THE DRINKS INDUSTRY IN SCOTLAND
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.
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.
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.
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
"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".
103. Mr Barr also emphasised the costly and time-consuming
nature of brand building.
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
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
973-i, Session 1999-2000, pp 3-4, Q.4. Back
p.4, Q.7. Back
p.5, Q.12. Back
pp 5-6, Q.16. Back