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Regional & local food - Government strategy report

Introduction

1. The Curry Commission's report made two specific recommendations concerning regional food:

  • That management of regional food should transfer from the Countryside Agency to a specialist body such as Food from Britain (FFB) and the regional food groups (RFGs). FFB should be given a new remit and, if necessary, additional funding
  • That each Regional Development Agency (RDA) work with FFB and others to devise a regional food component to its regional economic strategy

In formulating its response to these recommendations and in drawing up its strategy on regional food, the Department has drawn on:

  1. discussions within its cross-cutting group on regional food (which includes representatives from various interested DEFRA divisions, Food from Britain, the Food Standards Agency, the Countryside Agency, Regional Development Agencies and Government Offices); and
  2. the responses to the Department's consultation document Sustainable Food and Farming: Working Together. The main themes arising from these responses are summarised in Annex A.

2. This paper outlines a proposed Departmental strategy for regional food and drink, including objectives, the nature of any support for the sector and the mechanism for providing this support.

Definitions

3. It would help if we start from a common understanding of the term "regional food". The definition offered is:

Regional food (sometimes called locality food)

is food produced within a particular geographical area (whether administrative region, county, town or other appellation) and is marketed as coming from that area. However, it may be sold within or outside that area. Regional food is perceived to have a distinctive quality because of the area in or the method by which it is produced.

Examples of cases where the 'quality' criteria would be satisfied include:

  • protected food name status: ie denominations of origin or certificates of specific character in accordance with the relevant Community regulations
  • organic production methods
  • adherence to a quality assurance scheme whose criteria exceed the minimum legal requirements (eg "Freedom Food" animal welfare scheme)
  • otherwise exceeding (in a verifiable way) the legal minimum requirements in some aspect of production: eg hygiene, traceability, animal welfare.


Objectives

4. The Department's objectives for regional food flow from its headline objectives, particularly objectives 2, 3 and 4:

  • to enhance opportunity and tackle social exclusion in rural areas
  • to promote a sustainable, competitive and safe food supply chain which meets consumers' requirements
  • to promote sustainable, diverse, modern and adaptable farming through domestic and international actions

5. Applied to regional food, these objectives translate into the following specific objective: a flourishing high-quality regional food sector in England

  1. with increasing numbers of producers, employees, turnover and market share
  2. with a firmly implanted presence in the country's food culture so that quality food takes a natural and increasing share of the purchases of consumers both at home and overseas and of the retail and food service markets
  3. which enables farmers and other small producers to add value and thus improve profitability
  4. which promotes both a more sustainable use of resources and consumer choice

6. We also propose establishing a headline target for an increase in the sector's turnover or market share: this would give a clear and simple aim towards which all public sector actors could work.

7.  The regional food objective should be tackled in a coherent way, with the various different public sector players collaborating and co-ordinating their work, rather than each operating in isolation.

8. A regional food objective of this kind is appropriate for the following reasons:

    Socio-economic
  1. Regional food producers create jobs and prosperity for the local (predominantly rural) workforce and provide income less dependent on exchange rates, decisions on CAP policies or commodity price fluctuations; sourcing of ingredients for regional food is predominantly local; regional food production helps keep money in local economy;
  2. Many regional food producers are farm-based. Regional food thus offers an opportunity for farmers to diversify into added-value products which provide a more reliable source of income, with fewer middlemen meaning a higher proportion of the end price remains with the producer;
  3. A greater culture of regional food attracts tourists, both domestic and overseas;
  4. Successful regional food producers are well placed to enter the export market, with higher value-added products;
  5. A more vibrant regional food sector would help reduce farmers' dependence on production subsidies and would thus facilitate achievement of the Government's wider CAP reform agenda.
  6. The promotion of regional food can assist the development of feelings of local identity and community;
  7. Regional food branding makes consumers more aware of and interested in the origin of food, helping to improve their links with and understanding of the rural economy, food production, land management and rural community issues;
  8. Environmental
  9. Greater profitability of businesses (if diversifying into regional food) provides the necessary pre-condition for commercial farmers to be able to manage land in an environmentally sustainable way;
  10. Regional foods provide an important added value outlet for the products of traditional (and higher cost) farming systems that conserve landscape and biodiversity.


