Agri-food firms can aim even higher

The Agricultural Science Association (ASA) hosted its annual conference in Kilkenny last week and in so doing underlined the energy that exists within Ireland’s agri-food industry.

Agri-food firms can aim even higher

Over 600 delegates attended the event, drawn from all parts of the sector including primary producers, processors, marketing companies and service providers.

Along with optimism about the industry’s prospects as an engine of growth for the Irish economy, there were also some reality checks about the current state of global agriculture and, in particular, reference to the weakness pervading many commodity markets.

Such realism is an important input to any debate about the future of Irish agri-food as in the past couple of years, a sense of unalloyed euphoria developed about the outlook post milk quota abolition.

What is now starkly apparent is that agri markets act just like all other products and experience low prices when supplies are high and high prices when supplies are tight.

Right now, a range of dairy and grain markets in particular are suffering from very high supplies and that is inducing low prices. In that scenario, only the fittest will perform well.

A theme explored by the ASA was growing the overall food industry from Ireland. While we often hear about entrepreneurship in sectors like technology, it is very clear that Irish agri-food is brimming with individuals who want to pursue growth and expansion.

Moreover, that spirit is not just confined to executives in the high profile world of stock market-listed companies. In fact, it is present in private companies, plcs and the often maligned co-operative movement.

It was the co-op movement that put Irish agri-food on the international map post independence and that quest for enterprise and innovation extends right up to the current day.

Dairy co-ops invented the plc model to facilitate access to capital that helped develop global companies such as Glanbia and Kerry Group. Co-ops continue to dominate the processing of milk on the island and support Ornua which continues to develop markets for their output.

In the private sector there are a group of companies that have excelled in the meat processing industry without adopting co-op or plc mantles.

Using internally-generated profits and certain levels of debt, companies like AIBP, Kepak and Southern Milling have built successful businesses inside and outside the Republic.

Any debate, therefore, about how best to expand the industry should be agnostic as to what form of corporation is used by entrepeneurs.

The key objective by policymakers should be to support, resource and facilitate a new generation of business leaders who have the stomach and ambition to go out and double or treble the scale of the agri-food sector led and managed from Irish bases.

That does not imply solely a doubling or trebling of physical food production in Ireland.

Rather, it envisages a world where a cluster of Irish companies, plcs and co-operatives spread out to invest in creating true global agri-food champions that Ireland can proudly host and sponsor as a means of advancing our economy and creating job opportunities and wealth for the coming generations of graduates and entrepreneurs.

Although huge progress has already been made, the scope to do so much more is also clear.

Kerry Group has a stock market valuation of over €11bn this week, with Glanbia over €5bn. These are astounding sums, but bear in mind McDonalds has a stock market value of no less than $91bn (€80.7bn). Unilever is worth £78bn (€106bn) and Nestlé €35bn.

There is no reason why Irish food companies and co-ops cannot aim for a bigger slice of the global food industry. Part of the challenge is to instil confidence that Ireland has the ingenuity and determination to foster another wave of success.

The ASA is helping do that by hosting high profile gatherings in the sector.

Joe Gill is director of corporate broking with Goodbody Stockbrokers. His views are personal.

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