Scaling up food and drinks firms

Investment by food and drink companies In Ireland has accelerated this year, but there are concerns it is too narrowly based and that there are too few ‘scalable’ companies in the sector.

So far in 2015 Irish food companies have announced investments of €156.6m.

In addition, Glanbia’s new dry powder facility in Waterford announced in 2013, started operations earlier this year following an investment of €185m. It is one of the largest facilities of its kind in Europe.

Also earlier this year, Kerry Group opened its new R&D facility in Naas, Co Kildare, following a €136m investment over the past two years in a modern food ingredients research and development facility.

These investments will support the €10bn in exports from the sector and help drive food exports to reach the so-called ‘Harvest 2020’ target of €12bn and then the ‘Food Wise 2025’ target of €19bn.

However, Enterprise Ireland has concerns that there are not a sufficient number of companies coming though which have the potential to become large Plcs.

Enterprise Ireland in its submission to Agri-Food 2025 Strategy said that the key challenges for the sector included a weak pipeline of new entrants — the booming artisan sector is not translating into export-led and scalable companies and the difficulty companies face in raising finance, mainly because the Irish investment community is more focused on technology projects than the food and beverage sector.

Other challenges include a lack of ambition. It appears with promoters reluctant to take an aggressive approach in growing the company from the start.

Investment in the beverages sector has been growing at a more substantial rate due to expansion in the whiskey sector and investment in the craft beer sector — the investment level is running five times higher in the sector than in the agri-food sector.

Whiskey and craft beer exports for the beverages’ industry rose to €1.2bn in 2014, about one twelfth of the agri-food exports.

There has been a continued expansion in the international demand for whiskey of all kinds, with Irish whiskey exports increasing by 60% since 2009.

Ireland exports high value and branded drinks to 125 countries, but it is running well behind the €4bn Scottish whisky exports.

So far in 2015, investments of €91m have been announced by five companies in the sector:

  • €50m by Lord Henry Mount Charles in his Slane, Co Meath facility, under a joint venture with US spirits giant Brown Forman.
  • Boane Distributors, a new venture in the Boyne Valley announced a €20m investment in whiskey and craft beer facilities.
  • Quintessential Brands announced in April a €4m investment in its First Ireland Spirits Laois facility.
  • In June Irish Distillers announced a €17m investment in a new bottling plant at its Dublin facility.

The Irish Whiskey Association estimates there has been €397m invested in the sector over the past three years and estimates that a further €366m will be invested in the next five years to 2020.

Investments by John Teeling in his new venture the Great Northern Distillery in Dundalk, Co Louth, and that of his sons Jack and John in the Teelings Distillery in the Liberties in Dublin, are part of the investments made in the past three years.

Investments over the same period include the €35m project by Grants in the Tullamore Dew facility and Irish Distillers’ €100m investment in Midleton.

Raising funds to invest does not appear to be an issue. However, the ability of Irish-based companies to develop export markets against a strong challenge from the much larger Scottish producers, as well as that from the new and copycat producers in India and China, will be a key challenge for Irish companies investing in the sector.

In May, Agriculture Minister Simon Coveney announced plans to double exports in the sector by 2020 and double again by 2030.

John Whelan is an expert on trade. He will chair the Food and Drink Business Conference in the Aviva on September 16


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