Irish food and drink exports maintained their strong upward growth path in 2007 adding a further Euro414 million in sales, reaching Euro8.62 billion according to Bord Bia’s Export Performance & Prospects 2007 / 2008 report, launched today.
The increase, representing 5% on the record levels of 2006, is all the more impressive when viewed against a significant strengthening of the euro against the US Dollar and Sterling, rising ingredient costs and ongoing pressure on operating costs. “The Food and Drink sector’s solid export performance has been underpinned by the upward pressure on global food prices that emerged during 2007 and that is set to remain a feature of the international marketplace in 2008 and beyond”, according to Aidan Cotter, Chief Executive, Bord Bia commenting at the launch of the report. “The high export orientation of the sector, accounting for 10% of the country’s merchandise exports, means it is well positioned to exploit these global trends and maintain its contribution to Ireland’s economic performance”, he added.
Agri-food represents Ireland’s largest indigenous industry, contributing 8% to the country’s Gross Value Added and a corresponding share of its employment. Total output of the sector amounts to more than Euro20 billion, with a low import content magnifying its contribution to net foreign earnings. In 2007, some 55% of the sector’s exports, in equal proportion, were accounted for by meat and dairy products, with a further 21% and 17% respectively comprised of prepared foods and beverages.
The principal sectoral driver of growth last year was the dairy industry, whose 13% increase in exports amounted to more than Euro270 million or 65% of the total rise in food and drink exports. The market region experiencing the highest growth in turn was Asia, which accounted for as much as one-third of the increase in total exports, already reaching the government target set for the region in its Asian strategy for 2009, of Euro400 million.
The exceptional performance by the dairy industry, with exports reaching Euro2.36 billion, benefited from a significant strengthening in global prices for dairy commodities and ingredients. The global market was boosted by lower output due to drought and flooding in some key producing regions and especially the fact that global demand continues to grow at a faster rate than supply, particularly in Asia and the oil producing regions. This is reflected in the fact that approximately 50% of the growth in Irish dairy exports in 2007 came from Asian markets.
Beverages represented the other sector to benefit directly from the strength in Asian demand. Alcohol exports to the region more than doubled during 2007 fuelled by strong growth for cream liqueurs, whiskey and stout in China and a recovery in the import demand for whiskey in Japan. In total, exports of beverages reached Euro1.45 billion, an increase of 5% on the previous year.
An encouraging feature in the performance of the prepared foods sector, with export sales up 6% to Euro1.815 billion, is the growing penetration of Continental markets, particularly Northern European markets. Growth in the sector was strongest in the pizza, chocolate confectionery and frozen bakery categories, supported by an increasing focus on innovation and premiumisation.
Weakness in European markets resulted in Irish meat exports easing back, falling by 3% to Euro2.38 billion in 2007. Beef, which makes up the largest component of meat exports, fell by 2% in value despite a small volume increase, including the sixth successive year of sustained growth to Continental EU markets. Over 98% of exports are now destined for European markets and with EU male cattle prices falling by 5% and sterling weakening towards the end of the year, market returns came under growing pressure.
However, a further increase in Europe’s beef deficit in 2008 together with the recent restrictions announced by the EU Commission in relation to the import of Brazilian beef into the EU will have a significant impact on the market and have a positive effect on Irish market returns as the year progresses. Since the emergence of an EU deficit at the beginning of the decade, the anticipated market buoyancy has failed to materialise, as low-priced beef from Brazil, already excluded from other high-priced markets, including the US and Japan, targeted the EU with increased exports. The principal destinations for Brazilian imports are the UK, the Netherlands, and Italy, which also represent Ireland’s largest markets for prime beef.
The prospects for Irish food and drink exports overall in 2008 are also positive with global markets set to remain strong. “The dominant factor underlying the recent rise in prices would appear to be a supply shortfall induced by poor harvests and drought conditions”, according to Aidan Cotter. “Nevertheless it is clear that increasing Asian demand, the use of land for biofuels and climate change are poised to play a growing role in food markets. In particular, the changing market environment is set to further enhance the competitive advantage of Ireland’s grass-based dairy and meat sectors”, he stated.
“The dairy sector’s main challenge now is to consolidate the gains made during 2007 in the context of an easing in prices, although a prospective increase in quotas will support volumes during 2008. The prospect of further, needed price increases in the early part of the year should support growth in the prepared foods sector while beverage exports will continue to benefit from growing demand in developing regions”, according to Aidan Cotter.
However, Bord Bia notes that an increasingly fragile balance between demand and supply brings the potential for significant volatility in commodity markets. This has already been evident in the pattern of dairy commodity prices which began to ease significantly in the latter part of 2007, following their steep rise in the earlier part of the year.
Also, the Irish food and drink industry, with many processors now facing rising ingredient costs in addition to other operating cost increases, continues to face significant competitive challenges in its principal, UK market as revealed in a recent Bord Bia survey. In the survey some 76 per cent of respondents stated that difficulty in securing a price increase was having a very high or high impact on their business. A further 71 per cent said that increasing retailer power was having a very high or high impact on their sales, up from 62 per cent a year earlier. Finally, some 75 per cent of companies felt that intensity of competition was having a very high or high impact on their sales compared with 56 per cent in 2006.
Bord Bia’s initiatives for 2008 will include: The Marketplace Roadshow follows on from the corresponding event held in Dublin in May 2007 and is aimed to assist Irish companies develop their strategies in relation to key markets, starting with the Netherlands and Belgium. Bloom, the second national garden event with stunning gardens, a unique food market, thousands of plants and flowers and a number of interactive show features will take place again in the Phoenix Park from the 29th May to 2nd June 2008.
Bord Bia Vantage, the centre of excellence for small businesses designed to deliver pragmatic, meaningful and relevant assistance for market growth was launched in November 2007 and will continue to be rolled out in the year ahead.
The European Meat Forum will aim to raise the profile of Ireland as a source of premium meats, leveraging our close relationship with leading chefs and food writers. The event is targeted at over 100 key buyers and will communicate the image and capability of Ireland to produce premium and niche products of a world class standard.
The Brand Forum will continue to develop the branded route to market for Irish companies. The forum, which also delivers a range of services to brand owners, meets four times a year in Dublin combined with two regional meetings and features addresses from world class speakers.
Market Knowledge, will include initiatives in a range of areas including “Continental PERIscope” (tracking the attitudes of Continental EU consumers); a Needs State Segmentation study; a new focus on “Sustainability” and what it means for Irish food and drink companies, and the roll out of a “Weekly Food Alert” to companies.
Foresight4FOOD is an initiative to encourage Irish companies to market test new product concepts and improve their prospects of success once launched in the marketplace. The Food Dudes programme will be extended further in 2008. The programme aims to reach 3,500 schools and 445,000 children over a five year period.
Feile Bia, a programme to promote quality assured meat and eggs from farm to fork in the foodservice sector, will be restructured and re-branded in 2008.
The first major International Conference and Show of pedigree beef cattle in Ireland - Beef Expo Ireland - will be held in Kilkenny in October 2008. The event will be co-ordinated by Bord Bia.
Bord Bia will also be conducting marketing and promotion campaigns in all of key export markets, participating in key major international food and drink exhibitions, and working with individual Irish food and drink exporting companies to build on their success in overseas markets in 2008.
