Scottish Government

1. EXECUTIVE SUMMARY

Introduction

1.1 The information presented in this report was gathered from a number of sources. Firstly reviews were made of reports and information on the Scottish, UK and wider food and drink sectors. Secondly interviews (either face-to-face, telephone or by correspondence) were undertaken with some key players in all sectors of the industry.

1.2 Richard Lochhead, the Cabinet Secretary for Rural Affairs and Environment, announced in June 2008 the plans for Scotland's first National Food and Drink Policy. One theme in the development of the policy is 'Supporting Better Food & Drink Choices', which includes understanding what "Product Origin - Scotland" actually means and how this supports the goals of quality, health, affordability and environmental sustainability. This research project aims to clarify the current position with respect to labelling of food and drink products as 'Scottish'.

1.3 The objectives of this project are:

1. To set out the statutory regime within Scotland, the UK and EU for product origin labelling.
2. To investigate industry practice on 'Scottish' labelling and branding initiatives.
3. To review evidence on consumer understanding and awareness of 'Scottish' labelling and branding.
4. To identify current practice internationally with regard to national origin labelling schemes.

Statutory controls on labelling

1.4 The labelling of food and drink is covered by a plethora of food law designed to ensure the consumer is not misled. Additionally EU competition laws require that national legislation is not worded so as to favour its own State over others to allow for competition.

1.5 There is specific EU legislation that requires country of origin information for various food and drinks, including beef and veal, poultrymeat, eggs, fish, fresh fruit and vegetables, honey, olive oil, wine and spirits.

1.6 In 1993, EU legislation came into force which provided for a system for the protection of food names on a geographical or traditional recipe basis. Under this system, a named food or drink registered at a European level will be given legal protection against imitation throughout the EU. Producers who register their products for protection benefit from having a raised awareness of their product throughout Europe.

Protected Food Name SchemeEU

1.7 The EU Protected Food Name Scheme came into force in 1993 and provides for a system for the protection of food names on a geographical or traditional recipe basis. Under this system, a named food or drink registered at a European level will be given legal protection against imitation throughout the EU. The designations are:

• Protected Designation of Origin ( PDO) - open to products which are produced, processed and prepared within a particular geographical area, and with features and characteristics which must be due to the geographical area.
• Protected Geographical Indication ( PGI) - open to products which must be produced or processed or prepared within the geographical area and have a reputation, features or certain qualities attributable to that area.
• Traditional Speciality Guaranteed ( TSG) - open to products which are traditional or have customary names and have a set of features which distinguish them from other similar products. These features must not be due to the geographical area the product is produced in nor entirely based on technical advances in the method of production.

GuidanceFSA

1.8 In order to try to clarify the rules on labelling the Food Standards Agency has produced guidance on Country of Origin Labelling. The stated aims in producing this advice are to help:

• Manufacturers, producers, retailers and caterers to comply with the law and avoid misleading labelling;
• Enforcement authorities to identify and act on misleading origin labelling; and
• Consumers through the provision of more consistent, informative and transparent labelling practices.

Definition of "place of origin"

1.9 There is no statutory definition of "place of origin or provenance" in the Food Labelling Regulations 1996 or of "origin or provenance" in EC Directive 2000/13/ EC. But both in Codex and the World Trade Organisation Rules, the country of origin is deemed to be the place of "last substantial change of the food".

1.10 There is no legal definition of Scottish in regard to how it is used to label foodstuffs but guidance from the Scottish Government on the labelling of beef states that:

'If the term Scottish is to be used [in the labelling of beef] the animal must have been born, reared and slaughtered in Scotland.'

1.11 In January 2008 the European Commission issued a proposal for a new food information Regulation. The proposal aims to update and simplify food labelling legislation by bringing together into a single Regulation rules on general and nutritional labelling as well as some other horizontal texts covering additional labelling requirements. Where the origin, or provenance, of the product is different from that of any primary or characterising ingredient(s), the origin, or provenance, of the primary ingredient(s) should additionally be provided.

1.12 The negotiations on this topic have become protracted and the latest position (March 2009) is that further substantive discussion has been shelved until after the June 2009 European elections, at the earliest.

Enforcement of Labelling Regulations

1.13 There have been no recent prosecutions taken in Scotland with regard to mis-labelling of food and drink products as regards Country of Origin.