Rationale for Government involvement

9. Why should the Department involve itself in the promotion of the regional food sector, rather than just leaving the industry to develop using its own resources? Reasons include:

  • regional food producers bring significant public and policy benefits (see above) which go wider than the benefits to the individual producers
  • an element of market failure: regional food producers are almost all SMEs, and are often micro operations. Their lack of scale means that often they have insufficient resources to respond to market opportunities and are slow to increase competitiveness
  • such companies require assistance in raising their profile and increasing awareness of their product, at least until the place of regional food in English culture is more assured. Support can facilitate faster growth (from SME status into larger companies or into exporting)


Government strategy for promotion of regional food

10. How should the Department assist regional food producers, in a way that would encourage them to find their own feet by increasing turnover and profits? Three areas look promising, and the experience of the regional food groups thus far reinforces this:

Trade development

Projects aimed at encouraging retailers and the food service industry to source regional food and promote it themselves, eg:

  • facilitating small producers' access to the supply chain and assistance by increasing the efficiency of distribution systems
  • organising "meet the buyer" events
  • support for exhibitions and fairs
  • support for directories of producers
  • developing clusters of producers and other operators further down the food chain and encouraging collaboration between them
  • spreading best practice


Consumer awareness

Projects designed to increase consumer awareness of the rich variety of regional food which is available and of the wider beneficial effects of buying it, eg:

  • information campaigns
  • promotion of food tourism


Help with increased competitiveness

Complementing (rather than duplicating) other Government services such as the Business Links' help with business and financial planning, through sector-specific support to help develop competitiveness; e.g.

  • research and provision of market intelligence
  • input into business strategy
  • advice on marketing and promotion
  • help with production and design
  • technical support, including help with the introduction of quality assurance schemes and with training to implement them
  • dissemination of information on labelling, safety standards etc
  • advice on other (eg DEFRA or EU) funding sources available


Mechanism for provision of Government support for regional food producers

11. The current delivery of Government initiatives in support of regional food is confused. There are a large number of fund providers, each with its own objectives and agenda. The result is a somewhat incoherent and disjointed approach when looked at across Government as a whole. The Curry Report's recommendations offer the chance to remedy this.

12. Government support falls into two main areas: (i) support for the development of individual businesses; and (ii) support for the regional food sector as a whole. Schemes under the England Rural Development Programme, which is co-financed by the EU, provide the main source of support for the development of individual businesses. The Processing and Marketing Grant (PMG) provides aid towards capital projects involving the processing of added value primary food products. The Rural Enterprise Scheme (RES) provides support for both farm-based food processing projects (primarily capital based) and the marketing of quality food products (primarily revenue based). Finally, the Vocational Training Scheme provides training for farm-based food businesses. All the schemes are competitive and are delivered by DEFRA's Rural Development Service.

13. Taking account of Curry's recommendations and of the discussion in the cross-cutting group, the basic concept of Government support for area ii), the regional food sector as a whole, is envisaged as follows:

  • The Department will task the national food specialist body Food from Britain with developing a programme of support for the regional food sector at national level, under the three headings in paragraph 10 above and consistent with the guidelines on state aid.
  • Some measures in this programme (e.g. presence at national and international fairs, trade development activities such as meet the buyer events, and web-based promotional activity) will be carried out centrally by FFB. Other national level measures will need to be delivered by FFB through agents in each region (e.g. a nationwide food tourism campaign focusing on the specialities within each region): in these cases, FFB will work closely with the Regional Development Agencies to agree how and in what form the national level activity will be delivered in their region. The basic measure would be funded by FFB but each RDA could add resources to the measure if it wished.
  • The Department will agree the programme's budget, targets and performance measures with FFB in the context of the annual operational plan, after discussion in the cross-cutting group on regional food (this discussion will include the appropriate split between centrally and regionally delivered measures - see above bullet point).
  • Starting from the Department's framework strategy as outlined in this paper, each RDA should devise a regional food component to their regional strategy (most have in fact already done so). This will identify the measures required and resources to be deployed, according to the particular needs and priorities of the region concerned, to deliver the economic, social and environmental benefits of regional food. Measures should fall within the framework outlined in paragraph 10 above and the terms of the eventual state aid approval.
  • The RDAs will either provide this service themselves or may contract with specialist bodies (e.g. a regional food group) to do so. Such contracts would need to be tendered according to EU rules.
  • Both FFB's national and the RDAs' regional level programmes will be discussed periodically between the Department, FFB and the RDAs, with a view to ensuring that support measures complement, rather than duplicate or contradict, each other.


