Irish food and drinks industry has the appetite for challenges that could bite this year
From Brexit to globalisation, the Irish food and drink industry is facing headwinds as we enter 2017. But Padraig Brennan, director of markets at Bord Bia, Helen Cahill, co-owner at Cahill's Cheese, Rory Fanning, managing director at Slaney Foods, and Liam Casey, Lidl commercial director, explain how the industry is fighting fit and through strong relationships and innovations it will overcome these challenges.
What are the main challenges facing the Irish food and drink industry?
Casey: As a retailer and a supplier we are constantly looking at sustainability- sourcing of the products, food safety and other issues like food fraud.
All of that links into the quality of the products we get from our suppliers as well as relationships with agencies like the Food Safety Authority and the likes of Bord Bia - we work to ensure consumers have the best produce. There's better transparency now from farm to fork and right throughout the supply chain.
Over the past few years we've grown to 200 Irish suppliers, but on the bigger scale, the challenge is sustainability.
Fanning: I would agree, but there are a host of other issues like low inflation and we're coming out of a soft period for oil and energy costs, so what's around the corner in 2017 is a concern for us.
One of my cost concerns for 2017 is energy. We are high consumers of energy. We have in the last few years been used to relatively low prices, but there is a very real risk of having to deal with a significant cost increase. Prices increased during the autumn for large industry users and we have to budget for a six-figure increase in energy spend for 2017.
In addition, we've recently experienced a time of strong economic growth, maybe not of the Celtic Tiger proportions, and while we're a bit away from full employment, that's also giving us challenges.
We employ over 400 people at our plant down in Bunclody, Co Wexford, and thanks to the business we see ourselves sustaining the business and even expanding and that's also going to be an interesting challenge - in terms of the future we need the brightest and the best coming into our business.
The market for talent is very competitive and we realise this more now than we did probably a decade ago with developments like graduate programmes.
Cahill: As an owner of a small family business, this is also true. Along with my brother Dan, we have to play a number of roles and be adaptable. Given our size we have advantages and we can make decisions quickly. We can spot trends early and we are flexible. Possibly I do get some extra support from my buyer in Lidl, for example, with a new product. I can pick up the phone and he takes that call. I'm not sure my competitors on a larger scale are afforded those advantages.
Brennan: The biggest challenge we have seen is the uncertainty that has come into the market over the past year. We have Brexit, currency volatility and political uncertainty in parts of Europe.
This is very hard to plan for in any business, but there are also other opportunities in the international market place. Irish businesses have shown a remarkable ability to find new markets, whether in Asia or the US, and our job in Bord Bia is how we can respond to that and reflect what those companies are looking for.
So we're investing in getting our people on the ground and bringing those businesses there too.
On the home front I think a lot of what we do relates to sustainability - the trust in the quality, food safety - so a lot of investment around the Q-mark, for example, to give the consumer reassurance. Much of the work we would do on the domestic market would focus on that.
On the export side, it's about trying to find these new opportunities. We recently opened a permanent office in Warsaw, Poland. Likewise in Singapore and south east Asia, areas where we are looking at high incomes and growing populations.
What about Brexit, can you plan at this stage?
Brennan: The reality is nobody knows the definite outcome. But the UK has always been a core market - last year 40pc of our food and drink went to that market. What we have to figure out is what will change, particularly in the trading environment, what kind of trading arrangements will come into place, these are all things we will have to consider.
But I think before any of that is considered, we have to look at our position in the UK now and how that can be developed. We also have to look at other markets that we can diversify into whether it be Germany or newer ones. The more options we have, the more chance the industry has to get over the challenge.
Cahill: Brexit challenges are twofold. The immediate is currency fluctuation and competitiveness from others in the UK market. Long-term effects we don't know. We don't know when Article 50 will be invoked, but we know there are challenges ahead and we already feel them.
