Irish food and drink exports declined by 6.5% to €8.16 billion in 2008. State food promotion agency Bord Bia says the performance of the sector remains impressive considering 43% of our exports are destined for the UK.
“The Irish food, drink and horticulture industry has the potential to boost annual export returns by more than 20% to reach €10 billion by 2011”according toBord Bia’s Chairman Dan Browne. Speaking at the launch of Bord Bia’s Statement of Strategy 2009 – 2011 in Dublin today Browne commented “The indigenous nature of Ireland’s agri-food industry, its deep foundation in the Irish economy, and its potential for development in an expanding market puts it in a unique position to actively contribute to a national drive to secure sustainable economic renewal.”
“The relative stability of food markets during the downturn, combined with the relentless rise in the world’s population, growing at the rate of almost 80 million people a year, and shifting dietary habits will continue to underpin global demand for food”
He added:“as Bord Bia sets out its priorities for the period ahead however we must recognise that while the industry has an excellent track record of achievement it must overcome significant competitive challenges if it is to successfully grow market share at home and overseas”.
The potential growth of 20% during a period of world recession and achieving it, are different kettles of fish.
Review of 2008
“The challenges facing Irish food, drink and horticulture exports were evident throughout 2008 with significant currency volatility, shifting shopping patterns and reduced access to credit all impacting on exporters”commented Aidan Cotter, Chief Executive, Bord Bia. "Exports declined during the year by 6.5% to €8.16 billion. Yet the performance of the sector remains impressive considering 43% of our exports are destined for the UK market and that the average depreciation of sterling against the euro amounted to 22% ” according to Cotter.
Exchange rate movements also affected exports to destinations outside of Europe, which last year amounted to 24% of the total. The dollar was significantly weaker for much of 2008 and while the average decline across the year was over 7%, the cumulative depreciation since 2006 reached 17%.
Diversification towards Continental Europe continued with 33% of exports now destined for those markets.
The best performing sector in 2008 was meat and livestock, up by 2% to €2.58 billion. This was due to the value of Irish beef exports increasing by an estimated 7% to reach €1.7 billion. Recorded pigmeat exports are estimated to have fallen by 2% to €360 million as the product recall brought trade to a virtual standstill in December. Other areas that performed well included ready prepared meals, luxury chocolate confectionery and seafood.
A significant easing in dairy prices, falling from their 2007 peak, resulted in export sales dropping back by 5% to €2.2 billion. Meanwhile exports of alcoholic beverages, affected by slower consumer spending and the weakness of the US dollar, declined by 13% to €1.25 billion.
Strategic Priorities for 2009 – 2011
Bor Bia says a return to export growth in 2009 will be largely dependent on a more stable exchange rate environment, with prospects for recovery in all sectors of the industry. In the medium-term, significant growth potential exists in the dairy sector as quotas rise and some buoyancy returns to the market, while opportunities for growth also exist in prepared foods, beef and alcoholic beverages.
Meanwhile a strong position on the domestic market is critical to Irish food manufacturers if they are to build success overseas. The retail food and beverage market has grown significantly and is now valued at €8bn at consumer prices. However, rising costs, adverse currency movements, and increased import competition, partly associated with a growing international retailer presence with its own overseas supply base, is placing new pressures on Irish suppliers, leading to structural change and some outsourcing.
Addressing the industry’s capacity to compete successfully at home and overseas has assumed a new urgency if it is to boost its export performance and maximise its share on the home market. Bord Bia has identified six key priorities to be addressed including that of enhancing the industry’s position on its home market if it is to capitalise on the potential for growth and expand exports towards €10 billion. Bord Bia says these are:
Promoting Ireland – The Sustainable Food Island
Recent events have highlighted the fundamental importance of food safety. The impact of the product recall on the image of Ireland as a safe and reputable supplier of high quality food is not yet fully clear but it is evident that customer expectations will require evidence of actions taken to address perceived risks to food safety. In addition, the opportunity exists to reassess the platform on which we promote Ireland as a food island.
