UK the ‘right place to be and it would be wrong to abandon it’
Brexit Proof Q&A: Eoin Donnelly, Lilly O’Brien’s Chocolates
Eoin Donnelly, managing director of Lily O’Brien’s: “We are continuing to prepare for the worst and hope for the best.”
Lily O’Brien’s Chocolates employs about 120 people full time in the Republic, with a small sales team in the UK. All its chocolates and desserts are manufactured at the company’s facilities in Newbridge, Co Kildare, where staff numbers can rise to 300 during high-volume peak periods. In the UK, the company’s products can be found in major supermarket multiples.
What was your reaction when you heard the UK had voted to leave the European Union?
Surprise that they voted for Brexit because the indication had been that they would vote to remain in the EU. Even though we expected a remain vote, we had covered for the eventuality of a leave vote in terms of sterling exposure, which in hindsight was a great thing to do.
How is your business likely to be affected?
Fifty per cent of our business is in the UK so it will definitely be affected by it but it very much depends on what type of Brexit is finally agreed upon. If we have a soft Brexit, we will be looking to make savings to absorb costs. If it ends up being a hard Brexit, our tariff code increases in the UK would apply to almost all our competitors too, which is a good thing for us. Even our UK competitors are going to have tariff impacts for raw materials.
We are probably fortunate in the category that we are in, in that it is a relatively level playing field. I don’t think people will stop eating chocolate for a 10 per cent increase. It’s going to hit everyone to a degree. We will have to be clever about what we do, and look for savings elsewhere in order to manage it, but it is doable.
When did you begin preparing for Brexit and what contingency plans have you put in place so far?
Within three months of the announcement of the vote we refinanced the business to create natural hedge on our borrowings to mitigate risk going forward. We also went into other Brexit-specific initiatives – everything from looking at suppliers to getting suppliers in mainland Europe to bill us in sterling.
Does Brexit present any opportunities for your business?
I would hope there would be an element of Irish people supporting Irish manufacturers but there are other opportunities as well and a lot of them revolve around how well we adapt versus our competitors. There could be an opportunity for us in the UK to capture share. Most of our competitors in the UK come from outside the UK so, if we are adapting better than they are, that presents an opportunity for us.
When do you expect to be Brexit-ready?
We are currently as prepared as we can be, taking into account the uncertainty of whatever the final version of Brexit will be, because effectively we are trying to hit a moving target. We are continuing to prepare for the worst and hope for the best. It’s about monitoring on a daily basis, and, in the case of currency, on an hourly basis, and it’s also making sure that there are contingency plans for various different options as they hit the headlines in the media, in the UK in particular.
Are you stockpiling goods or raw materials?
We did have a stockpile of finished goods in England for our UK customers and of raw materials and packaging in Ireland from our suppliers in the UK in the months leading up to the original Brexit date in order to ensure continuity of supply, but we’ve since gone back to normal operating levels. We anticipate that we will have to go and do the same again in advance of the next Brexit date.
How might the Irish or British governments, or the EU, help ease the pain of Brexit for your company or sector?
In Ireland, Bord Bia and Enterprise Ireland have been very supportive to businesses in terms of assisting growth plans through the years, and in the awareness of what people have to do with regards to Brexit, so I think they are doing quite a lot as it stands. In the UK, I am not sure how much they will want to do and, again, it really depends on what the final outcome will be.
Looking out five years, how do you think your business or industry will have changed as a result of Brexit?
I think we are going to be present in more markets than we are currently but I still think the UK will be a key market for us because I want it to be a key market for us.
It is the right place to be and it would be very wrong to abandon it, but we will need to adapt to whatever that final version of Brexit will be and adaptation will be the key part.