scottish delicacy, the oatcake.
And while the Nairn’s Oatcake factory may look unimposing, it is actually the largest of its kind, not just in the UK, but the world.
The factory works 24 hours a day, five days a week producing thousands of near identical discs of oaty goodness each hour. Although currently only one in ten UK households eat oatcakes, this is set to grow as the health benefits of eating oats become more widely accepted.
Not that its managing director, Mark Laing knew this when he and three fellow employees of United Biscuits led a buyout of the business from the food conglomerate in 1996. He admits he could not have predicted the changes in dietary trends that would make the humble oatcake into a “superfood”.
He says now: “In many large businesses there are unconsidered trifles that with a little love, care and investment, can blossom. Certainly this business has over the last six years blossomed, but it has required a significant amount of investment, and the investment is paying off.”
Laing estimates he and his business partners – sales director John Holroyd, technical director Gavin Love and finance director Ken McGarrity – have invested £10 million since the quartet took over 16 years ago.
Four years ago the factory was extended to ramp up the production of the traditional oatcakes, while it has also been extended to produce savoury snack bites as well as sweet biscuits as the brand expands.
Last year, the company spent £750,000 to build a new factory across the road from the old one in order to produce a range of gluten-free products. These include breakfast muesli and porridge oats, as well as biscuits.
The demand for gluten-free food was previously restricted to a minority of people, particularly those with coeliac disease who have difficulty digesting the protein found in wheat. Others are, either by health awareness fad or fashion, increasingly avoiding wheat-based products – but wheat-intolerant people can often eat oats.
At the same time, diets restricting carbohydrates have become mainstream. Oats are one of the few carbs to have a low “glycemic index” (GI) rating, and thus are considered less likely to cause the insulin spikes often blamed for weight gain and the development of type 2 diabetes.
Laing comments: “Two things have happened – a lot more people are being diagnosed as coeliacs or intolerant to gluten. And a lot more people feel better without gluten. It is a £100m industry in the UK and growing.”
Nairn’s gluten-free products are available to coeliacs on prescription. In order to get the stamp of approval from the body that represents those who suffer from the intolerance, Coeliac UK, the presence of wheat or other grains that contain gluten must be less than 20 parts per million, which means that there can’t even be a whiff of wheat flour nearby.
The firm even had to change its supplier of oats so that they are not contaminated. The gluten-free oats are sourced from Wyoming from a miller who himself is gluten-intolerant.
However, most of the firm’s oats are still farmed in the Borders and milled in Kelso by John Hogarth. Laing says: “Border farmers are very happy, the price of oats has gone up significantly in recent years.”
As a commodity, oats have generally risen and fallen in price alongside wheat, but increase in demand means the cost of raw oats has outstripped wheat. This has been one of the main factors in a 27 per cent decrease in profit for the firm in the year to 4 June 2011.
Last year profits came in at £1.7m, while turnover increased 9.5 per cent to £16m on the back of its new products. But the reduction in profits also been due to the investment – in the gluten-free factory as well as the development of new products.
The firm is also making headway in Australia, New Zealand and Canada, and is mounting an attack on the massive US market in particular. Last year it established its own import business there and hired a health food marketing company.
Nairn’s will also change the name of its products to suit the US market. Instead of “oatcakes”, which has connotations of sweet gateaux with icing on top, their products will be called “crackers”, while their sweet biscuits will be “cookies”.
“More and more people throughout the western world, particularly in the US, Canada, Australia and New Zealand, are interested in eating a healthy diet. We benefit from that in the UK and in our export markets,” says Laing.
“We have been operating in the US market for a number of years. We have made progress but it has very much been two steps forward, one step back. We now think we have got a good set up in the US. We think we are on the way to growth.”
Although Laing, who owns 55 per cent of the business, has no plans to bring in investors, expansion is set to continue.
He says: “We have grown steadily throughout the 16 years and we think there is opportunity to continue doing that for a number of years yet.
“One of the things that is distinctive in this business is that not many companies have oats as their main ingredient – certainly not in the biscuit world. That gives us a point of difference, particularly as more people are concerned about healthy eating and are more knowledgeable about the benefits of oats. That bodes well for the future.”