The United Nations estimate that by 2030 the world will need to produce 50% more food from less land, water and energy while also reducing the level of greenhouse gas emissions. “While overcoming immediate competitive challenges is a major priority, the industry must also now begin to address the key issue of sustainability to meet both current and emerging market needs” said Cotter. “The emergence of sustainability as a key strategic issue means that it is no longer enough to say that we are natural and green, we now must actively demonstrate and prove it” he added.
Broadening Export Reach
The UK will continue to be Ireland’s single largest export market and a major priority for exporters. Other Eurozone markets however offer the prospect of new opportunities and more stability in the light of recent exchange rate volatility. This is reflected in the recent growth in the share of exports destined for Continental Europe while Bord Bia research has prioritised key target markets for prepared foods and identified opportunities for cheese and dairy ingredients as the dairy sector continues to seek out new markets. Similarly the recent establishment by Bord Bia of a full-time presence in Shanghai, servicing the Asian region, and the relocation of the US office to New York reflect continued growth potential in these regions.
Enhancing the position of Irish food and horticulture on the Irish market
Bord Bia says the competitive threat on the Irish market is highlighted by rising food imports which on a per capita basis have increased by 50% since 2000 to €1,070 in 2007, with growth strongest in the meat, vegetable and prepared foods categories. In terms of meat, strongest import growth has been evident in pigmeat and poultry putting significant pressure on local processors to maintain a viable business on the Irish market. It is estimated that as much as 90% of poultry and 60% of pigmeat sold at foodservice level consists of imported products.
Bord Bia said it will increase its focus on the Irish market to assist suppliers compete successfully through initiatives in consumer insight, innovation, and branding. In particular, the focus will be extended to highlighting the importance of supporting a dynamic domestic supply base and ensuring sustainable local food supplies. Promotion of the Bord Bia Quality Mark will be intensified with a view to expanding demand for meat, eggs and horticultural produce bearing the logo, which now enjoys 79% awareness levels.
Consumer Focused Innovation
Bord Bia says innovation in products, packaging, processing and branding will be critical to the success of the Irish industry in enhancing its position on the Irish market and extending its export reach. Data indicates that just over 2% of new products in the European food industry represent revolutionary innovation. The majority, around 80%, come from either line extensions or me-too products, highlighting the evolutionary nature of innovation.
Over the last decade however the average time to market for new products has reduced from 18 to 13 months. The competitive nature of the market is further highlighted by figures from The Grocer, which showed that in the UK only 300 ‘new’ product introductions annually achieve sales of more than £1m.
Bord Bia’s innovation programme will continue to evolve with the needs of food and horticulture manufacturers. Central to the programme will be the Foresight4Food initiative, which offers services in three core consumer focused innovation areas: stimulation, ideation and validation and seeks to assist an increased rate of successful product launches. Bord Bia’s Consumer Lifestyle Trends Programme will also continue to provide the insight and understanding necessary to help manufacturers identify potential gaps in the market.
Pursuing a repositioning and differentiation strategy for Irish meat
The repositioning and differentiation strategy for Irish beef initiated over the last year remains a priority as the sector continues to enhance its role in the European market in advance of any future WTO deal. The industry which now has listings among 70 retailers across Europe has further consolidated its position over the last year, achieving 17 new retail premium product listings and 7 new such listings in foodservice in both existing and new accounts.
Following the pigmeat recall, a rebuilding of the domestic and international markets is critical while in the lamb sector quality assurance, promotion on the Irish and French markets combined with further market diversification will continue to be the principal focus.
According to Aidan Cotter “Bord Bia will, through close collaboration with industry, ensure its programmes and activities are designed and implemented to ensure they deliver optimum benefit to all stakeholders. This will involve full utilisation of our key strengths in terms of our people, our overseas office network and our ability to understand and interpret market developments. It will also involve a rigorous and continuous review of resource allocation to ensure alignment with priorities and value for money with expenditures.”
Ireland’s agri-food sector accounted for 10% of total Irish exports in 2007 compared to 7% in 2002 and representing approximately 8% of the national workforce. Output in the sector, as measured by Gross Value Added (GVA), reached almost €15 billion in 2007 having expanded by over 22% compared to 2006. Forfás estimate that 65% of manufacturing exports by Irish-owned firms consist of food and drink.
