Despite the challenges of both Covid-19 and Brexit, Ireland’s food and drink sector has adapted well and is ready for the future, says the head of Food & Drink Sector at Bank of Ireland Roisin O’Shea.
The Irish food and drink sector has run the gauntlet of the tribulations of Covid-19 and having to adapt to the changes wrought by Brexit.
The latest Insights and Outlook report by the head of Food & Drink Sector at Bank of Ireland Roisin O’Shea shows how adaptable, innovative and resilient the sector has been, but makes it clear that the opportunities are there for the taking only for those who are prepared.
“The rollout of the vaccine and the subsequent reopening of the foodservice sector will have a very positive impact on sectors such as whiskey and the seafood industry and on-the-go products”
The industry entered 2020 in a strong position with significant export opportunities as new markets opened in Asia.
But when Covid-19 became a reality exports to China suffered as well as those to the UK and continental Europe.
While sales into the retail channel increased, foodservice dependent companies and sectors were significantly impacted. As an essential industry, food processors remained open during even the strictest lockdowns and they were at the forefront of adapting business models to the new physical distancing protocols. Despite these challenges, exports declined by only a modest 2pc compared to 2019, demonstrating the resilience of the sector. From a sectoral perspective, Dairy continued to be the standout performer.
Growth in pig and sheep meat export, compensated for a more difficult year for Beef in the meat sector. However the drinks sector faced particular challenges, largely driven by a fall in US whiskey exports.
A major effect of Covid-19 on the sector was the switch in consumer demand from foodservice channels into retail. O’Shea cited Bord Bia figures to the end of November 2020 that indicated a
48pc decline in the value of food and drink purchases by the Foodservice sector domestically.
As well as battling market volatility domestically and globally, the sector has also had to battle the Brexit headwinds and O’Shea said significant effort went into building resilience into inward supply chains. In many ways these preparations made for Brexit and rapid reaction to the effects of Covid were largely complementary.
Looking ahead, O’Shea pointed out that UK remains Ireland’s biggest export market at 33pc, however exports to non-EU/UK markets are becoming more important. For example, exports to Africa reached €883m in 2020.
Keeping the food chain flowing
Roisin O’Shea, head of Food and Drink Sector at Bank of Ireland
ThinkBusiness spoke to O’Shea about the prospects for the food and drink sector for the year ahead.
How did the sector demonstrate resilience during the pandemic?
First and foremost, the sector showed its resilience by keeping production sites open and keeping the food chain flowing. Office based employees moved to working from home at short notice. Key personnel such as quality managers were split between shifts to ensure that they would not all be isolating at the same time as close contacts. Ranges were narrowed to keep stock of bigger lines moving. Businesses with exposure to foodservice reconfigured their models to focus on retail, online and direct to consumer offerings.
Did Brexit have a material impact on the sector and is the sector opening up new export market opportunities?
With €1 in every €3 of food and drink exports going to the UK, as well as significant levels of cross border north-south processing, the sector was highly exposed to the risk of a hard Brexit. Over half of companies surveyed last year by Bord Bia had delayed investment as a result of Brexit. The Trade and Cooperation agreement signed in December gives great clarity and comfort to the sector, although frictionless trade between the two islands is gone.
The exporting sector was well prepared, and the agreement means that the majority of our exports are tariff free. There are significant opportunities for Irish producers now to substitute the circa €4.4bn or imports that come into Ireland from Britain and to target the circa €10bn of exports that the UK send to the rest of the EU. This is particularly the case for shorter shelf life products. If you look at the example of a fresh fish product processed in Scotland there are now 26 steps between the processor and their final customer on the continent.
How did the sector demonstrate innovation during this time and what segments are doing things differently?
The pace of change to respond to the challenge of Covid was phenomenal. Many businesses had to completed reconfigure their business models. Government support was key to give them the breathing room to do this. Product formats changed – for example in the craft beer sector there was a rapid change of product from kegs to cans. We saw a significant switch to online – some businesses developed or enhanced their own platforms, others came together in producer groups or accessed new customers that were now focusing on direct to consumer businesses. Food is one of the key pleasures left during lockdown and there was a rise in gifting and particularly of hampers as we came into Christmas.
What is your outlook for the near future of the sector and what changes are on the way?
The outlook for the year ahead is very positive, primarily driven by the Brexit deal. The rollout of the vaccine and the subsequent reopening of the foodservice sector will have a very positive impact on sectors such as whiskey and the seafood industry and on-the-go products. For other sectors who have adapted well to the switch to grocery, they will be cautiously returning their focus to the foodservice industry in the latter half of the year, however there will undoubtedly be challenges as many key foodservice operators were substantially affected by the lockdowns and they will not necessarily be reopening in the same shape that they closed in last year.
Sustainability will remain a key challenge and opportunity, with the area of packaging in particular, remaining a key focus for Irish producers.
By John Kennedy (john.kennedy3@boi.com)
Published: 11 March 2021
