Ireland's drinks sector toasts expansion, but bemoans 'double regulation'

THE drinks industry in Ireland has the potential to grow exports in excess of €2 billion over the next 15 years and to create an extra 13,000 jobs, most of them in the rural economy.

However, a new report claims this potential expansion is being compromised because a “double regulation” of the industry is undermining competitiveness and is at odds with Government expansion plans for the sector.

Leading agri-food economist Ciaran Fitzgerald produced the report, commissioned by the Alcohol Beverage Federation of Ireland (ABFI), which is part of IBEC and represents alcoholic drinks manufacturers and suppliers.

The industry is home to iconic brands such as Guinness, Jameson and the brewing of Heineken.

It is a very significant employer directly, and indirectly through its support of tourism, farmers and rural pubs.

According to the report, the industry has the potential to grow exports by at least 85%.

This ambition is supported by the Government in Food Wise 2025, but will require at least €1.15 billion private sector investment to deliver.

Ciaran Fitzgerald maintains there is now a clear disconnect between the Government’s targeting of the drinks industry for growth and expansion and some of the emerging policies on price, taxation and regulatory costs.

“These are inconsistent, lack an evidence base for proportionality, and will ultimately act a as a barrier to local and inward investment.

“The imposition of high taxes, regulatory costs and barriers will place Irish-based businesses at a disadvantage to other jurisdictions, and fundamentally undermine the export-led economic growth of the sector,” the reports says.

A total of 92,000 jobs depend on the drinks industry in Ireland. It supports 12,000 farm families as it requires 50,000 apples, 200,000 tonnes of barley and 300 million litres of milk each year. It also provided 1,000 construction jobs over the last five years.

Overall, the industry purchases over €2 billion worth of raw materials and services and underpins 20,000 jobs in services and distribution.

It has annual exports of some €1 billion and collects €2.2 billion in taxes through VAT and excise.

The 52,000 retail jobs it supports include those in 7,457 public houses, 641 hotel bars and 2,458 fully licensed restaurants. It also plays a vital role in Ireland’s €4.5 billion tourism industry.

Guinness Storehouse, the Old Jameson Distillery and the Midleton Jameson Experience are major tourist attractions. Guinness Storehouse attracted a record of 1.2 million visitors in 2014 alone.

The drinks industry also generates positive international awareness about Ireland through their global brands. The top three internationally recognised Irish brands include Guinness, Baileys and Jameson.

Some 80% of overseas visitors see the pub as one of the potential experiences influencing them to visit Ireland while 83% explain that “listening to Irish music in a pub” is one of their visit activities.

The report notes there are huge opportunities for growth in the whiskey and craft beer sector with plans to double whiskey exports and increase the number of microbreweries to 100.

Emerging markets in Asia and the explosion of the craft alcohol market in the United States provide Irish companies with enormous potential to expand.

Meanwhile, Diageo has invested almost €200 million in a new brewery at St James Gate in Dublin and Irish Distillers Pernod Ricard (IDPR) has recently completed a €200 million upgrade in Midleton .

According to the Irish Whiskey Association’s “Vision for Irish whiskey” report, the sector grew by almost 200% in the last decade.

In 2014, more than 6.7 million 9-litre cases of Irish whiskey were exported to over 100 countries worldwide. This figure is set to exceed 12 million cases by 2020 and 24 million cases by 2030.

Three years ago, the island of Ireland had four distilleries in operation. In the next three years that number will grow to over 15 if all the current projects move forward.

However, alcohol consumption in Ireland last year showed a 24% decline from 2001, while spending in 2013 had dramatically fallen by almost €1bn since 2007.

There has also been a major shift in the location of consumption from the pub to the home. Drinking in the local has declined by 35%.

Ciaran Fitzgerald said the imposition of high taxes and regulatory costs is not economically sustainable and will only serve to undermine the sector’s contribution and curb its growth.

Excise and VAT taxes on alcohol in Ireland are the second highest in the EU and four times the average rate across the European Union. Alcohol prices here are consistently 60% higher than average EU prices.

The report highlights the sector’s significant efforts to collaborate with the Government in restricting access to alcohol by minors and promoting responsible consumption.

Significant resources have been committed into codes of conduct and legal constraints around labelling, advertising and product promotion in order to inform consumers of the health risks associated with harmful consumption of alcohol.

Under these codes, the industry in Ireland adheres to much stronger rules than most other European and developed countries.

The report says the commitment to responsible consumption regulation costs €30-40 million/year beyond normal compliance costs.

But it claims the layering of regulatory costs on top of compliance costs acts as a poor signal to multinational and domestic investors in the alcohol sector.

Ross MacMathuana, director, Alcohol Beverage Federation of Ireland, said significant export growth opportunities exists for the industry.

“If we are to realise these ambitions, we need to have a more consistent policy framework in place informed by evidence-based regulation.

“We welcome Ciaran’s input into the debate, and hope that it will encourage a more informed discussion on the drinks sector, its contribution to society and its regulation in this country,” the director added.