Nutrition Labelling and Health Claims

1.14 Nutrition labelling of food and drink is only mandatory if a nutrition claim is made. The European Food Standards Agency ( EFSA) is collating health claims submitted from member states.

1.15 Certain claims are outside the scope of the EFSA Regulation, for example:

• Government messages for example '5 a day';
• Charity endorsement; ( FSA is developing guidance on this area)
• Specific disorders for example 'gluten free';
• Ingredient claims such as 'no hydrogenated fat'

1.16 The Regulation also allows for transition periods, for example:

• Trade Marks in use before 2005 can continue to be used until January 2022.
• Nutrition claims in use before January 2006 (and not included in the Annex) can continue to be used until January 2010

Assurance Schemes

1.17 In 2006 the European Commission produced an inventory of 386 food assurance schemes operating within the EU. For most of these schemes the scope is food safety and quality, but many also include requirements for good agricultural practice, sustainability etc. However none embraces all four of the issues identified by Scottish Government - quality, health, affordability and environmental sustainability.

1.18 Sustainability schemes such as Marine Stewardship Council, Responsible Fishing Scheme and the Carbon Trust's Carbon Footprint are expanding in membership and influence, but have some way to go before being as widely adopted as schemes on food safety and quality.

Findings from survey of industry practice in Scotland

1.19 A telephone survey of 113 food and drink businesses was undertaken across 11 food and drink sectors. The sample was not designed to be representative of the 2,500 food and drink businesses estimated to operate in Scotland but it did achieve a good spread by enterprise type and region. There were considerable differences in different sectors.

1.20 A total of 100 of the 113 respondents reported that some or all of main product carried origin labelling e.g. country, region or local. In terms of images used 12 used the Saltire, 12 a Tartan design, 11 Scottish landscape and eight a Thistle logo.

Benefits of Origin Labelling

1.21 The perceived benefits were listed as:

• Product attracts a higher sale price/adds value.
• Sales volumes increased.
• Advantage over UK or English products.
• Helps to identify the product for target consumer groups:
• • Scottish consumers (local purchasing).
  • Tourists/visitors to Scotland.
  • Overseas consumers (including expatriates).

1.22 One third of respondents estimated that 100% of the ingredients of their main product could be regarded as being of Scottish origin.

Improvements to Current Practice

1.23 Respondents were asked to suggest improvements with regard to current practice in terms of origin labelling. Responses tended to focus on aspects of traceability and concerns about the potential to mislead consumers. Suggestions included:

• The source of products should be made clear.
• Scottish imagery can mislead consumer.
• Tighten up on supermarket origin labelling.
• Need to avoid confusing the consumer with too many terms.
• More effort needed regarding food labelling within food service sector to follow traceability and food origin through to menu

Government Guidance

1.24 When asked if they thought that there should be more Government guidance on the use of terms such as 'Scottish', 'Made in Scotland', 'Product of Scotland' etc., half of all respondents answered yes.

Response from Multiple Retailers

1.25 The move to Scottish labelling could become more comprehensive but inclination by each retailer varies as to the size/nature of their business. Several of the retailers indicated they would be happy to extend Scottish labelling of food and drink products in Scottish stores but there would need to be a strong commercial reason for doing so, i.e. sales increase. For some retailers, Scotland and the Scottish market is probably not large enough to warrant a lot of the additional cost/expense required setting up dedicated supply chains.

1.26 Some retailers believe consumers are confused by the plethora of food logos/assurance labels and the relative qualities they confer.

1.27 Traceability through the retail chain is considered to be robust because of the initiatives led by the British Retail Consortium, set in place because of the need to demonstrate Due Diligence, initially introduced by the Food Safety Act 1990.

Response from Food Service Companies

1.28 A consistent view across the foodservice providers interviewed is that caterers do not typically promote origin on their menus. Because of this caterers do not typically demand country of origin labelling. If such labelling is used then it tends to be with regards to fresh products such as fruit, vegetables and meat and not necessarily specialist products that may already have their own very specific provenance, such as a brand of cheese. If any reference is made to Scotland then it tends to be within the name of the product, such as Scottish Salmon. The nature of Foodservice is that it does not lend itself to elaborate packaging design although it was stated that marking country of origin labelling on the boxes will help the chef if the item on the menu requires that item.

