Growing potential of the food industry in Ireland

The industry is developing new and greener ways to do business and the results are pretty mouth-watering, writes John Daly

The future for the food industry and opportunities for global growth are literally mouth-watering.

With the world’s population expected to grow by over a billion by 2030, demand for food sources will need to increase by 50% to cope with demand.

Driven by a doubling of the world’s middle class to well in excess of 3.2bn by 2020, major Irish companies like Kerry Group, Glanbia and Greencore are already gearing up plant and personnel to meet this soaring expansion.

“Last year’s record €10.5bn in exports follows five years of sustained growth by the sector, which is now well positioned as it seeks to expand towards its €19bn export goal set in Food Wise 2025,” said Agriculture Minister Simon Coveney.

“As the industry continues to develop premium positions in established markets, significant progress is also being made in opening up new markets that can help sustain its growth.

“I am deeply conscious that business is not easily won and Irish food and drink companies are to be commended for their success and determination in developing Ireland’s largest indigenous industry.”

Ireland’s largest industry has an annual turnover of €25bn, exports of €10bn and 230,000 jobs. The sector supplies much of the country’s €14bn domestic grocery sector, is the largest net exporter of dairy ingredients, beef, and lamb in Europe, and the UK’s largest supplier of food and drink.

A number of factors underpin this turnaround — not least the extraordinary rate of urbanisation continuing across the globe. A very large proportion of these potential new consumers now live in geographically concentrated markets across the world from growing EU conurbations to the teeming city hubs of Asia.

The new agri-food strategy, Food Wise 2025, has set out the ambitions of the sector for the decade, and predicts that Ireland can increase the value of exports by 85% to €19bn, push the value added to the sector by 70% to €13bn, and grow the value of primary production by 65% to €10bn.

The strategy builds upon the success of the current strategy, Food Harvest 2020, which has seen exports grow faster than any of the other main merchandise sectors since the economic crash began in 2008. Research by the Department of Agriculture, Food and the Marine, estimates that the agri-food sector contributes almost 40% of net foreign earnings from 19% of exports.

In terms of balance of international payments, every €100 of exports from the sector generated €52 in net foreign earnings. In contrast, exports from other sectors contributed only €19 in net foreign earnings for every €100 of exports.

Given this embeddedness of the agri-food sector within the Irish economy, targeted output growth will have an important impact on Ireland.

Another important attribute of the agri-food sector is that it is located in rural Ireland. Growth in these sectors can help deliver on the rural employment objectives within the Commission for Economic Development in Rural Areas report.

Ambitious growth projections are also on the cards for the beef industry, which could become the most carbon efficient in Europe, generating an additional €300m annually, as part of the Irish food and farming industry’s plans to be a world-leader in sustainable food and drink production.

While Ireland’s green image has been a key platform for the success of the industry, as underlined by last year’s exports to 175 markets and generating €10.5bn for the economy, it is no longer sufficient for Ireland to just declare its green credentials.

In a world facing challenges from climate change and resource scarcity, we must prove it as well.

Since Origin Green was established in 2012, more than 55,000 Irish farms and 122 food and drink companies have become fully-verified members of the programme.

The farms account for 90% of Ireland’s beef production and half of its milk output, while the companies are responsible for 85% of the country’s food and drink exports. As part of the programme, food and drink manufacturers have committed to over 800 sustainability targets around raw material sourcing, manufacturing processes and social sustainability — and which has met with universal acclaim from the World Bank, the World Wildlife Fund, and from global leaders in the food and drink industry.

“Three and a half years following its launch, Origin Green has gained traction at home and won plaudits abroad, and on a scale few of us might have imagined,” said Bord Bia chief executive, Aidan Cotter. “It is transforming our thinking about how we produce food and how we do business, and how we can be different, and make a difference, in a challenging marketplace and a changing world.”

A unique feature of Origin Green is the practice that all participating farms be audited and carbon-footprinted once every 18 months.

“No other country anywhere is carbon foot-printing its farms on such national scale. And we are not just doing this once; we are doing it routinely over an 18-month cycle. This is a process of measurement, feedback and continuous improvement. Farms are also measured on their performance around water conservation and biodiversity, as well as on animal health and welfare and on food safety.”

Ireland’s dairy herd already enjoys the joint-lowest footprint in the European Union, while our beef herd ranks at number five. Were the carbon footprint of the beef herd to be reduced by 10%, it could become the most carbon efficient in Europe, and generate improved on-farm income of €300m per year.

A partnership recently signed between Bord Bia and SF Best, one of China’s leading e-commerce platforms for imported food will see a concentrated online promotion and sale of premium Irish food and drink over the next 12 months. SF Best operates 2,800 stores across China and, importantly for food exporters, its e-commerce business is recognised as a leader in fresh and frozen imported produce.

Online shopping for food is becoming an increasingly important part of Chinese consumers’ purchasing habits. In the first three months of 2015, the value of Chinese online shopping transactions exceeded €108bn, up 45% on the same period in 2013. Online sales of food are expected to continue growing at a rate of 50% annually, to a value of €280bn by 2025, with imported food expected to account for some 13% of this total value.

Ireland’s exports to China increased in value by 50% last year to reach €367m, and exports to Hong Kong increased by 24% to €180m.

China and Hong Kong continues to be a growing market for Irish seafood with exports increasing nearly five-fold in value since 2011 to reach almost €27m in 2014. This positive growth in Irish exports to the region continued last year with sales to mainland China up 45% year-on-year compared to the 2013 figure.

