Business Irish

Tuesday 24 October 2017

A welcoming image will attract visitors and bring prosperity

Continuing our series where business leaders suggest ways of kick-starting the economy, John Kennedy of Diageo says we should develop iconic brands

'Baileys is one of the largest purchasers of dairy produce in Ireland -- almost 10 per cent of national cream production goes into this iconic product'

September 2008 seems like a lifetime ago. This was when I arrived in Dublin to take on the role of Managing Director of Diageo Ireland. As the son of Irish emigrants to New York, returning to Dublin to head up the company on the eve of the Guinness 250th celebrations felt like a privilege. It was the dream job.

Thirty days after I arrived, Lehman Brothers collapsed and the banking and fiscal crisis that had been waiting in the wings took a stranglehold of the Irish economy. It hasn't loosened its grip since.

I still feel fortunate to work for this company. However, I never imagined the scale of the challenges that would beset our company, our industry and the entire country.

The economic downturn has been harder and longer than anyone predicted. However, Ireland is in a better position than other economies to recover because difficult decisions were made earlier here than in many other European countries.

Last week's Budget announcements were very difficult. However, we are three years into dealing with challenges that some neighbours , like Italy, are only now starting to tackle.

In the long term, Ireland has strengths that will drive growth and create jobs. Two of these are areas that Diageo is deeply involved in -- tourism and food and drink exports.

The food and drink industry doesn't always get the same airtime as other industry sectors like technology and pharmaceuticals. Yet Ireland has deep agricultural roots and has built a strong international position as a food exporter. Many of the country's most successful home-grown companies are from this sector and they have built a track record of creating sophisticated, innovative products and world-class brands.

Diageo plays a big role here as a major exporter, with sales abroad of Irish products worth more than €1bn. Guinness, Baileys and Bushmills are some of the most iconic brands Ireland makes.

They are enormously valuable to the economy, not just because of the direct and indirect jobs they support in the manufacturing and services sector, but also because of the more than 5,000 Irish farms that the ingredients come from.

Baileys is one of the largest purchasers of dairy produce in Ireland -- almost 10 per cent of national cream production goes into this iconic product. The latest news is that the Chinese seem to have a taste for our famous liqueur, so the opportunities for growth are strong. Our brewing and distilling activities account for the vast bulk of malt barley produced in Ireland. The continued success of Guinness in many corners of the world and the impressive growth of Irish whiskey are promising trends.

For Diageo, the largest premium drinks manufacturer in the world, those Irish brands are extremely important and we are investing heavily in growth across the globe.

There are two key drivers of export growth in the drinks sector for Irish brands -- innovation and emerging markets.

Just like in technology and pharmaceuticals, innovation is extremely important to the food and drinks industry. Wednesday's Budget announcement on enhanced supports, such as R&D tax credits, was very welcome. To really fulfil its potential, the food and drink sector requires a bespoke innovation strategy. I know Minister for Agriculture Simon Coveney is committed to this type of approach and I look forward to seeing genuine progress in this area.

Opening up trade opportunities is another area where government support is critical. One example is India, where the Irish Government is supporting industry efforts to reduce tariffs for imported products. The Indian whiskey market is one of the largest in the world and it is hugely protected by a massive 150 per cent import tariff that means it is closed to imports. This is an enormous opportunity and the type of area where government can directly stimulate exports and growth.

However, further opportunities arise in opening markets in South East Asia where Guinness has a substantial presence and other Irish brands can thrive too.

In Latin America we need to find new and imaginative ways to open up Mercosur (the Common Southern Market) and balance the legitimate concerns of the beef sector with the real opportunities in high-valued-added food and drink products.

International research reinforces perception of Ireland as the Emerald Isle -- natural and unspoiled. It makes sense that the country should be a leader in the food industry. Our products are valued because they come from this island.

Another belief comes through the same research -- the people of Ireland are friendly and welcoming. This is part of the appeal of Ireland to international tourists and one of the reasons tourism is a significant sector in the Irish economy. It is a distinct competitive advantage to be seen as having the friendliest people on the planet.

The Guinness Storehouse will have welcomed almost one million visitors by the end of this year -- including the Queen of England. This is an impressive eight per cent increase over last year. We have an ambitious plan to grow this number over the next three years and have just announced a €10m investment to continue to improve the visitor experience.

The hospitality sector is a critical part of the tourist experience. In particular, Ireland has the best pubs in the world and a visit to a local pub is at or near the top of any tourist's must-do list. Specific focus on supporting the job-intensive on-trade sector is very important. Introducing the lower VAT rate last year was a positive step. Further policy steps to reduce the cost of travel to Ireland should be introduced to make visiting the country as easy as possible.

Investing in keeping our key public assets looking fantastic will also show a great return for a small investment. I've seen fabulous properties like St Stephen's Green littered upon and worse. We need our most famous sites to look beautiful and well kept.

I grew up in New York City in the Seventies when the city was dirty and dangerous. Now it shines and the world comes to visit. Let's make sure we treat our prized sights, the ones everyone comes to see, with the respect they deserve.

Building competitive businesses and a competitive economy is essential if we are to secure our future. I know that Diageo needs to be able to brew beer at a cost that matches our best competitors across Europe. If we don't, our business is at risk. The same goes for any manufacturer across industry.

After a period of cost inflation, the Irish economy has regained some of its competitiveness in the last three years. However, most estimates are that we are about halfway there with more to be done.

I understand the desire to provide as much protection as possible to people during a deep downturn.

However, real job security comes from economic growth -- not from legislation that can add cost and lack of flexibility to businesses. There are a number of initiatives under way through the review of the JLC model, the punitive bankruptcy system and other areas that will hopefully help spark business investment and growth.

The private sector has to lead by continuously focusing on becoming more lean and efficient. Government can play a supporting role by ensuring that public policy keeps a constant eye on creating conditions for continued investment by business.

John Kennedy is the Chief Operating Officer for Diageo in Western Europe

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