Ireland's food industry is a tale of two business types. At the top of the food chain are behemoths like Kerry and Glanbia that span the globe. At the other end are a myriad of innovative food start-ups – in community kitchens, food incubators and market stalls. The challenge is to fill in the middle, growing businesses of scale that can compete globally.
Brexit makes achieving this more important than ever.
"It's still the number one challenge facing the food industry here and the worrying thing is that we are not any clearer about how it's going to go," says Dr Lance O'Brien, head of strategy and international relations at Teagasc, the State agriculture and food development body.
A recent report from Copenhagen Economics, a consultancy, examined four possible Brexit scenarios, with Ireland losing out under all of them.
“The other challenge is that we are in the final phase of CAP reform, and if the UK withdraws from the CAP budget, will the other 26/7 fill that gap? There will be huge repercussions for Ireland if not,” says O’Brien.
Is there anything palatable ahead? The fact that food exports grew 13 per cent last year helps, even if some of that was down to currency. More heartening still is the fact the UK’s share of Irish exports dropped from 37 per cent to 35 per cent . It suggests efforts to cultivate new markets are bearing fruit.
“We have started our diversification strategy and that has to continue. Remaining competitive will be a huge part of that and innovation is the key for the future,” he says.
Teagasc has invested heavily in this area, not least with the Moorepark Technology Limited (MTL) a joint venture company established by Teagasc with shareholders from the Irish dairy industry. It provides commercial pilot plant and research services for food industry customers and promotes technology transfer between research and industry.
The Government has also committed to investing €8.8 million in the new National Food Innovation Hub at Moorepark.
With so much of our food exports relating to beef, butter, milk and cheddar cheese, the race is on to innovate and add value, transforming commodities into goods that can command a premium.
Development programmes such as Foodworks, run jointly by Teagasc, Bord Bia and Enterprise Ireland, are helping food businesses grow to sufficient scale to be able to cope with Brexit.
Innovations are emerging
Innovations are emerging from the third-level sector too, particularly the application of internet of things technology to agriculture. Science Foundation Ireland has committed tens of millions of euro to Teagasc's work with food companies based in Moorepark to develop digital technologies related to everything from soil , to grassland to gut – both animal and human.
Investor interest is growing too, with specialists such as Finistere Ventures taking an active interest. Last year saw the launch of a €20 million Ireland Agtech fund, following a partnership between it and the Government's Ireland Strategic Investment Fund.
“Where previously that kind of investment went into the tech sector in terms of software and ICT, it’s now going into agtech. The availability of venture capital has grown enormously,” says O’Brien.
David Carson leads the Brexit response team for Deloitte Ireland. "What has changed in the past year is that there is a bigger realisation of potential negatives of Brexit and it is falling into two categories. Larger companies with the resources are probably well advanced in their preparations, even though they don't know exactly what Brexit will look like. But survey after survey shows that smaller companies, which make up the vast majority of the sector, haven't done a lot."
In some respects it is understandable. “They don’t know what’s going to happen and they have limited resources, so they’re not inclined to put them into it.”
But the UK’s economy is far more diversified than Ireland’s and, given the importance of the food industry here, and the fact the majority of its constituents are SMEs, lack of action is a worry.
After all, it’s not just trading that’s at stake, but the supply chain too. Those that are acting are streamlining their supply chain to take out costs. “The food sector operates on very small margins, so any cost that can be taken out is to the good,” Carson says.
Programmes like Enterprise Ireland’s LeanStart and LeanTransform help winkle out inefficiencies.
But more work is needed. “Ireland has been a member of the EU for so many years and the larger companies have taken advantage of EU markets. Others have gotten so used to the proximity and the ease of access in relation to ferries and language that they never looked beyond the UK. Brexit is the catalyst for them to do so. And it must be remembered that for every Irish company worried about losing access to UK markets, there are multiples of UK companies worried about access to EU ones,” says Carson.
“Enterprise Ireland has been very proactive about this and is going out and talking to companies. Anyone I’ve spoken to in EI is very passionate about what they are doing in relation to Brexit and what they want to achieve, so the supports are there.”
Since 2013, EI has funded 86 R&D programmes in companies, for example, ranging from small businesses to large enterprises. Post-programme surveys found companies that participated had an average of 67 per cent growth in global sales.
“The challenge is to be more innovative but that is also the opportunity because it enables businesses to win new markets, to stand out from the crowd and to be more than a ‘me-too’ product,” says Kevin Buckley, manager, Europe, Food and Beverage Inward Investment at Enterprise Ireland.
“If there are 50 products out there, you’ve got to give the consumer reason to pick yours. And when you combine Ireland’s clean, green image with innovation, that’s a very powerful message to be able to put out there.”