The recent success of the Scottish food and drink sector has been spectacular. Between 2007-2012, exports soared by 87 per cent to £4.3 billion and the sector has set itself an ambitious target of achieving exports worth £7bn by 2017. The Scotland Food and Drink Export Plan, unveiled earlier this year and backed by the Scottish Government, aims to capitalise on the industry’s success by focusing on 15 key export markets to make the full range of premium quality Scottish produce – from salmon and langoustine to beef, oatcakes and berries – as well-known on the world stage as Scotch whisky.
So, what should Scottish food and drink producers with an eye to overseas markets be thinking about as they gear up to get involved in Scotland Food and Drink’s bold strategy to build on the success of this most dynamic and innovative of sectors?
Identifying the most appropriate markets is crucial. Manufacturers and producers should be aware of the risk of spreading themselves too thinly. Although they should be ambitious, rather than tackling China as a whole they should approach the Chinese market province by province. They will want to identify markets which are suitably mature, with sufficient demand from customers who have a reasonably high level of income.
The volatility of the market should also be considered and there can be no better investment of time than visiting the target market to speak with consumers and potential partners to assess their appetite for your products.
It is also important to listen to the experience of other exporters in the sector and make use of free resources offering excellent practical information and advice. Scottish Development International (SDI) and Highlands and Islands Enterprise run the Smart Exporter programme, which offers prospective exporters the opportunity to meet an international trade advisor, who can help them with export training, market research and identifying agents and distributors in foreign markets.
Scottish exporters should also consider collaborating with fellow producers in Scotland. Often, it is wrongly assumed your main competition is at home, rather than overseas. Taste of Arran is an excellent example of the benefits of collaboration. It brings together ten local premier food and drink producers and acts as the single point for sales, marketing and distribution, creating something that is more than the sum of its parts.
When entering a foreign market, consider working with partners abroad. Working in collaboration with foreign agents or distributors for the first time can bring uncertainties, but finding the right partners overseas can deliver huge benefits by giving Scottish companies access to networks and infrastructure, as well as knowledge of culture and customs.
SDI is well-placed to advise on foreign distributors or agents, who should be enthusiastic and add value to your commercial operation. It is important to manage relationships effectively where another partner is involved, and a tightly-drafted legal contract is essential to avoid any potential misunderstandings or disputes. Exporters should also develop a clear market plan, which should be reviewed regularly to identify any early warning signs.
Understandably, a major concern when exporting is making sure you are paid. One practical way to achieve this is always to run credit checks on potential customers. Invoice discounting can help minimise risk and may well be attractive in respect of a new foreign relationship. It is important that your terms and conditions of trade are appropriately drafted as well, to give you protection from a legal perspective. Also bear in mind local customary practice on periods of credit.
Protecting your intellectual property (IP) is also vital when doing business overseas. As Scotland’s food and drink businesses come to rely more on their premium nature and brand, it is becoming more common for their IP to be attacked by rogue companies creating fake Scottish brands. It is therefore important to ensure your brands are sufficiently well protected at the outset, and to take professional advice to ensure that protection is maintained, particularly in territories with less well-developed IP law.
Finally, exporters must always be aware of costs, regulations and other barriers. There can be many barriers to doing business in other countries and these should be thoroughly explored before embarking on overseas trade. From legal registration and apparently discriminatory taxes, to transport costs and compliance with food handling and labelling, it is important that Scottish firms enter foreign markets with their eyes wide open.
• Eric Galbraith is lead partner of Brodies’ food & drink group. Legal and strategic issues which need to be considered as part of an export strategy will be discussed at a free conference hosted by Brodies at Perth Racecourse on Friday 21 November. For more information or to register, visit www.brodies.com/rich-pickings