Aiming to capitalise further on the established reputation of Irish food in the Middle East, Bord Bia participated at Gulfood Manufacturing Exhibition in Dubai for the first time.

The only dedicated food ingredients show in the Gulf region, the three-day event brought together 1,500 exhibitors and over 30,000 attendees from 26 countries, including international government minsters, top level trade delegations, and global industry leaders.

The Bord Bia stand was themed Origin Green, and targeted dairy and dairy ingredients buyers from the Middle East, North Africa and near Asia.

“Participating at Gulfood Manufacturing proves our confidence in the region to deliver for Irish producers and exporters and offers an ideal opportunity for Bord Bia to engage directly with buyers from near Asia, the Middle East and North Africa and to present Ireland’s unique message on sustainable food production through our Origin Green programme,” said Michael Hussey, Bord Bia’s manager in Dubai. “In addition, the recent announcement by Minister Coveney on opening market access for Irish beef and sheep meat to Oman with no age limit gives a renewed boost to our efforts in that region.”

The Middle East and North African markets have performed very well in recent years with Irish food and beverage exports to the region valued at €364m in 2014, an increase of 20% on the previous year, driven mainly by the dairy sector.

Six-fold increase in beef exports to Germany

Growing potential of the food industry in Ireland

Irish beef is performing increasingly well in the German market, growing six-fold in as many years.

The continuous growth of the sector follows a major promotional campaign, which saw Irish beef exports reach almost €120m in 2014, compared to just €50m in 2011.

While beef exports have remained strong in 2015, a new three-year promotional campaign starting this year aims to increase beef exports by a further 50% to reach 30,000 tonnes annually by 2018.

Germany represents Ireland’s fourth largest export market for food and drink, valued at €565m in 2014.

Distribution has also significantly increased, with Irish beef now widely available through all key German retailers, including REAL, Sky Coop, Kaufland, Rewe, and Karstadt. REAL Hypermarket, part of the Metro Group, the world’s fourth largest retailer with an annual turnover of €67bn, is a key customer of Irish beef, importing over 5,000 tonnes each year.

Early in 2015, REAL launched a national promotional campaign to celebrate its 50th birthday and selected premium Irish beef as the key focus of its television campaign. “The German market continues to offer significant growth potential for premium, sustainable products,” said German president Joachim Gauck, who visited an Irish farm to gain an insight into Origin Green and sustainable farming in action.

“It has a long history of environmentalism and interest in sustainability and Bord Bia’s Origin Green sustainability programme is being very well received by key stakeholders in the German food industry.”

Kerrygold butter is the number-one selling butter in the German market, with a 17% market share. Ireland’s dairy exports account for 41% of food and drink exports to Germany, valued at €230m in 2014.

Most German consumers associate Ireland with ‘Die Grüne Insel’ — the Green Island — and high-quality Irish dairy products, such as butter and cheese.

Organic and farmhouse cheeses such as Little Milk Company and Cashel Blue have also gained ground in Germany in more recent years. In 2014, prepared foods accounted for approximately 16% of Irish food and drink exports to Germany, where key players include Keogh’s Crisps, Dawn Farm Foods, Green Isle Foods, and Kepak Convenience. New to the market is Irish sous-vide specialist, Ribworld, who secured three new listings this year in the German market, including in one of the country’s leading premium retailers.

Future of milk is green as plan aims to double output

Growing potential of the food industry in Ireland

“In Ireland, the future of milk is green”, wrote Agathe Lejeune, a French journalist with the highly-respected trade magazine, Lineaires, following her visit to Ireland last October.

Her observations give an insight into how the Irish food industry’s sustainable food production initiatives are received abroad, as well as its penetration in the French market and its drive to innovate.

Pointing to Ireland’s ambition to increase milk production by 50%, to 7.5bn litres by 2020, Ms Lejeune wrote that “although this quantity is just a splash on a European scale, it represents a fabulous opportunity for Ireland’s 18,000 dairy farms”.

She noted that scope exists to increase the yield of Irish dairy cows, with each animal currently producing, on average, 5,500 litres of milk per year compared to a French cow’s 6,800, and added that “the best news is that Ireland intends to use a highly ambitious national sustainability programme entitled Origin Green to help it achieve its objectives” she added.

The journalist described the Origin Green programme as “an impressive display of national unity”, built around its three pillars of raw materials sourcing, manufacturing processes and social responsibility.

“The programme is very popular in Ireland, because it is based on individually set, achievable, measurable improvement targets,” said Ms Lejeune.

“Origin Green is not designed to be completed and then forgotten. It is a long-term commitment to progress,” she wrote.

She concluded that although the initiative may not directly raise export prices, it is an excellent mark of quality, recognised by leading organisations worldwide.

Ms Lejeune found herself surprised at one particular discovery during her visit: “Who would have thought that Ficello, France’s fourth-ranking children’s cheese brand, is produced by Kerry Foods in one small plant at Charleville in Co Cork, which has a population of just 4,000.”

Ms Lejeune also noted Ireland’s insatiable appetite for milk, and the fact that practically everybody drinks it fresh, while UHT is the preferred option for the French.

“The Irish drink plenty of it,” she added, with an average milk consumption in Ireland of 130 litres per person per year.

She remarked that Glanbia, with its Avonmore brand, brought back the old-fashioned milkman in late 2014, backing him up with modern technology by way of the website through which it sells fresh milk for delivery across the country.

However most customers are in major cities such as Dublin and Cork, or on the west coast.

“Yes, almost one hundred lines are available, with eggs, fruit juice, yoghurts, butter and more — all the ingredients for a perfect Irish breakfast,” Ms Lejeune concluded.


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