Exports of food and drink may break records
IRELAND’S ECONOMY may be in a very fragile state but the agri- food sector has been one of the few bright spots this year.
Although final figures for 2011 are not yet available, food and drink exports are expected to reach an all-time high of €8.9 billion, an increase of more than 12 per cent on 2010. Overall, the industry is estimated to be worth €24 billion.
Nonetheless, it was something of a tale of two economies during 2011, according to Paul Kelly, director of Ibec’s food industry group, Food and Drink Industry Ireland. “As with many sectors of the economy, two conflicting trends were at play during 2011.
“Exports were very strong, due to a combination of the strong price environment globally for food commodities as well as volume growth. The domestic market remained very difficult during the year, with downward pressure on pricing.”
In a relatively quiet year for mergers and acquisitions, the food and drink sector saw its fair share of corporate activity. Valeo Foods acquired biscuit and jam-maker Jacob Fruitfield and Boyne Valley Group bought the Irish brands of Premier Foods – including Chivers, McDonnells, Erin and Gateaux.
There was Christmas cheer for John Teeling and fellow shareholders in Cooley Distillery after it was sold to US-based Beam, the world’s fourth-biggest spirits company, for $95 million.
Ireland’s major listed food companies performed strongly, reflecting their heavy dependence on exports, as product innovation and new market penetration offset the pressure of rising input prices and weak consumer sentiment.
Kerry Group maintained its position at the forefront of global business in 2011. With a 20,000 workforce scattered around the globe, the Tralee-headquartered company increased turnover to €5 billion last year, with revenue increasing by 8 per cent in the first half of 2011.
Kerry continued to pursue a strong acquisition strategy in 2011, buying German flavours business SuCrest and, more significantly, the flavours business of US food giant Cargill for $230 million. It also announced the acquisition of British frozen food company Headland Foods.
Meanwhile, Glanbia settled back to its core focus of developing its increasingly international business. Revenues rose by 28 per cent in the first 10 months of the year. Glanbia’s US Cheese and Global Nutritionals business, which accounts for about half of turnover, continued to drive its growth, boosted by the expanding market for whey protein ingredients in food products such as cereals, bars, sports drinks and weight-management products.
While business continued to be tough for Glanbia’s Irish consumer products division, which produces brands such as Avonmore and Kilmeaden, this was offset by a very strong performance from its dairy ingredients division, which processes milk from Irish farmers and exports it in various forms.
It was a rollercoaster year for Greencore. The company’s plans to merge with UK company Northern Foods – announced with much fanfare in November 2010 – were thrown into disarray in January when UK businessman Ranjit Boparan made a bid for the company. Greencore’s proposed merger was eventually scuppered and it officially abandoned the bid in March. It later completed the acquisition of British company Uniq for £113 million.
In another twist, US private equity firm Clayton Dubilier Rice made a takeover approach for Greencore in the autumn, although talks ended without a deal.
While the tumultuous year did have an effect on Greencore – its share price plummeted in the wake of the failed Northern Foods deal – results for the year to the end of September showed that revenues rose by 8.7 per cent to £804.2 million (€939 million).
While Greencore showed no sign of returning to its roots in the sugar industry, the mooted revival of the sugar beet industry gained traction during the year as sugar prices soared amid supply issues.
A report by the Irish Sugar Beet Bio-Refinery Group, headed by former Greencore executives, found that 5,000 jobs could be created in Ireland by a revival.
Drinks group C&C continued to bounce back in 2011, despite the surprise departure of chief executive John Dunsmore in October.
Its half-year results showed that operating profit grew 7.8 per cent in the first half of the year to €67.4 million, despite pressure on sales, as the company continued its focus on the international expansion of the Magners cider brand.
The year also saw a strong performance from a range of privately owned Irish companies of varying sizes. The acquisition of Superquinn by Musgrave’s was one of the main stories of the year for food producers, fuelling concerns by some suppliers about the dominance of multiples.
However, Irish food producers continued to hold their own on supermarket shelves, despite extremely tough downward pressures on prices and rising input costs. Well-known Irish brands, such as Tayto, Flahavans and Glenisk maintained a high- profile presence domestically, complementing their core domestic business with a focus on international expansion.
It was another good year for farming, with the dairy sector in particular benefiting from record milk prices.
Some moves were made towards industry consolidation in preparation for the abolition of milk quotas in 2015, with Connacht Gold acquiring Donegal Creameries’ dairy business.
Profits at some of the State’s largest co-ops, such as Lakeland Dairies in Cavan, soared, while the Irish Dairy Board opened a new office in Algeria, now the second biggest market for Irish cheese outside the UK.
Elsewhere, Wexford-based Dragon Nutrition is exporting supplement products for the sports, fitness and lifestyle sectors to the UK, France and Poland.
Similarly, Shannon-based ABC Nutrition, which sells sports and health nutrition products overseas, was named exporter of the year, with 83 per cent of its product exported.