Major food report backs development of value-added products and food ingredients

Attention to competitiveness and market orientation have been identified as key strategy areas by the Food Industry Development Group.

In a major report yesterday, the group - which is made up of industry figures, Government representatives, and farming and research interests - recommends a strategy that will encourage the development of value-added products and food ingredients in an environment of Agenda 2000 negotiations and EU enlargement.

"As living standards rise and increasing numbers of women work outside the home, more and more consumers are seeking the convenience of readily available foods prepared outside the home and are looking to the retail sector to provide this service," the report states.

The group's chairman is the secretary general of the Department of Agriculture and Food, Mr John Malone. He said an integrated approach by agriculture and food interests was best to access the next tranche of Structural Funds. The group is seeking £450 million (€571 million) in public funding as part of an overall investment of £1.6 billion, although in the last round of funding only £240 million was obtained. The bulk of the money involved comes from the EU.

The Minister of State for Agriculture and Food, Mr Ned O'Keeffe, who established the group, said food was a low margin business requiring the added investment to achieve the targets envisaged in the report. The "heavy reliance" on commodity products had to be reduced, he said.

The report recommends a £1.3 billion increase in prepared food output by 2006, of which £1.2 billion's worth would be exported. In 1997, the industry's output was valued at almost £10 billion which is expected to increase to £10.3 billion in 1998.

The industry, which employs 40,000 people, suffers in general from scale-related difficulties, the report states, and over-capacity in some sectors. "The large number of small and medium-sized enterprises [600 out of 700 companies in total] inhibits cost competitiveness and access to markets.

"It is also a barrier to investment in product/process innovation and in the development of human resources," the report states.

The dairy and beef sectors together comprise 40 per cent of the industry's output. The report envisages a switching of 100,000 tonnes of beef exports to EU countries where market share has fallen by 27 per cent, representing a 70,000-tonne loss, since the BSE crisis in 1995.

The establishment of "supply chain partnerships" for the beef industry is recommended as well as tackling its lack of competitiveness at the slaughtering and primary processing levels. In the pig-meat sector, the group notes that greater attention to animal welfare and environmental concerns will have to be made, going beyond minimum compliance, if it is to match Britain, "which is already well ahead". Prepared consumer foods, which is dominated by smaller companies, now comprises 13 per cent of total output and "a large growth in volume in the food service and private label markets is anticipated".

"The challenge of scale can be tackled by addressing the other major factors facing the sector - market development, new product development/introduction, plant and equipment, and information technology/logistics," the report recommends.

Mr Malone said the State had a good raw material base with big markets on its doorstep. "The food industry has performed well and does need significant funding. An integrated stand-alone approach is the way we feel we should go."