1.29 The Scottish-based foodservice business focused on the West Highlands and Islands and in their case they will specify region on certain products such as Argyll Pork or Argyll Venison. They also make reference in the packaging of the product through the use of Tartan or "Highland". This requirement for specific labelling is driven by the location of its customers (i.e. Scotland) as opposed to the other foodservice providers interviewed whose supply chain is servicing a broad range of customer across the UK.

1.30 The foodservice businesses interviewed were adamant that the traceability systems in place are adequate and changing labelling would not make a significant improvement to this aspect of their operation. Foodservice providers generally audit their suppliers and test the traceability of their products so claims are not taken totally on trust as the reputational risk to their businesses is very high, although this was less evident with smaller scale operators.

1.31 The larger foodservice providers all mentioned the Red Tractor scheme as a standard that they included on some products and looking to include on others.

1.32 A commonly held view across the foodservice consultees is that customers are looking for Provenance rather than Country of Origin Labelling i.e. a story behind the food of the specific producer. One of the dangers identified of going down the route of over-labelling or branding as Scottish is that customers could become fatigued and it could also dilute strong brands associated with provenance.

1.33 Another issue highlighted is that local, regional or specific country of origin branding can confuse the customer as to the sustainability of the product and there is a natural assumption that local is automatically more sustainable, which may not be the case.

Findings from literature review of consumer awareness and understanding

1.34 For origin indication to have an effect on consumer purchasing patterns two features are needed:

• positive images of country or place; and
• origin clearly and consistently portrayed to trigger recognition.

1.35 Many consumers store positive images about Scotland but there is consumer confusion over Scottish origin labels. Origin indication is only one of many attributes that appear on products and often other attributes (e.g. price, brand name, quality) play more important role in consumer choice. Survey research shows that price and product intrinsic attributes are higher priorities for most consumers. Origin is generally middling to low relative importance.

1.36 There are three main types of consumer response to origin labelling: ethnocentric, affective and cognitive. Overlaps exist between the types.

1.37 Ethnocentrism whereby individuals make judgements and attributions using their own cultural perspectives. These include situations where consumers have:

• innate preference for products from their home country
• gut feeling that home produce is superior to foreign
• a strong sense of national loyalty

1.38 However evidence from Market Research in 2003 indicated more ambivalence regarding standards in Scottish agriculture, with New Zealand perceived as superior, and Denmark and USA seen as comparable.

1.39 Affective responses refer to situations where origin labelling information conjures up images and associations that arouse specific emotions within the consumer. Consumers react with specific emotions to origin labelling information in connection with:

• family
• belonging
• self-identity & status (domestic consumers)
• fun, fantasy and adventure (recalling travel or holidays)

1.40 Scotland possesses numerous powerful images, symbols and other stimuli which consumers may respond to in affective way, some of which are stereotypical e.g. tartan, kilts. However some evidence suggests consumer weariness towards such symbols, finding them patronizing and inauthentic and existing to serve commercial interests, particularly tourism.

.1.41 Landscape images viewed more positively - connect more with consumers' own experience. Some research notes a tendency of natural and historical symbolism to reinforce a backward-looking, folklore-ish identity - unhealthy and problematic for certain industries.

1.42 Cognitive responses refer to situations where consumers infer physical quality characteristics about products from a country, based on their store of beliefs about the abilities of that country to provide a quality product.

1.43 If consumers believe country has favourable contexts and skills to produce products in a given category they are likely to believe the resulting products will be of high quality (and vice versa).

1.44 These come into play when origin labels are quality assurance labels e.g. Protected Designation of Origin ( PDO) and Protected Geographical Indications ( PGI). The ability to distinguish from similar labels is extremely important - if not costs of assurance unlikely to be recouped.

1.45 Survey research repeatedly shows consumer awareness and understanding of quality assurance labels is poor, although an exception is the Scotch Meat labels. However the Consumer Focus Scotland Report in 2008 showed poor levels of discrimination amongst consumers in relation to Scotch and 'Scottish' beef labelling.