The optimist in me tells me we can focus on other European markets dealing in the EU and those further afield. This year, Cahill's exported to eight countries because of our relationship with Lidl, including Switzerland and Slovenia. So for me, there are core relationships here in Ireland that will help us through the choppy waters ahead.
Fanning: When you compare us to the French and their cheeses and wines, we are pretty modest in comparison. Particularly under the banner of grass-fed beef and the traditional butchering, what we've achieved is giving consumers access to a premium product through Lidl stores and they can go home and cook something themselves which is the equivalent of a meal in a very good restaurant - the emphasis is on consistent quality.
When it comes to Brexit, while the currency issue is important, we have to move on from that - 55pc of our sales are in the British market. In addition, we have a sister company Linden Foods based in Dungannon in Northern Ireland and that's a link we intend to continue.
Britain will continue to be a very important market for us, but there will be a whole host of issues, for example, around trade deals. There are other issues like the Common Agricultural Policy and while that won't come up for discussion until 2019 or 2020, it will be upset by the very imminent exit of Britain from the EU. I know it's clichéd, but what we want is a soft exit, not a hard one.
Having a unique, quality product is a bonus. We have also had an amazing response with our Hereford Beef because of the relationship with Lidl. For consumers looking for extra special beef, a key is breed. Hereford has the key ingredients for the consumer of quality, tenderness and flavour. The Hereford is outstanding from that point of view - and it was through Liam really that the relationship started.
We started supplying 20 to 50 cattle a week and now we're up to 400 - that's for both domestic and export.
In a globalised environment, how can the Irish food and drink industry adapt to changing consumer tastes and continue to grow?
Casey: "We spent €539m last year on Irish produce, €152m of that would have been on exports and €21.5m on beef alone. The buying team goes to Germany six times a year and we would showcase the products from Irish firms to European buyers who are there for potential export. We had €152m in exports in 2015 and we are aiming to double this in the next two years.
It's really about scale - we have 149 shops in Ireland, 38 in Northern Ireland. In Europe we have over 10,000 shops. Through increased volumes, you also get efficiencies in areas like transport, pricing and packaging and we can all benefit from that.
Using the Hereford as an example, it's also about having a point of difference. There's a number of things about how it's marketed, how it looks and explaining to people how it's reared, matured and actually getting it from farm to fork.
Brennan: There's a theme coming through here and it's about relationships. This will be critical for the industry now more than ever before. The export value of the Irish food and drinks industry will be €19bn by 2025. That means between now and then we have to grow the value of our exports by €8bn. While we hope Britain will remain a big partner, to achieve that goal we will have to quadruple our exports to China and Asia, treble in the Middle East and double in North America.
Globalisation will continue, but if we can establish and maintain relationships with key customers, understand new markets better than anyone else and establish a point of difference, we have a winning formula. Ultimately, a consumer wants to buy a proposition.
Cahill: For us, we are focusing on digital marketing. Consumers are changing, technology is changing and the environment is changing so quickly. For a small business understanding and utilising digital marketing is very important. We can also interact with customers at home and abroad using Facebook, for example.
As Padraig said, we can sell our story, our proposition which is very unique. We're a small, green producer and have that wonderful family back-story and Bord Bia do a wonderful job helping us tell it. We have an export relationship with Lidl, and we have about 3,000 customers on both Facebook and Twitter and we interact with them.
Fanning: Globalisation for us is market access and there's also a connection to the green story. For example, a few years ago we got market access to Japan. A unique market there now is beef tongue and there's a significant amount of that product going from Ireland to Japan. It's an extraordinary story, even if it's not the dictionary definition of globalisation.
Casey: It's a global world, people are travelling more, tastes are changing. Health is another trend. As a retailer we're reacting to consumer demands. We have increased our health ready-to-go products over the past year by 30pc. The consumer is increasingly aware of issues like sustainability and carbon footprint and we have to be aware of these. We can build on innovations like Bord Bia's sustainability programme abroad too.
Sunday Indo Business