John Whelan: Ireland may be losing its grip on selling food into China

Ireland’s exports to China fell sharply at the start of this year, suggesting that last year’s stellar sales to China are at risk

In March, H&M faced a social media campaign in China over complaints of abuses in the Xinjiang region. Picture: AP 

Driven by consumer spending and foreign trade, China’s economy surged in the first quarter of the year as the huge economy bounced back from the effects of the pandemic and provided a much-needed boost to exporting companies in many countries.

However, Ireland’s traders showed little sign of benefiting from this rapid growth, unlike other European countries. 

Exports into China climbed 36% in the EU, despite long-running concerns regarding human rights' breaches in China’s Xinjiang province and the treatment of Uighur Muslims there.

There have been campaigns on Chinese social media against H&M and other western clothing companies against their statements on human rights in the region. 

However, US exports in the early months of the year appear to have grown significantly.  

The US and China have put aside their trade war issues, with US exports in the first quarter climbing to €140bn.

By contrast, Ireland’s exports to China fell sharply in the first two months of the year, suggesting that last year’s stellar sales to China are at risk.

There may be a few issues in play and the lack of diplomatic clout is one factor. This became evident in January, when the Taoiseach  appealed to the head of the Chinese government to reopen its market to Irish beef exports “as a matter of urgency”.

Irish beef has been banned from the Chinese market since May 2020 due to a case of BSE, or Mad Cow Disease, having been identified during an inspection

It’s a major loss of sales for the agri-food sector. China’s meat consumption has steadily increased over the last several years and is now the largest single importer globally.

However, to control epidemics and support the domestic beef industry, the Chinese government has tightened import regulations. Only countries included on its eligible list can export beef to China.

Along with only 21 countries — including the US, Brazil, Australia, Canada and Uruguay — Ireland is not on the list.

Lack of interest by Chinese investors in the Irish market is also an issue. 

Investment by Chinese corporations into foreign markets has increased substantially. However, only a paltry amount has been invested in Ireland. 

Chinese companies investing in Ireland are mostly involved in aircraft leasing, financial services, and information and communications technology. 

There is a strong interest in investing in the agri-food sector, but the industry here has not been able to tap into it

One of the few recent investments was Huawei’s announcement of plans to inject €80m into research and development projects. 

The company has come in for strong criticism in the US over its 5G technology, while the UK government alleged that Huawei technology could be used to spy on companies and their intellectual property. 

This may indicate an opportunity for the IDA to provide an open door to Chinese companies, if possible.

Making up for the lack of clout in diplomatic activity or the attractiveness of Ireland to Chinese investors may be a long game. However, more overseas companies are sensing the potential of the Chinese market. 

Even the Covid-19 global epidemic has not stopped foreign firms entering and ramping up sales in China. Over 200,000 new products launched in the first three months on the Chinese Tmall Global platform, where Bord Bia lists Irish produce.

Glanbia, the Kerry Group and Ornua, are leading the push into the Asian market and all have facilities or partnerships in the continent.

However, these Irish multinationals have manufacturing facilities in many jurisdictions and the products that they sell to the Chinese market do not necessarily come from Ireland.

In the case of Glanbia, besides its baby food sales, it is also tapping into China’s national fitness plan and increased interest in health and wellness. However, while the baby food supplies originate in its Irish plants, other products for the Chinese market come from the US and other plants.

Kerry Group opened its first office in Shanghai in 2000 to target the flavours and fragrance market. 

More recently, it established a manufacturing and a bio-science division in China. 

Again, the sales in China will primarily be met from their local facilities and, hence, will not show up in Irish export statistics.

Five years ago, Ornua acquired the Shanghai-based dairy manufacturer Ambrosia Dairy to provide sour cream, yoghurt and speciality cheeses to upmarket stores and foodservice companies in the Shanghai region. 

The acquisition was Ornua’s first base in China and showed that China is one of the most important dairy markets in the world.

Ornua aims to provide locally produced premium cheeses to its existing range of Kerrygold Irish milk products on sale in China.

While Chinese companies have been slow to set up in Ireland, the number of Irish companies investing in China has increased, with around 400 firms operating in the populous Asian country

Meanwhile, China is purchasing land in foreign countries to make up for its own lack of arable land. It was the world’s fourth-largest buyer of foreign land between 2000 and 2018, mostly farmland in Australia, where it owns up to 3% of the country’s soil for cattle farming.

Like in the past, the Chinese government recently released the 14th of its five-year plans to make agriculture and food security a central part of the directive. 

Its central government drafted a food security plan to increase domestic capabilities and diversify sources for agricultural imports.

China’s ambition to reduce the market share of international suppliers of baby food in the country was made clear with its aim to increase domestically owned, locally produced formula milk products to over 60% from the existing share of 40%.

No date was set for the target, but it clearly presents a rising challenge for producers of baby food formula based in Ireland, which have large shares of the China market.

Nestlé, with its major facility in Askeaton in Co Limerick; Danone in Macroom in Co Cork; and Abbott in Cootehill in Co Cavan, all have significant shares of the baby food formula market, according to Statista.

The story of China’s trade with Ireland can be told and interpreted in many ways, but one thing is undeniable — companies from countries such as China and Ireland, which are over 8,000k apart, won’t come together if there are no mutual benefits.

• John Whelan is managing partner at the Linkage-Partnership