Ireland’s food industry opportunity has been saved
Ireland’s food industry opportunity
From sunset industry to great Irish hope
Ireland’s food industry has the world at its feet if it invests in research and development
The food industry is facing a market opportunity that is the envy of almost every other business sector. The world’s population will grow by 1 billion in the next 15 years. Food requirements are expected to grow by a phenomenal 50% during that period.
In 1990, 40% of the world’s population lived in extreme poverty; that is on track to fall to 15% or less next year. The global middle class is therefore growing at a startling rate. Some 1.8 billion people can be described as middle-class today. By 2020, that figure will be 3.2 billion. While global food requirements will soar, more and more people will have the means to secure their food requirements.
There is also an extraordinary rate of urbanisation. In 2009, for the first time, we passed the point where over half of the world’s population lived in cities. We are truly becoming a “city planet”. A very large proportion of these new consumers will be living in geographically concentrated markets, with excellent transport links, storage and retail facilities.
All of this offers huge opportunities for those in the food industry who are capable of developing and scaling up to meet that demand.
There is a lesson here for economic futurologists: projections change, and business must change with them. It is not long since Ireland’s food and drinks sector was seen as a sunset industry. Now, it is Ireland’s largest and most important industry. It has an annual turnover of €25 billion, exports €10 billion of this and sustains 230,000 jobs. It supplies the majority of produce to Ireland’s €14 billion domestic grocery and food service sector, and is the largest net exporter of dairy ingredients, beef and lamb in Europe, the largest exporter in Europe of powdered infant formula and the UK’s largest supplier of food and drink.
Most importantly, as the figures given above show, it can look forward to a vastly increased market for its produce. The opportunity for Ireland, if it can develop further as a food and beverage centre of excellence, is enormous.
Steps that need to be taken
We can grow our food exports very substantially in the coming years if we take a number of steps.
Identify what kinds of products these new markets will need: many of these markets are new to Irish exporters: food and beverage leaders must identify how we can serve geographically and culturally diverse cities such as Mumbai, Shanghai and Sao Paolo.
Technology is key: Ireland has evolved steadily from exporting live animals and freshly harvested crops to adding more and more value: developing advanced products with the use of modern production technology, as well as using technology to manage orders and inventory and for reporting and financial analysis.
Technology continues to accelerate. Increased consumer sophistication, including concerns over sugar and salt, requires product reformulation. Businesses must develop more nutritional foods whilst maintaining price and taste and those with the best technology will thrive. Consumer-facing technology is also central. Smart retailers use mobile apps and payment systems to grow revenue; digital media engages with vast numbers of customers about the health and lifestyle aspects of products; and real time analytics are used to offer customers tailored products.
In France, Evian offers a fridge mounted device that helps you automatically order more of their products when your supply is getting low; apps downloadable to the iWatch will monitor your health and advise you on nutrition. Irish food and beverage businesses that innovate through combining product development with the latest information technology will prosper.
Partnering and collaboration will open the door to new markets: small companies are working to access large markets through partnering with local suppliers or clustering with others to jointly brand and market. Corporations are collaborating with governments and not-for-profits to enter new markets. Business that see overseas markets not solely as places to sell their stuff, but as countries to partner with and help improve, will find opportunities too.
Ireland is very well positioned to innovate to grow its food and beverage industry. Whatever international university league tables suggest, we continue to have a well-educated workforce and strong technology and life sciences sectors, though we need to continue to encourage the take-up of science, technology, engineering and maths subjects among young people. We have a well regulated industry supported by an active government which, together with its agencies, has great skill at networking overseas. We have access to clean water, something much of the world struggles with.
Research and development is key
Of course, we have our own struggles: energy costs are high; business regulatory costs and staff costs (as opposed to take home pay) are on the rise; and we have a small domestic market.
We have some great companies that are showing the way. Kerry Group is spending €135 million on its new research and development centre; Glanbia is an international leader in Global Performance Nutrition; Aryzta is a leading innovator in baked products; we have many excellent SME companies; and, of course, we are home to world leading drinks brands such as Guinness, Baileys and Jameson.
However, most Irish food and beverage companies spend less than 3% on R&D and, indeed, many spend less than 1%. More needs to be done by the industry if Ireland is to succeed in these new markets. R&D is the final, crucial part of the jigsaw. A recent survey we conducted of the food industry showed that 91% of businesses in the sector saw Ireland as a good location for R&D activity. However, a much more modest 17.6% said they were considering investment in R&D next year. And 89% said they spent less than 3% of turnover on R&D, with half of these spending under 1%.
Ireland is a suitable hub for innovation. We need business to have the confidence to spend on innovation and deliver the increase in exports as targeted in Food Harvest 2020. The opportunity is vast and Ireland should take it.