Performance measurement

14. Up to now, FFB's work on the regional food sector has been measured largely according to the number of members the Regional Food Groups have and the number of events (and participants in them) which FFB and the RFGs together organise. If more Government resources are devoted to the regional food industry, more sophisticated measures will need to be developed. These might include an increase in total turnover of regional food producers in the region, an increase in numbers employed, an increase in regional food's market share etc. To help develop these measures the Department has commissioned research that will assess the scope and scale of activity in the regional and local food sectors. The research will also identify opportunities to further develop the sectors through conventional supply chains and direct marketing and look at existing barriers that prevent expansion. The results of the research will be used by the Department to agree with FFB appropriate measures to monitor the impact of the strategy. The research also aims to help increase the number of quality RES and PMG applications concerned with regional food by producing a set of criteria against which to appraise and prioritise applications and guidelines for businesses.

State aids

15. Government support for the regional food sector will need to be cleared with the European Commission as being consistent with the guidelines on permissible forms of state aid. Informal discussions with the Commission on the range and type of support measures contemplated have been constructive and the Department is aiming to make a formal request for state aid clearance by the end of September. The potential use to which public funds can be put is quite tightly defined in the state aids guidelines. The regional food industry should therefore self-finance (through subscriptions to the service delivery bodies and/or ad hoc fees for participating in campaigns/events) any activities which fall outside the guidelines (such activities are not banned, they merely cannot benefit from public funding).

16. The Commission prohibits permanent "core funding" of bodies such as the RFGs. Any grants to such bodies (whether from FFB or the RDAs) should be for specific activities or projects delivered. Of course, the fees charged for delivering such activities/projects may include an element for overheads. Contracts for delivery will also need to be time-limited (say 5 years).

Next steps

17. The Department will now take forward, in conjunction with Food from Britain and the Regional Development Agencies, work on developing a programme of national support measures for the regional food sector which complement regional measures being taken by the RDAs. It will seek formal state aids clearance from the European Commission , with the aim of being able to bring the regional food strategy into effect from 1 April 2003.

18. The Department's cross-cutting group on regional food (see paragraph 1) will continue to meet periodically to review and if necessary develop the strategy set out above.

Work on local food

19. The Department is continuing to develop its policy on local food in the light of work being carried out by the cross-cutting group to identify possible benefits claimed for local food in terms of the environment, food quality, regeneration of local economies, community development etc. The group is collecting evidence regarding the impact of local food initiatives and examining issues such as funding, other support measures and barriers to further development. The aim is to formulate an appropriate strategy by early 2003.

EU Protected Food Names Scheme

20. The Curry Commission also recommended that industry, with help from Food From Britain, should do more to ensure that English producers take part in the EU protected food names schemes. In support of this recommendation, Defra has written to relevant trade associations and producers to remind them of the economic benefits to producers of achieving protected name status. The Department is also working with FFB to bring supermarkets, other retailers and the food service industry together to examine how they might be able to help increase both public and producer awareness of the scheme and help it move towards critical mass.

Regional and Local Foods Branch
AERF Division
December 2002

Footnotes

  1. Regional food should be distinguished from local food, which is food both produced and sold within a limited geographical radius but which does not necessarily have any distinctive quality. See paragraph 19 for details of work to develop a strategy on local food.
  2. Most of the following rationale also applies to speciality food, i.e. premium, low-volume food which has been through specialist processing to add value but which may not be not identified with any particular English geographical area (an example would be high quality marmalade or other preserves). Encouraging such production would bring the economic and environmental benefits listed in paragraph 8 and some but not all of the social/cultural ones.
  3. Around 70% of regional and speciality food and drink producers are based in rural areas and approx. 52,000 full-time equivalent jobs are supported by this production [DTZ Pieda, 1999].
  4. Two thirds of regional and speciality producers source more than 50% of their key ingredients from their local district (not region) [ibid.].
  5. 72% of regional and speciality producers sell more than half their output direct to the retailer [ibid.]
  6. the smallest 28% of regional and speciality producers account for only 1% of the sector's turnover [DTZ Pieda, 1999]

     

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