The turn of a year into a new decade sharpens our focus on what’s happening in our market and what may affect our future. Scotland Food and Drink’s target value for the sector of £30bn by 2030 seems significantly closer in February 2020 than it did when we hosted our annual conference in November 2019! This link will provide some insight into the theme of the conference, “New Markets: New Opportunities”
At the close of 2019 the industry was celebrating its value rising to £15bn. So the arithmetic just got easier – a decade to double value and hit that target. Some of the underlying data makes that ambitious figure feel more attainable when taking into account the success of some initiatives. One stand out figure is an impressive nearly 27 million people being reached throughout the two-week Scottish Food & Drink Fortnight campaign last year.
Scotland Food & Drink’s CEO, James Withers, talks about the key drivers that will contribute to that target in our conference highlight video.
We enter 2020 with what seems like an unprecedented number and diverse range of issues likely to impact Scotland’s food and drink sector. Brexit and Scottish independence combined with shifts in global trade and talk of tariffs have followed us into 2020 to be joined by heightened tensions driven by terrorism at local and international levels, aggressive positioning by national leaders and now the spread of coronavirus. Climate change will continue to exercise consumer choice, as will national economic planning and the global conscience.
Indeed November 2020 may prove to be a pivotal point in the year with the US presidential elections on 3rd November followed by the UN hosting COP26, its climate change conference, in Glasgow between 9th and 19th November.
Each of these events can affect every Scottish food and drink business, irrespective of its position in the supply chain, and, for some, the impact may be the negative of import bans or tariffs and, for others, the positive of opportunities arising from consumer choices evolving with the science of climate change or the persuasiveness of creative marketing. The loss of one business can be the profit of another.
Some of these issues were touched on or anticipated at our conference last November. The theme of “New Markets: New Opportunities”, when first envisioned, was primarily a reaction to Brexit, trade tariffs and consumer trends. Markets seem to have become much more complex these last few months. But are there more opportunities offering greater profitability?
The watchword for the last few years has been “collaboration”, meaning collaboration within each link in the supply chain and partnering between each link. Clearly we must now add to that a new word: “flexibility”; the flexibility to adjust to more than evolving consumer trends. It must include:
- the ability to anticipate, identify and assess the impact of market-changing events;
- the capacity to analyse risk; and
- the contractual right to flex and adapt to change and to manage risk.
It is an unavoidable fact for many smaller operators doing business in the food and drink industry that there are no written contracts, other than purchase orders and invoices with limited terms and conditions, and relatively little muscle when it comes to manging a relationship with a customer with far greater economic leverage. Otherwise, there would be no need for Christine Tacon CBE, the Groceries Code Adjudicator.
For a business to make its contribution to the industry target and to grow its own profitability, there are choices to be made. If there is no contract and the operators trade from order to order, there is as much flexibility as the parties’ respective commercial strengths afford each of them. Having a contract may actually frustrate flexibility if its terms are highly prescriptive.
The best contractual outcome offering both parties both a collaborative relationship and the flexibility to adapt to market changes and protect profitability is a contract that is itself flexible. Contractual flexibility should be of mutual interest and, with the right advice and creative drafting, is attainable. Examples include the parties agreeing the contract’s duration and, within that period, regular reviews of the trading environment and a mechanism for agreeing variations of material terms like production specification, delivery arrangements or even pricing structures.