The latest Irish Farmers Journal/KPMG Agribusiness Report focuses on the competitiveness of the Irish food and agriculture sectors and how they measure up on the global stage. It also looks at the impacts the sustainability agenda and new technologies are having on the industry.
"A key theme of the report is disruption," says KPMG partner David Meagher. "There is a growing sense that agribusiness is on the cusp of significant change. This will bring disruption and it is critical for the future of the Irish agribusiness industry that it remains aware of, and indeed at the forefront of, the resulting changes."
He points out the importance of the industry to the economy and explains some of the challenges it faces. In 2018, Ireland exported €13 billion of food and drink to more than 180 markets. Irish beef and dairy companies, which export 90 per cent of their output, face competition from producers from lower-cost countries which often have lower regulatory standards than the European Union.
“KPMG has a team of people globally which is looking at technology and innovation and how it might impact agribusiness,” Meagher adds. “Our focus is on competitiveness and disruption. Standing still won’t be a successful way of building for the future. Disruption is coming down the tracks whether we like it or not. Agribusiness and the agriculture community generally have been slower to adopt technological change than other industries such as retailers, but this has to change. Look at retail in comparison to how it was even five years ago. The landscape has changed fundamentally thanks to new entrants like Uber Eats. We are also seeing new trends like vertical farming with retailers like Ocado growing food beside their own warehouses. That’s the way things are moving.”
Sustainability is another key issue. “Resource usage is critically important in terms of water, carbon footprint, land usage and so on. There will be a significant amount of change in the coming years in relation to the sustainable production of quality food. Private equity is now investing very heavily in agritech. Five years ago, there wasn’t much going on at all in terms of investment in this space.”
The challenge is the requirement to feed a growing world population with finite resources while dealing with climate change at the same time. “A substantial proportion of the world’s population goes to bed hungry at night, at the same time as we have a global obesity epidemic,” Meagher notes. “Food waste is another major issue. We can’t go on the way we are if we want to continue feeding ourselves and our families properly.”
Ireland has certain advantages in terms of its grass-based production system which is more carbon efficient than the industrialised systems utilised in other countries, but this does not make us immune to the carbon debate. “Carbon footprint is an issue and there is a debate about farming being the single biggest contributor to Ireland’s greenhouse gas emissions. Irish farmers are very carbon efficient producers when compared with other countries, however, and the application of technology and innovation will help the industry become even more carbon efficient. The thrust is around doing more with less.”
But efficiency gains are not the ultimate solution. "The focus from an Ireland Inc point of view will be to continue to move from commodity to premium markets. We can't compete with Brazil for beef or New Zealand for dairy commodities. We must focus on niches where premium prices can be commanded. To achieve this, companies must understand the consumer, and acknowledge that tastes differ from country to country and even between different regions in the same country. Market research is key, and Bord Bia, for example, is doing great work in this area. In essence, the global food market is actually a series of distinctly different local markets and Irish producers have to be able to meet their distinct needs. This means investment in R&D.
“R&D comes in many forms,” Meagher notes. “At one level it’s people in white coats in labs. But many SMEs don’t really have the resources for that and should focus on product development rather than research. They can look at things like product size, characteristics such as taste variances, packaging and so on. To sell globally you’ve got to be able sell locally.”
Collaborations between the industry and research organisations such as Teagasc and the universities will be important for future product development and the continued move into premium markets. "We are seeing the pharma and agri sectors coming together in the development of prebiotic and probiotic products. How people consume medicine in future will change. It mightn't even be a medicine, it could just be a food.
"The whole area of plant-based foods will also be very important", he continues. "Seven years ago, who would have believed that a plant-based food company which has yet to turn a profit would have a market capitalisation of around $10 billion? The great thing is that we have demonstrated in Ireland that we can play at a premium level on the world stage. Companies like Ornua, Kerry Group, Glanbia, Lakeland and Carbery, which are selling high-value-add products all over the world, have proven this."