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Monday 26 February 2018

'It's a series of constant unknowns' - New Bord Bia boss Tara McCarthy taking a pragmatic approach to Brexit

Tara McCarthy is leading the drive to expand non-EU markets for Irish food produce. Photo: Alan Rowlette
Tara McCarthy is leading the drive to expand non-EU markets for Irish food produce. Photo: Alan Rowlette
Louise Hogan

Louise Hogan

"Behind every single sector there is a Brexit story," says the new Bord Bia chief Tara McCarthy.

From losses in the mushroom industry to the fears over South American imports knocking our beef off British supermarket shelves, Brexit has dominated the agenda since the West Cork woman took the hotseat at the Irish food and drinks promotion body earlier this year.

"Nobody has the right answer here but it is about scenario planning to see where your pressure points are going to be," she said of the challenges facing the €11.1bn food and drinks industry in a changing international marketplace with Brexit, oil slumps and the new Trump regime.

Businesses that farmers depend upon to buy their produce have been undergoing the Bord Bia 'Brexit Barometer' to establish their potential liability in the tumultuous times ahead.

"It is very hard to say that you are prepared for Brexit, you are dealing with an environment that is really uncertain and all you are trying to do is have a little bit more scenario planning for your business to try to manage your way through," she said.

There have already been two scenarios faced by businesses from Brexit - with the first being the currency volatility that saw sterling swing in value and curb the value of Irish imports.

"That for those who weren't hedged was a short sharp lesson on the benefits of hedging, and that was where the mushroom industry got really hit," she said, with Bord Bia working hard to deliver key insights behind hedging to help small and medium-sized businesses buy time for their businesses.

Another key factor was route to market with businesses seeking to guard their margins by negotiating smaller pack sizes or other factors.

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Over the years the food industry has dealt with many crisis from the BSE issue that saw markets vanish overnight to the more recent the horsemeat scandal that was found in many countries across Europe.

"BSE hit one sector but this is hitting every single sector. To me this is the biggest strategic issue the industry has ever faced," explained the Bord Bia chief who took over the post following the retirement of Aidan Cotter earlier this year.

"It is hitting every sector at the same time. In some ways as well with BSE, there were an awful lot of 'knowns' and you could map your way through with certainty.

"It is the 'unknowns' here that is a key part of it. It is the constant unknowns that you are working through, and the uncertainty of every week - whether that is the UK elections, will negotiations be starting on Monday or won't they. All of that is uncertainty that you have no controllables for and that is what makes this particular challenge unique and huge."

The portfolio of food and drink business in Ireland is diverse from the likes of the dairy giant Glanbia to small craft beer producers, with dependence on the UK varying widely.

The UK is Ireland's largest market for food and drink, accounting for 41pc of Irish food and drink exports, valued at €4.4bn. Between 2010 and 2015 Irish exports to the UK increased by €1bn largely driven by increased meat exports.

Beef

With 95pc of Ireland's beef exports go to the Europe and 50pc destined for the UK, there have been concerns over potentially cheaper beef from South American countries undercutting Irish produce, but Ms McCarthy has doubts about how realistic that scenario is.

"The UK is a deficit market for beef and we are the number one supplier to fill that deficit."

However, Ms McCarthy cautioned the potential scenario of a 50pc tariff on beef entering the UK if talks do not secure a soft Brexit must be examined.

"The UK still won't be self-sufficient on beef and will still have to import it from somewhere," she said, adding that we must position ourselves as their "best solution" in terms of understanding the needs of consumers.

She pointed out that talk over a 'bonfire of regulations' by UK farmers when they leave the EU was missing the point. "It is not the EU that has really been putting on most of the asks of food production, it has been the retailers and your customers," she said. "They are not reducing their rules and there is no where outside of Europe that will be able to deliver the same set of rules as we can."

Ms McCarthy said in recent meetings that they have held with chains including Tesco they stated their buying teams are among the "most sophisticated and possibly ruthless" and they have chosen to source from Ireland and the UK.

"You would want to give them a compelling reason to risk their consumer confidence and brand by sourcing elsewhere," she said.

Ms McCarthy said the UK had been associated with having a cheap food policy but there was a balance to be struck where a consumer was demanding quality.

Work is underway to prioritise the key markets for products from cheese to whiskey by sector, yet it must all be consumer-led to be successful.

Now researchers are being sent to live with families in China to see how they opt for various dairy products. "It has got a huge appetite for infant formula, moving now from a country that wouldn't have a traditional association with dairy, always having had a reputation of lactose intolerance, now looking to push dairy as part of the diet," she said.

"You are working with a huge population from a tiny base. You can't just say we'll switch off the cheddar and move into China and expect similar margins. This is why two years out we are starting that work."

Now, it is all about scenario playing as they face the big 'unknown' of the potential return of customs regulations and tariffs.

With much of Ireland's produce destined for Europe also travelling across the UK, options for transport from the island of Ireland will be explored depending on the level of delays in ports and regulation applied.

"If you want to go from Ireland direct to France rather than through the UK will the traffic warrant it?"

Ms McCarthy said they were an "ambitious" organisation and had been honest and open with the Government in discussions. "They've increased our resources, we've had an extra €3.6m in Bord Bia since Brexit," she said, adding they were not seeking a "blank cheque" but targeted response.

Despite the negativity from Brexit, there are one or two chinks of light peeping through, including the evolution of the industry.

Ms McCarthy pointed out there is now a huge appetite for businesses to diversify. "We're going to 27 different trade shows this year, which is basically a trade show a fortnight," she said.

"We've opened two new offices in Singapore and Warsaw late last year. We are extending a lot of the projects we do to build market insight because this is not an overnight win. What we are trying to do now is help our companies understand where there are opportunities," she said.

"Could you imagine Ireland Inc by 2025 being much stronger? You would hope that could be the result."

She points out dairy industry leaders have shown they are collaborating in the face of the challenges, particularly as they assess the possible scenarios that may impact the cheddar sector with up to 65pc going to the UK.

"It is almost a responsibility of all of us, the State and industry, to work really really closely together and inform ourselves on how fast we can look at these issues.

"You can't switch this off in March 2019 and decide whoops I've too much cheddar now. You've to start planning now even though you will have no answer before March 2019."


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