1.46 In the limited number of existing studies on consumer perceptions of Scotland and Scottish products, two topics do not appear to have been explored. Firstly, the negative images or associations consumers link to contemporary Scotland (i.e. not the traditional stereotypes) such as urban deprivation and poor diet and health records. Secondly, no studies to date appear to have investigated consumer awareness and perceptions of origin and symbols at a sub-national level in Scotland. This is in spite of the fact that different regions of Scotland have very distinctive identities and reputations for particular goods/products, and that place brands from some areas are already well established, e.g. Orkney beef, Harris tweed, Islay whisky. Overall, there is a need to know what role country branding plays in consumer choice when regional identity (or indeed private brand) is strong.

International practice

1.47 Regulations concerning protection of designations have a long and complex history. The countries of southern Europe (France, Italy, Spain, Greece and Portugal) have historically accorded greater importance and means for the support of products of certified origin, while northern countries have neither accorded specific aid nor appointed institutions, being happy to act as simple administrative intermediaries between the producers and the European Community.

1.48 The Label Rouge movement began in the 1960s in the Southwest of France, in the forested Landes region describing a system of slow growing broiler poultry. Besides broilers, standards now also exist for layers, turkeys, ducks, geese, guineafowl, and capons. There are also Label Rouge ham, sausage, eggs, rabbit, and cheese products. The scheme emphasizes quality attributes such as taste and food safety, and free-range production practices.

1.49 Government agencies are responsible for setting and maintaining certification standards accrediting the certifiers and protecting against label infringement which protects Label Rouge from being copied by store brands or private labels. Label Rouge is farmer-created, consumer-driven, and government-supported.

1.50 Catalonia has its own Quality Marque (Marque Q) overseen by the Catalan Regional Government. Products are deemed to have different characteristics which vary depending on the type of product, and they may affect composition, production process or presentation format. The scheme is not recognised by the EU.

1.51 Switzerland, which is not a member of the EU, is developing legislation to define "Swissness" and has two main goals:

• To reinforce the protection of 'Made in Switzerland' designations and of the Swiss Cross at a national and international level
• To create greater clarity and legal security for their utilization.

1.52 "Australia Made, Australia Grown" scheme was established by the Australian Government in 1986 to promote Australian made products in local and export markets. The scheme is now managed by a public company - run by business for business. To be able to use the Australia Made logo on their products companies must meet stringent rules on origin of products and ingredients.

1.53 The case of New Zealand lamb is especially interesting as an unsubsidized commodity product competing against subsidized lamb in some of the most competitive and sophisticated retail markets in the world. New Zealand has used country-of-origin labelling as a "country brand" to differentiate New Zealand lamb in international markets and increase consumer awareness of this lamb as a high-quality imported product.

1.54 Mandatory Country of Origin Labelling ( COOL) became effective on 30 September 2008 in the USA. COOL is regarded as a retail labelling law that provides additional information to consumers at the time of purchase. Commodities included are:

• Muscle Cuts of Beef (including veal), Pork, Lamb, Goat, and Chicken
• Ground Beef, Ground Pork, Ground Lamb, Ground Goat, and Ground Chicken
• Wild and Farm-Raised Fish and Shellfish
• Perishable Agricultural Commodities (fresh and frozen fruits and vegetables)
• Peanuts, Pecans, and Macadamia Nuts
• Ginseng

Key Recommendations

1.55 The Scottish Government, Food Standards Agency and the Food and Drink Sector in Scotland should:

• Investigate potential impacts of requiring the different food and drink sub-sectors to label by origin the main or characterising ingredient in their products - changes that may benefit one sub-sector may well be prejudicial to others.
• Investigate the "Australia Made" scheme to see if there is scope to use this in the Scottish context including whether a similar scheme would be considered legal under EU rules.
• Consider how the four issues of quality, health, affordability and environmental sustainability can be pulled together into one coherent labelling scheme. Researchers and practitioners appear to work independently within their own disciplines and do not always share common goals.
• Investigate the negative images or associations that consumers link to contemporary Scotland such as urban deprivation, poor diet and poor health record compared with other parts of the UK, to understand if this is inhibiting more uptake of Scottish products.
• Sponsor empirical research to better understand consumer attitudes to local/regional marketing campaigns and to further develop this form of branding. Many smaller producers believe that this is their best way to expand but the evidence is currently not in place.