Select Committee on Scottish Affairs First Report


9. The soft drinks industry

101. Around 2000 are employed in the soft drinks industry in Scotland which accounts for about 7.5 per cent of all UK production.[139] While this figure is below Scotland's share of UK population, we saw no substantial evidence that Scottish producers face any competitive barriers that do not apply to other UK-based companies. However, it was noted that companies located in Scotland do face some additional costs due to the fact that there are no locally-based can or bottle manufacturers.[140]

102. A greater source of concern was the increasing requirement to build a successful brand image in order to prosper in soft drinks, and the level of advertising expenditure required to do so. Evidence on this was taken from the owner of one of Scotland's remaining indigenous soft drinks manufacturers. Mr Robin Barr, the Chairman of A G Barr plc, the company responsible for the soft drink Irn Bru, said that Scotland probably had around 200 indigenous soft drinks manufacturers in the period after World War II, and that this had now shrunk to nearer six.[141] This reduction has partly been caused by companies increasingly seeking economies of scale. Of far greater significance, however, is that consumers are increasingly demanding well known branded products, and the smaller Scottish sector has simply been unable to survive this onslaught. Mr Barr's evidence was clear on this point:

    "the smaller local company, who could not create a marketing fund from the scale of their operations, has in fact gone out of business because the branded product, the Coca-Colas, Pepsi-Colas and Irn Brus and so forth, have in fact become the products which the consumer wants to buy".[142]

103. Mr Barr also emphasised the costly and time-consuming nature of brand building.[143] Irn Bru, for example, was founded in 1901 and Coca-Cola before that in 1878. The big soft drinks producers have, by and large, achieved their current position by long-term investment in the current brands.

104. It appears that the position of Scottish soft drinks manufacturing has been seriously undermined over the long term by the advent of the global economy. Furthermore, the prospects for any serious revival in activity beyond the present level would seem to be limited. While the existing small band of companies do not seem to suffer any serious competitive disadvantages from their Scottish location, we did see evidence that some elements of the necessary support industries have increasingly moved out of Scotland as the size of the local industry has been reduced. For example, while Scotland was once self sufficient in glass bottles, there is now no container manufacturing of any kind in Scotland.

105. Similarly, the two sugar refineries formerly located in Scotland have now closed. While the importance of such changes to Scotland's competitive base was not felt to be overriding, this loss of infrastructure, coupled with distance from the main centres of UK population, probably means that it is less likely that, so far as soft drinks are concerned there will be any new inward investment in Scotland. Future growth will therefore probably depend on growth in Scotland's indigenous companies, and only one of these currently has sufficient scale and reputation advantages to take this forward.

139  The BSDA figures are for both soft drinks and bottled water. See HC 973-i, Session 1999-2000, p.1, para 2. Back

140  HC 973-i, Session 1999-2000, pp 3-4, Q.4. Back

141  Ibid, p.4, Q.7. Back

142  Ibid, p.5, Q.12. Back

143  Ibid, pp 5-6, Q.16. Back

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Prepared 28 November 2001