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News : Irish Last Updated: Jan 14, 2010 - 7:06:22 AM

Irish food and drink exports fell 12% in 2009 to €7bn - - accounting for 4.5% of total exports from Ireland; Bord Bia predicts some recovery in 2010
By Finfacts Team
Jan 13, 2010 - 11:42:01 AM

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Bord Bia, the Irish State foods and drinks export promotion agency, says in its Export Performance and Prospects report launched today, that  the value of Irish food and drink exports fell by 12 percent in 2009, or by just under €1 billion, to stand at €7.12 billion. The agency predicts some recovery in 2010. The sector exports last year, accounted for 4.5% of total Irish exports.

Bord Bia said a sustained decline in the value of sterling combined with the economic downturn and severe difficulties in the global dairy market created unprecedented challenges for Irish food and drink exporters in 2009.

The agency said there are indications however that export values are now beginning to stabilise and Bord Bia predicts some recovery in the year ahead. “The prospects for 2010 point to a return to growth for Ireland’s food sector”, according to Dan Browne, Chairman, Bord Bia. “The potential for stronger export revenues from the key dairy and meat sectors, and investments by prepared food companies to broaden their market presence on the Continent, will help exports as 2010 progresses. However, developments in sterling and consumer sentiment remain critical.”

The decline in sterling and price deflation in the marketplace were responsible for the majority of the reduction in export revenues in 2009. “The underlying performance of the industry, reflected in an estimated volume decline of just 3 percent, was impressive when set against these challenges,” according to Aidan Cotter, Chief Executive, Bord Bia. “Sterling remains the single biggest issue for the industry," he said, adding that, “in 2009, it is estimated the depreciation of sterling reduced the value of exports to the UK by some €400 million.”

Bord Bia says the agriculture and food industry plays an important role in the Irish economy and remains its largest indigenous sector accounting for almost 9 percent of employment. As much as 65 percent of manufacturing exports by Irish-owned firms are estimated to consist of food and drink.

The agency said the long-term outlook for the sector, with its high export orientation, remains positive. Due to an expanding world population and evolving demographics, the world will need to produce over 40 percent more food by 2030 and some 70 percent more by 2050. It will have to do so from fixed resources while minimising its impact on the environment.

However, as it seeks to avail of emerging opportunities, the challenge for the industry to improve competitiveness while broadening its export reach, remains a formidable one. Bord Bia says Ireland’s uniqueness within the Eurozone, sharing a land border with the sterling area, has compounded the industry’s difficulties on its domestic market. At the same time, it must compete with UK-based exporters as it seeks to build share elsewhere within the euro area.

Bord Bia said the UK remained Ireland’s principal export destination in 2009 with sales valued at just under €3.1 billion, a decrease of 15 percent compared to 2008 figures. Despite this, the market still accounted for 44 percent of Ireland’s food and drink exports although its share of trade came under pressure as the year progressed, dropping from 48 percent in January to approximately 43 percent by late 2009.

The share of exports destined for other EU markets increased to 34 percent in 2009, from 32 percent in 2008, helped by a higher share of beef exports destined for the Continent, together with a stronger focus on the region by prepared foods manufacturers. The value of trade to international markets was adversely affected for much of the year by the weaker global dairy market.

Exporters focusing on efficiencies, but concern over sterling remains

The agency said Irish food companies have adopted a range of measures to defend their market positions in the face of the economic downturn, according to a recent Bord Bia survey. Measures have included reducing non-staff costs (68 percent of firms); reducing staff numbers (36 percent but rising to over 70 percent among the largest firms); discontinuing some product lines (35 percent), and reducing expenditures on business development and sales (38 percent) and new product development (28 percent).

Eight out of every ten exporters report difficulties in securing price increases in the UK market to compensate for the decline in sterling. As a result, one in every two firms confirmed they have withdrawn from customers that are no longer profitable, while changing their focus to less price sensitive channels and customers.

Nine out of every ten exporters say that the changes they have made will enable them to maintain their business situation in the UK should sterling remain at 90p over the next six months or so. However, if sterling were to remain at this level indefinitely, having fallen by 30 percent over the last two years, only seven out of ten firms believe they could continue to sustain their business situation. Furthermore, only one in every two believes they could maintain business levels should sterling depreciate further to between 95p and 100p, with the number dropping off to one in three at a rate between 105p and 110p.

Export Performance and Prospects report (the report should be accessible from the Bord Bia homepage on Wednesday).

Finfacts Comment: We have highlighted how Germany increased its food and drinks export 15% in 2008, making it a net exporter in the sector for the first time in recent decades while Ireland's exports fell.

We have also said that the Irish dairy sector is fragmented; it invests significantly less than its major competitors in terms of capital investment and R&D and focuses on low value-added products.

We compare poorly in exporting compared with a comparable country New Zealand and we have very few international consumer brands:

SEE Finfacts article, Dec 2009: The challenge of creating 160,000 new Irish jobs

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© Copyright 2009 by Finfacts.com

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