Wednesday 18 July 2018

Getting all its ducks in a row key to food firm's global expansion

Monaghan-based meat producer Silver Hill is already ahead of the Brexit game after starting to spread its wings four years ago by decreasing its reliance on the UK market and selling its 'London' duck in 50 of south east Asia's top hotels and restaurants, writes Ellie Donnelly

Barry Cullen, head of sales at Silver Hill Foods. Photo: Rory Geary
Barry Cullen, head of sales at Silver Hill Foods. Photo: Rory Geary

With Brexit looming, there are growing concerns that businesses trading across the Irish Border are not ready. The latest InterTradeIreland Business Monitor found that 95pc of businesses across the island of Ireland simply don't have a plan for Brexit.

Bucking this trend however is Silver Hill Farm, a county Monaghan-based duck producer that has already slashed its dependence on Britain by looking east.

The family-owned company was established in 1962 and is betting that a decision four years ago to move into Asian markets has vastly lessened any potential fallout from Brexit.

"We had already started on the path to Asia before the Brexit vote came, the background being that Chinese customers are our core market," says head of sales Barry Cullen. "You go where the markets are and south-east Asia made the most sense from a strategic point of view. We had got ahead of Brexit, no one expected it so when it did come we were already well on the path to developing those markets."

Four years on, Monaghan duck can now be found in around 50 of the top hotels and restaurants in Singapore, on a growing number of menus in Hong Kong and in Macau's Mandarin Oriental five-star hotel. In addition, Cullen expects Malaysia to come on stream in the next six months, then Indonesia, Thailand, Vietnam, and Japan.

Ironically, the Irish-reared fowl is known in the Far East as 'London Duck' because it initially took off among the restaurants of the UK capital's China Town district.

Because the company looks after every element of production, Cullen says it is important that it carried out its expansion in phases to ensure they do not run out of the product.

"There is lots of potential out there and duck would be the dish of honour in these markets so it is less price sensitive. We would be three times more expensive than the local Malaysia duck but the locals know the London duck so they are prepared to pay the extra for the quality and that is our uniqueness, that is our selling point."

Silver Hill send around three containers of frozen duck a month to Asia, with each container carrying 10,000 ducks. By comparison, the company sends about two containers a week to London, - the aim for the company is to be sending two containers of duck to Asia each week.

Cullen is quick to credit both Bord Bia and the Department of Agriculture in Ireland for their support in helping Silver Hill with its expansion into Asia.

"There have been a lot of trade missions over the last two years into those markets to try and develop trade links and that is bearing fruit now - you are starting to see more and more business contracts being signed.

"We have fantastic produce here in Ireland. We don't realise it until you go out to these countries and you get the feedback from the customers and they say it is the best food they have ever tasted.

"We have had customers over here and chefs, and they try not just our product but the milk, the beef, the pork, on the back of that then they have started doing business with more local companies. The Bord Bia phrase is co-opetition and we are very much into that."

Cullen's advice for companies looking to move into the Asian market is to contact Bord Bia from the very start.

"Their guy Ciaran Gallagher is based out there (in Singapore), what he doesn't know about Asia isn't worth knowing ... Bord Bia have a fantastic market intelligence library down in Dublin - use that before spending a lot of money to go out there."

Despite the company's expansion into Asia, Cullen says that Silver Hill has no plans to lose sight of its main market.

Brexit or not, in 10 years' time he still thinks London will be Silver Hill's biggest market, with expansion complementing rather than replacing the UK business.

"The focus will be for the next phase of growth on Asia but at the same time we don't take our eye off the ball back at the home markets that we are established in. Longer term it makes sense that, in time, Asia will overtake all other markets, but getting into mainland China would be the big catalyst - we would need to build another factory if that were to happen which is a nice problem to have."

One thing is for sure though, the company will expand on its own terms,

"We are not like shareholder companies where you need an immediate return on investment.

"We take a 10-15 year view - we are happy to invest in the long-term relationship. We have been here 55 years and we plan to be here another 55 years."

In terms of the immediate impact of Brexit on the company that employs 220 on both sides of the Border, Cullen says that Silver Hill has taken all the necessary steps as far as it can.

"We have a committee here, a project-led group which looks at all the different aspects of Brexit. So, from that point of view, we have prepared as well as we can. We have also looked at currency hedging. We are naturally hedged because we sell a lot into the UK. We buy our feed in the UK, but we have dual supply where possible for all the large inputs; packing, feed, fuel and so on."

In terms of the daily impact of the Border, all Silver Hill duck eggs are laid in Northern Ireland in the Tyrone village of Aughnacloy.

They are hatched just outside Emyvale in Monaghan, and the company has farms both North and in the Republic where the ducks go to grow, before all being processed in the Republic. So potentially the ducks could cross the Border three times in their life cycle, and that is before they get exported.

While a hard border would have a huge impact on this, Cullen says that the company is there long enough that it remembers the last border.

"We would deal with it - we are entrepreneurial people around the border regions so you just get on with life. We will hope that it doesn't have a massive impact on us."

Cullen, who himself lives north of the Border, says that approximately 20-25 of the company's employees live in the North and work in the Republic, while there are also a small number of employees living in the Republic and working on the company's farms in the North.

He remains hopeful however that "sense will prevail" and there will be some agreement in respect of the Border.

Along with the geographical difficulties posed by Brexit for the company, the UK remains the company's biggest market, with approximately 40pc of the company's 80,000 ducks produced each week being exported there. However, with the company expanding into Asia, this figure is something Cullen expects will decline.

In addition, the company last year moved its prices on two separate occasions based on exchange rates. Overall prices in sterling increased 15pc in 2016 and the company did not lose any business from the increases.

Nonetheless, Cullen acknowledges that they will have to wait and see what tariffs, if any, are in place once Britain leaves the European Union.

"We are a premium product so we are lucky in one sense that we are not as price sensitive as say the mushroom growers in this area particularly would have been hit, but the exchange rate more so, now there is a price where people will not pay but we haven't thankfully reached that yet."

"Worst case scenario you are looking at WTO tariffs at 30pc-plus, obviously that would have an effect. We have taken estimates on how much we will be hit in the business but no one knows for sure, but we are trying to spread the risk.

"We are exporting into 27 countries now, the UK is the biggest the minute but we will become less reliant on that, worst case with a hard Brexit certainly we will lose a fair chunk of business but hopefully we will pick it up elsewhere."

In terms of advice for other companies on in the Border area, Cullen recommends that they get as much information as possible, something he says will reduce the potential for shocks when the UK does leave the EU.

"We started getting dual suppliers. If we have an important product that we were sourcing in the UK or in the North of Ireland we now have an alternative supplier in the South of Ireland.

"With that kind of thing you just need to eliminate the risk. You try and eliminate as many unknowns as possible in the absence from a clear direction from the Government, you have to wait and see to a certain extent but the more homework you do, the luckier you will get".

Meanwhile, at Silver Hill, the company sells "everything but the quack". Duck feathers are washed in Monaghan and graded, and then the company makes them into duvets and pillows that are supplied to the same top-end hotels where the meat is so sought after. The head, the feet, and the necks of the duck go out to Hong Kong, the fat and the liver go to Belgium for pate, and Monaghan farmers get the benefit of duck-generated fertiliser.

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