Ireland’s food and drink exports reached a record high of €16.7 billion last year, up €3 billion since 2021 and almost 30 per cent up on pre-pandemic levels. This performance is attributable to a number of factors, including increased unit prices due to inflation, but also a rise in the volume of goods exported.
Increasingly, however, the sector’s growth is tied to a fresh crop of innovative products and ingredients. In fact, a key strength in recent years has been its ability to move up the value chain from raw commodity to value-added goods. It is a recipe for success in which research, development and innovation play a clear part and it is particularly apparent in the dairy sector.
Until relatively recently the primary focus of Ireland’s dairy sector was development through operational efficiency. Basically the aim was to produce as much raw milk as efficiently as possible. As a result of that drive, production has gone from five billion litres of raw milk taken off Irish farms in 2014 to 8.8 billion litres last year, a phenomenal rise in response to the lifting of EU quota restrictions.
“Irish farms invested and expanded their herds, and the processing sector invested billions in production capacity,” says David Kennedy, Bord Bia’s head of dairy.
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Co-ops, secure in the knowledge that they would have a plentiful supply of milk, had the confidence to invest in the stainless-steel technology required to process it. Now, however, the sector is at a place where those high-volume growth rates are behind it.
“It will be growth rates of one and two per cent from here on in, so we are now focused on value creation rather than volume processing,” says Kennedy.
After almost a decade of productivity rising like milk in a pan, activity has shifted. “The view now is that, okay, we’ve got this really reliable milk pool. We can take a breath here and make decisions about what we will make from that milk in terms of return on investment – as in, what will give a better return for farmers. That includes making strategic decisions about what we produce and where we sell it,” says Kennedy.
That could be anything from making mozzarella for pizza toppings to casein-based protein powders for body builders, which is why the race is on to identify new ingredients of higher added value.
Moving up the value chain
“We’ve got brilliant raw material with some of the best, most sustainably produced dairy in the world, and have the R&D teams ready to go,” says Kennedy, whose team works alongside food businesses to develop added value propositions for their products, such as nutritional or functional health benefits.
“It’s not about barrels of raw milk any more. It’s about offering international customers a blend of products to give them an edge in the marketplace,” he adds. “It’s all about finding out what can we do, what niche can we derive out of the milk pool that we have.”
Bord Bia’s recent trade mission to SIAL, the largest food and drinks trade show in China, saw big product launches from Dairygold and Kerry, both relating to adult nutrition, using a value proposition that was specifically designed for the Chinese market. It’s the result of the collaborative view that the sector is now taking in relation to its R&D agenda, says Kennedy, characterising this as a “step change”.
Increasingly the industry’s focus will be on producing products that are blended into other food companies’ products, helping to provide them with a competitive edge in markets around the globe. Food giant Kerry has already established itself as a leader in this area, being the go-to company for other businesses seeking to, for example, minimise salt but maximise taste, or who want a low-fat product that still tastes good.
It has become the supply partner its customers turn to for innovation, says Kennedy. That’s reflected in the fact that the company, which has a global turnover of €8 billion, has many more staff engaged in R&D than in manufacturing, he points out.
The appliance of science
A key resource for Irish food companies looking to move up the value chain is Food for Health Ireland, the national full-service scientific organisation that gives companies a competitive edge in the global food and ingredients market.
Established 15 years ago, it works to position Ireland as a global leader in functional foods. One of the ways in which it does this is by bringing together large co-ops such as Kerry, Tírlán and Dairygold in a pre-competitive space and conducting research programmes for them. One such programme has established the nutritional credentials of food products derived from grass-fed livestock.
Food for Health Ireland works with companies of all sizes which have come up with proprietorial ingredients or foods, providing scientific evidence – if it exists – to back up, for example, health and wellness claims.
“We have the ability to go from bench to bottle, to create a food ingredient with health benefits,” explains Nessa Noronha, director of Food for Health Ireland.
Demand for such products is set to soar. The global functional food market is forecast to be worth more than €450 billion by 2028. “The big trends at the moment are around gut health, immune health, and healthy ageing,” says Noronha.
Food for Health Ireland has worked on cheese, for instance, to show that the “dairy matrix phenomenon”, the way in which its ingredients work together, means that even full-fat cheddar is not the cholesterol fiend it was previously thought to be.
It has also done extensive research into marine supplements, showing the ways in which various minerals can help with even the most specific conditions, such as osteoarthritis of the knee. Through its trials and research, it provides the collateral that allows both consumer-foods and trade-ingredient suppliers to go to their customers with claims that they can stand over.
“We really concentrate on creating value add and moving a lot of food producers away from high volume, low value, and moving them up the value chain,” says Noronha. “Consumers are much more educated now. They demand food that is safe, nutritious, sustainable and, increasingly, has some other health benefit too. Companies are having to continually innovate to keep up with these consumer demands.”
Adult formula in its infancy
One of the innovative launches at SIAL was Aerabo, an adult nutrition powder from Dairygold.
“In China they understand that they need nutrition from dairy but are not getting it, and when they do it tends to be very heavily processed and sweetened,” says Olivia Slevin, Dairygold’s head of proposition development.
China is a market that has learned a lot about the nutritional value of dairy as a result of infant formula. It is also a market that has previously seen scandals relating to adulterated formula from local suppliers.
“They trust imported formula and understand the benefits, so in recent years we’ve created new products for the 35-plus market, typically young professionals, mainly women, who buy it for themselves and their parents and grandparents who live with them,” says Slevin.
Dairygold initially launched a wholemilk powder – essentially dried, full-fat milk – the first of its products to be Bord Bia Grass Fed accredited. “The Chinese get the grass-fed story and the credentials that go with it in terms of nutrition,” says Slevin. Dairygold has since brought a skimmed milk powder with added vitamins and minerals to the market.
Adult formula is a category that is still in its infancy but could have a future in a country such as China, which has an ageing population. On the other hand, sales of infant formula milk, a product at which Ireland has excelled, suffered from that country’s one-child policy. Even since the policy was lifted in 2016, birth rates have remained low.
“Our innovation is driven by consumer and market insights. We gather data to see what’s coming down the tracks,” says Slevin.
“When you think about it, sports nutrition didn’t even exist as a category 10 years ago; now it’s all dairy shakes. People’s perception of dairy nutrition has changed for the good. You only have to walk around a pharmacy to see dairy powders with collagen for beauty within, or for diabetes prevention, or with lutein to help gamers’ eyes,” says Slevin.
“The dairy industry will evolve according to all these trends and, with fortifications, the possibilities are just endless.”
