Understanding the importance of the Welsh food and drink sector

The food and drink sector is one of Wales’s largest and most strategically important business sectors, and as a consequence, it has received considerable support and focus in policy terms. Wavehill has undertaken extensive research and evaluation activity over the past decade to identify the sector’s impact on the Welsh economy alongside the performance of individual projects and programmes to help the sector grow in Wales.

Recent initiatives and support for the Welsh food and drink sector.

The food and drinks sector has received support and investment, including a series of interventions funded through a combination of Welsh Government and EU investment via the Rural Development Programme (RDP). These interventions formed an important part of the Welsh Government’s ambitions of growing sales by 30% to £7 billion by 2020, as articulated in the ‘Towards Sustainable Growth 2014–20’ Action Plan. That target was achieved a year early, with sales rising to £7.5 billion in 2019, and remained above that level of turnover despite the downturn caused by the pandemic in 2020. By 2021, the sector had surpassed its pre-pandemic level, reaching a value of £7.6 billion. Building on this, the Welsh Government’s current strategic vision for the sector aims to grow sales to £8.5 billion by 2025.

Wavehill’s research and evaluation of the sector over the years.

Wavehill has delivered numerous evaluations of projects designed to support the food and drink sector in Wales over this period. We were then commissioned to conduct an independent review of all relevant RDP-funded food and drink projects between 2014-2020. The intent, to examine how well they had worked as a package and to assess their economic and environmental impact. The final report was published in January 2025.

As part of this wider review, Wavehill identified 34 schemes and projects that supported the sector and received RDP funding. These varied in scale and relevance. Four stood out as flagship interventions:

• Cywain. A £13m project that provided business development support for food and drink producers, specifically focusing on ‘high-growth potential’ businesses.

• Project Helix. A £16m investment that delivered practical knowledge transfer activities to help businesses develop and reformulate innovative products through three innovation centres across Wales.

• Food Skills Cymru. A £3m project that provided technical and staff development training to food and drink businesses. This comprised accredited and non-accredited training alongside bespoke solutions that were identified through a diagnostic skills component.

• Food Business Investment Scheme. Provided just under £60m of capital grants, awarded for businesses to invest in their processing capability.

Key successes in supporting the sector.

Our evaluation found high levels of satisfaction with the support offered and showed that the projects and schemes had been delivered effectively. The expertise of the delivery team and the effectiveness of the offer were most often noted as key strengths. This demonstrated the importance of intermediary bodies in delivering targeted support. In addition, the flexibility and adaptability of the support offered, alongside the ability to use external expertise, were further strengths identified during the evaluation process.

Our review found that there was sector-wide growth and strong evidence to suggest a positive return on investment from the funding made available. Between 2014-21 the sector grew by 33% vs 11% across the UK. Collectively, the schemes have delivered on the priorities outlined in the policy documents covering this period (Towards Sustainable Growth and the current Strategic Vision).

Lessons learnt for future funding opportunities.

Whilst our review generally provides a positive portrayal of the support given to the food and drink sector, it has also found areas where improvements could be made.

1. Targeted support

The key policy ambition was to create a ‘healthy pipeline’ of micro businesses transitioning to small firms, and small businesses expanding to become medium-sized. This was to redress the dominance of microenterprises and the lack of medium-sized businesses, which limited the potential for greater job opportunities. To achieve this goal, support focused on targeting high-growth potential businesses.

Across the different projects and schemes however, we found that this was not given sufficient operational focus during implementation. What is more, the review found that the support would occasionally provide “too much handholding”. It found a lack of clear exit points for businesses with some receiving support over several years, and mostly free of charge.  

Additionally, whilst the package of support directly responded to the policy objectives outlined by the Welsh Government, there could perhaps have been a more explicit emphasis on themes such as fair work, reputation, standards, and the wider promotion of the food and drink sector.

2. Environmental impact and efficiencies in sustainable practices

The food and drink industry faces unique challenges related to sustainability. The review noted several positive outcomes including:

• greater efficiencies in manufacturing processes

• an increase in the use of renewable energy

• improved recycling and waste management

• positive impacts of shortening supply chains to be more localised.

Yet the evidence to assess these impacts was lacking and insufficient to quantify the true environmental impact.

3. Better integrations in the food and drink support package

Whilst the schemes generally offered a good level of complementarity with clear lines of delivery, there has been some crossover, where those lines became blurred. For instance, many had a similar remit and delivery model of providing food and drink producers with key account management support and network facilitation. Additionally, there was overlap and potential duplication of non-RDP-funded provisions.

While there were examples of good collaboration, particularly through cross-referrals and signposting, it could be sporadic and relied on individual staff members having the awareness and understanding to make those referrals. Stakeholders cited that cross-referrals were generally not embedded in the schemes’ operating practices.

Recommendations for the Food and Drink Sector

Building upon these lessons, Wavehill’s recommendations offered strategic insights to support the Welsh Government’s initiatives within the food and drink sector:

1. Improve the targeting of support.

There should be a better understanding of the target audience so that future support can be directed at the most appropriate businesses and subsectors, with a focus on those areas that will help deliver against the Welsh Government’s strategic objectives. This should inform the marketing of future support.

2. Support the Welsh Government's strategic principles.

Aligning initiatives within the food and drink sector with the Welsh Government's strategic principles will ensure a cohesive and unified approach. This includes incorporating sustainability, innovation, and collaboration as core tenets of government support, which will enable the sector's continued growth.

3. Targeted support for innovation and export readiness.

Providing targeted support for innovation and export readiness as an essential component for businesses in the food and drink sector. This should include financial assistance, training programmes, and market access support to enable businesses to compete globally while maintaining a commitment to quality and sustainability.

4. The support package should be better integrated.

With central relationship management and information storage, the complementarity of the offer to businesses could be fully utilised through effective triangulation. A central access point, potentially through Business Wales, would enable both unified branding. It would address the challenge of businesses having to navigate the different offers to find the most appropriate support.

5. Building sustainability and environmental considerations into future funding.

Our review highlights the need for more efficient utilisation of resources, support for sustainable practices, and innovation in reducing environmental footprints. Building this into future programmes would allow better measurements. This approach would not only align with global trends but also position Welsh businesses for long-term success.

6. Addressing persistent challenges in the sector

Wavehill's evaluation prompted a crucial question: Why are some businesses in the food and drink sector, despite years of government support, not making progress?

Alongside a more targeted support system and better tracking of progress and triaging through central management, this should be accompanied by clear parameters and timescales to ensure clear transition and exit points.

Our report shows that the food and drinks sector in Wales continues to grow from strength to strength. Yet with the end of EU funding, the Welsh Government had to consider which aspects of the support offer would continue to receive backing in the medium term. This report has helped to inform that process, and we note that several of the recommendations are being implemented in the Welsh Government’s Strategic Investment Scheme, which is the main successor to the RDP-funded provisions that were part of our review.

For more information contact Endaf Griffiths and Ioan Teifi.