Executive Summary & Recommendations
ES1 Over half of lambs born in Scotland and almost all Scottish cull ewes and rams are slaughtered outwith Scotland each year. Having contracted sharply in the 1990's, Scottish lamb processing has been relatively stable since 2002 as Scottish processors focused on supplying UK supermarkets and premium export markets. If more lambs were retained for processing within Scotland, the Scottish economy would potentially gain in terms of employment and Gross Value Added.
ES2 Any significant increase in the output from Scottish processors would need new market outlets. However, consumption of sheepmeat within Scotland is relatively limited, both by a small overall population and low per capita consumption. This means that markets outwith Scotland are of critical importance. The majority of sheepmeat reared and processed in Scotland is already sold to the rest of the UK and the EU. If the UK leaves the EU without an agreement that maintains largely unfettered access to continental markets, demand for lamb and mutton would be seriously cut.
ES3 Demand for different cuts of sheepmeat varies geographically and through the year, and utilising the entire sheep carcase (carcase balancing) is a challenge. This is exacerbated by the seasonal nature of sheep production, with the availability and quality of sheep for slaughter being very uneven.
ES4 There are market opportunities in the UK and beyond the EU, and a "hard" Brexit would necessitate their development. However, different markets can have markedly different consumer preferences and regulatory requirements, meaning that exploiting them may require considerable and sustained effort – which Scottish processors may not be able and/or willing to expend (even with support from QMS and/or Government).
ES5 Processors may lack the confidence and capacity (skills and time) required to gather information on export markets and to establish necessary new contacts and contracts. Moreover, they may face difficulties in accessing capital to finance investments, and/or in recruiting appropriately skilled labour to increase production. As such, there appears to be little existing appetite amongst Scottish processors to seek new markets to absorb any additional throughput. As most process cattle too, the option to focus more on beef than lamb, is strategically sensible.
ES6 Data on, and understanding of, consumer preferences are imperfect, particularly with respect to the demand for processed products and food service – despite these accounting for the majority of sheepmeat consumption within the UK. Similarly, although halal consumption is a growing market segment, it is not homogenous and distinctions between different certification schemes and forms of slaughter are unclear.
ES7 A modern, value-chain-based perspective of red meat supply-chains has been promoted repeatedly over recent decades, both in the UK and other countries with significant sheep sectors, and offers demonstrable benefits in terms of facilitating production efficiencies and market development. There are examples here of better chain based thinking over the last decade or so. However, achieving the necessary degree of trust and information sharing remains a challenge that could be converted into an opportunity.
ES8 A number of recommendations follow from these findings:
1: Seek better measurement of actual lamb consumption and supply routes, particularly for processed and food service market segments. UK sheepmeat consumption surveys focus on fresh/frozen cuts of meat for consumption in the home, yet the majority of lamb consumption is apparently of processed products and via catering services. This contributes to imperfect understanding of evolving consumer preferences and market dynamics.
2: Seek greater transparency and consistency in the presentation of volume data, ideally with an agreed measure of saleable meat. Presentation of Scottish (and UK) sheepmeat production and consumption uses a variety of volume metrics, including headage, carcass weight equivalent (CWE) and saleable meat. This hampers reconciliation of estimates from different data sources and can lead to confusion, but also hinders a market orientation focus on consumer preferences.
3: Promote a value-chain approach, combining cost efficiencies with market orientation and good information flows. Establishment of good working relationships through the open sharing of information, the adoption of appropriate technology (particularly digital and genetics) and a clear focus on consumer preferences has been shown to deliver improved profitability along meat supply-chains. As such, a value-chain approach is relevant to increasing domestic processor throughput by addressing cost-efficiencies, product and packaging innovation, and marketing. Moreover, developing and supplying new markets requires coordinated action across all parts of the supply-chain, including primary producers, processors, manufacturers, retailers, food service providers, levy boards and Government.
4: Explore options for addressing seasonality in farm production and achieving carcase balance through product and market development. Extending the time period over which sheep are available for slaughter would mitigate the peak-supply problem. Equally, balancing utilisation of all parts of the carcase would be aided through new products and/or new markets. (It is, however, acknowledged that there are practical obstacles to all of these).
5: Publicise, to industry members, the strategic importance of sheepmeat sales outwith Scotland, highlighting that (given the small size of the Scottish market) any increase in processors' output has to be matched by market development elsewhere. Market share for Scotch lamb is highest in Scotland, but low per capita consumption and a small population limit the size of the domestic market. This means that Scottish sheepmeat production is already predominantly sold outwith Scotland, and any significant increase in production will mostly have to be sold to the rest of the UK or abroad.
6: Review prioritisation of strategic target markets for promotional campaigns, either solely by QMS and/or jointly with other bodies (including other sectors and even competitor countries). Promotional campaigns within Scotland are highly visible to Scottish primary producers and processors, but ultimately have less potential for growth than targeting other geographies (e.g. public sector procurement of lamb in Scotland may be symbolically important, but is trivial relative to overall production volumes. Continued collaboration with other levy bodies (e.g. AHDB) may be desirable for exports beyond the UK, and tie-ups with other sectors (e.g. Scotch Whisky) may have some potential. (It should, however, be noted that increases in lamb consumption inevitably mean reduced consumption of another meat, which may include Scotch beef or pork).
7: Explore further the specifics of particular halal market segments. Lamb's share of overall meat consumption is relatively low, and declining relative to chicken in particular. However, the halal market segment is growing, both in the UK (especially England) but also the EU and abroad. As such it represents a possible priority target. However, it is not a homogeneous nor a static market, with different and evolving preferences that vary with geography and demography. Combined with halal certification being somewhat fragmented and contested, and controversies around the use of non-stun slaughter for some halal segments, this implies that development and servicing of halal markets may not be straightforward.
8: Offer support to processors to encourage them to develop new export markets. Scottish sheepmeat processors with currently stable (and profitable) supply contracts appear to have little ambition to increase production for export markets. However, advice/training, capital grants and export guarantees might help to overcome perceived barriers such as lack of (language/marketing) skills and exchange rate or payment default risks. Assistance with maintaining a skilled workforce may also be relevant. Given the current dominance of the EU as an export market, Brexit adds some urgency to new market development – although it is important to recognise that other markets are often highly competitive (e.g. Middle East and China already dominated by Australia and New Zealand) and typically offer lower prices than the EU.
9: Review allocation of funding between production and market development activities. Across the UK, red meat levy rates and the share of levy bodies' funding allocated to market development are fairly consistent (although comparisons are not necessarily straightforward). However, Bord Bia in the Republic of Ireland has lower levy rates yet higher funding due to significant direct grants from government. Post-Brexit, it may be that a small proportion of funding currently directed towards Scottish primary producers would be better allocated to market development efforts. This would, however, require a clear strategic intent and rationale.