As the world shifts out of lockdown and the economy begins to reopen, the demand for energy has skyrocketed, the price of natural gas more than doubling since the beginning of this year.

But how has this affected the food and drink industry and what does it mean in the long term?

The increasing gas price isn’t the only affecting factor; interruptions in the supply chain as well as labour shortages have all contributed to staggering the UK’s food and beverage sector. Reports from businesses in the industry indicate that they have been hit by the increasing energy prices more than any other industry, with over half of them reporting that the increases have caused disruptions to both their suppliers and production.

Natural gas has been a primary energy source in production and industry since 1785, but with its cost – both environmental and financial – continuing to increase, its scarcity becoming more and more apparent (it is expected to be entirely used up in a matter of only 50 years) and renewable energy sources becoming more and more viable, many companies are beginning to see the advantage of making a switch.

With the recent energy cost increases and food security being threatened as a result, more and more businesses are beginning to shift towards the use of renewable energy and carbon-neutral production. Diageo has recently begun construction on a solar energy farm consisting of 9,000 solar panels generating up to 22% of the company’s annual electricity, and up to 60% during the summer. The solar farm will reduce the company’s annual CO2 emissions by 830 tonnes and will take them a great step further from non-renewable energy dependence. Diageo pledges to be completely carbon-neutral by 2026.

Highland Spring, which became carbon-neutral in 2021, are also in the early stages of constructing a solar farm, as well as a new rail freight system to transport products with reduced carbon emissions, which altogether will cost the company £35m. Mark Steven, co-managing director of Highland Spring, is an advocate for new, more sustainable energy and transportation methods, saying that the new rail system will substantially reduce the number of lorry transportations and will altogether reduce carbon dioxide emissions by 3,200 tonnes every year.

Last year, field-to-bottle distiller Arbikie Highland Estate also created the world’s first “climate-positive” spirit, using peas to produce its carbon-neutral Nàdar gin and vodka. You can hear more about the research and production behind Nàdar here

It is clear that the impact of increasing energy costs is a turning point for the food and drink industry in the UK and further afield. With many businesses under threat from disrupted production and diminishing profits, it is nigh-inevitable that solar power and other renewable energy sources such as wind and hydro power will begin to take their place as the primary energy source in the food and drink business.

How can we help?

MacRoberts has been involved in a diverse range of renewable energy projects in Scotland for over 30 years. With our experience in wind, hydro, solar and energy from waste (biomass), we address all of the relevant commercial, strategic, consenting and legal issues from the conception of a project through to its ongoing operation.

We also advise businesses at each stage of the food and drink supply chain, from assisting with supply agreements and supply chain liability to advising on packaging and advertising requirements and obligations. Our lawyers have a comprehensive grasp of the ever changing food and drink environment and understand the increasingly complex supply chains which operators and businesses must navigate.

If you have any questions or would like to find out more, please contact us.