Business Irish

Friday 24 January 2020

Brexit and green issues conspire to grate on Ireland's dairy sector

The UK is a vital market — now under threat due to Brexit — for Irish cheddar exports
The UK is a vital market — now under threat due to Brexit — for Irish cheddar exports
Samantha McCaughren

Samantha McCaughren

Brexit has taken a welcome back seat over the past few weeks, but now that we're back to business as usual, some of the concerns of the last two years will once again rear their ugly heads.

The farming sector is still facing into an uncertain relationship with the UK, which has been a primary trading partner for many producers.

At present, Britain takes a quarter of all our dairy exports, and UK businesses pay around €1bn annually for Irish dairy products. The reliance on that market is particularly acute for the cheese sector.

The UK takes around half of Ireland's cheese exports, providing a vital outlet for a large and valuable slice of our total dairy output.

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Cheddar is the main cheese exported to the UK, and there is little demand for this cheese in other parts of Europe.

Whatever way Brexit plays out, there is now an acknowledgement that the relying on the cheddar business brings with it too many risks, given the political uncertainty in its main market.

So there has been a scramble to diversify, not to new markets as demand would be limited outside of our nearest neighbour, but into production of other types of cheese. For example, West Cork cheese producer Carbery, known for its Dubliner brand, is investing €78m as it diversifies from cheddar into mozzarella.

And a joint venture between Dairygold Co-operative Society Ltd and Norwegian dairy subsidiary TINE Ireland Ltd will produce Jarlsberg cheese, also from Cork.

However, late last year, it emerged that Glanbia was coming up against opposition from environmentalists regarding a planned new plant for the production of a continental cheese. It is a joint venture between Glanbia Ireland and Dutch dairy group Royal A-Ware.

Such opposition is not unusual in the development of plants and production facilities.

However, Friends of the Earth and An Taisce are asking questions about intensification of the dairy sector, and the implications for greenhouse emissions.

Glanbia Ireland says the milk is already being processed, and that it will produce a sustainable and nutritious dairy product at the Kilkenny site.

The matter is now with An Bord Pleanála and while the new Glanbia plant may well get the go-ahead, we can expect a great focus on the impact of dairy on the environment in the year and decade ahead.

  • It has been easy to be sceptical in recent years when companies such as Diageo and Heineken made noise about the launch of a new low or non-alcohol beer.

At a time when the mood music around alcohol consumption had been shifting, it seemed like good corporate policy to provide alternatives for people who did not wish to consume alcohol on specific occasions.

As the smooth marketing messages said, some consumers might want to enjoy the fun of an evening out, blending in within a pub setting, while keeping a clear head for the next morning.

Whether real customers would feel the same way was another matter entirely.

However, this Christmas, there certainly seemed to be more non-alcoholic beers in the mix, bearing out numbers from the Irish Brewers Association which suggested that sales of low and non-alcoholic beer were up 60pc in 2018.

The Financial Times reported last week that UK sales of alcohol in some categories were waning, with sparkling wine sales down for the first time since 2012.

Perhaps more worryingly for the Irish drinks sector is an apparent slowdown in growth of gin consumption.

Gin grew in the UK by 4pc in October 2019, compared with growth of 30pc in the same period in 2018.

Gin production has exploded in Ireland in recent years, partly due to the fact that emerging distilleries can produce it as they wait a minimum three years for their spirits to be legally called whiskey. At last count, there were more than 50 Irish gins.

It is positive that gin is still in growth. But now the bubble has apparently burst, it will be an increasingly competitive market, which will test the marketing skills and distribution abilities of newcomers and established labels alike.

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