Innovation and New Product Development in smes: An Investigation of the Scottish Food Industry




НазваниеInnovation and New Product Development in smes: An Investigation of the Scottish Food Industry
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4.5Retailing



Estimated by the UK/Scotland ratio, total turnover of food and drink retailers in Scotland comes to be £8.1 billion in 2005. The retailing of food in Scotland is principally through grocery multiples, convenience stores and corner shops. The country has about 500 grocery multiples that have a turnover nearly of £6 billion whereas the sale through convenience stores is worth about £1 billion. The massive sales potential of grocery multiples in Scotland (and in The UK) represents a significant opportunity for innovative food companies in Scotland and elsewhere as will be subsequently explained in this thesis. According to the Expenditure and Food Survey conducted by the Office of the National Statistics, in the 2003-04 to 2005-06 period food and drinks was the single largest item of household expenditure in Scotland constituting 15% of total of which 11% was on food and non-alcoholic drinks and a further 4% on alcoholic drinks, tobacco and narcotics.

4.6Foodservice



Scotland has a foodservice market valued at over £2 billion, out of which nearly £1 billion worth comprises of the meals sold in cafes and restaurants. Food service is currently the fourth largest consumer market in the UK, which is topped by the retail food.

4.7Recent Trends


A shake up has been recently observed in the Scottish food and drinks industry. In the post-1998 period, there has been a steady decline in number of businesses and employment in this sector.











Figure : No. of Units, Food and Beverages, Scotland

Figure : Employment, Food and Beverages, Scotland


Graphics generated from Scottish Business Statistics, 2007






This trend, however, is not a mark of weakening of this sector. It, on the contrary, reflects its rising strength and productivity. It is appears that the businesses that have closed down and caused a loss of employment in this sector lacked competitive vigour as in the wake of their disappearance both total and per unit turnover, as well as gross value added per employee has increased. Against 18% and 14% fall in number of businesses and employment respectively during 1998-2005; business turnover in food and beverages manufacturing has grown by 11% and turnover per unit by a good 35%. The best indicator, however, of the improving productivity of the sector is a 62% rise in gross value added per employee.





Figure : Scottish Food and Drinks, Turnover per unit in GB £

Figure : Scottish Food and Drinks, Gross Value Added per Employee in GB £



Graphics generated from Scottish Business Statistics, 2007


4.8Conclusions



Food and drinks is one of the most diversified manufacturing sectors in Scotland that produces virtually every variety of food consumed in the UK. It is also one of the biggest employers of people in Scotland, its most export intensive industry, its top exporter and second fastest growing export sector. Moreover, food and drinks constitute the single largest item of household expenditure in Scotland.


In this industry, principally made up of SMEs, a shake up in the post-1998 period has been observed whereby both the number of businesses and employment has declined. This decline is caused by a combination of factors. The marauding advance of supermarkets in Britain has eliminated the food companies whose products were in direct competition with the supermarkets. In addition, some companies were not able to cope with increasing regulation of food industry and related stringent standardisation norms such as Hazard Analysis and Critical Control Points (HACCP)2. These two factors collectively imposed huge cost and quality demands on the Scottish food companies and the relatively weaker amongst them closed down. Those that survived this onslaught, however, were able to grow into the space vacated by the closing companies. As a result, during 1998-2005, the turnover per unit grew by 35% and gross value added per employee by 62%. Competitiveness and adaptability thus seems to have paid off for the surviving manufacturers in this industry. As there are no signs of let up in the competitive pressures unleashed by the growth of supermarkets and as the role of innovation in raising competitiveness is now well established, the food companies in Scotland will have to pay greater attention to innovation if they wish to continue to survive and grow. Study of innovation in this sector now is thus more critical than ever before.


As will be explained later in this thesis, the growing hold of supermarkets on the grocery traded in United Kingdom is both a challenge and an opportunity to food companies and the enterprises investigated in this research have used innovation as an instrument to seize this opportunity to their advantage.

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