Agri Food 2010 Committee

Main Recommendations

16. Developing a Competitive Food Industry

The Committee broadly concurs with the conclusions of the Food Industry Development Group. Significant changes will be required if the industry is to be profitable and provide an adequate return on capital in the increasingly competitive and demanding market conditions that are developing.

16.1: Adopting a more proactive approach to Marketing

• Investment in effective marketing will be critical to the food industry’s capacity to compete and win market share in a rapidly changing marketplace
• Irish companies must adopt a more targeted marketing approach to branded products, private labels, niche markets and food service, as well as the traditional commodity markets.
• A comprehensive market research and intelligence service should be developed by Bord Bia, in co-operation with other agencies as appropriate. This will require significant resources.
• The marketing capability of companies must be developed through the disciplines of category management. This will require the allocation of increased resources in the areas of training, personnel, shopper research and effective promotional platforms.
• Trade marketing initiatives are required to assist companies targeting new markets. There should be an increased focus on developing market presence in continental EU markets by companies who have already established a track record in the Irish and UK markets.
• An increased focus is needed on opportunities in the expanding food service sector and exploration of opportunities arising from the emergence of new retail formats, including Internet shopping.
• Irish food companies should re-evaluate their brand and private label strategies to ensure an appropriate strategic fit between their marketing capabilities and market opportunities.

16.2: Improving the level of Consumer Focused Innovation

• High quality Research and Development will be essential if the Irish food industry is to keep abreast of current market trends
• The indicative funding for food research and development in the National Development Plan should be ring-fenced, and the possibility of moving additional funds to this heading should be reviewed regularly.
• In allocating these and other public funds, priority should be given to companies which show a commitment to customer focused research, product development and innovation.

16.3: Developing Strategic Partnerships along the Food Chain

• It is imperative that stronger and clearer links across the food chain are established between farmers and processors and between processors and their customers.
• The Committee welcomes the recent establishment of some market led producer groups.
• Centralised distribution may offer opportunites to Irish companies to reduce the time and cost involved in serving a large geographical area
• The ‘efficient consumer response’ system is made possible by advances in information technology and the Committee believes that all food companies must, as a matter of urgency, develop high quality e-commerce capabilities.

16.4: Rationalising Primary Processing

• The search for efficiency and, within that context, the issue of scale, is vital to the future of the primary processing sector. Our current structures are far from optimum and there is a clear need for significant change.
• The Committee welcomes the moves initiated by the Beef Task Force to address the particular problems in that sector, and recommends that a similar effort be made to develop rationalisation plans in the other sectors.
• However, the Committee is seriously concerned at the lack of progress to date on implementing the Task Force recommendations.
• Public funding for the development of primary processing should be made dependent on structural change.
• To the extent permitted by EU state aid rules, and within the limits of the funds available, public funding for the closure of excess processing capacity should also be considered.
• However the Committee recognises that the realistic scope for Government action is limited in this area and acknowledges that responsibility for dealing with this issue rests primarily with the owners, farmers, unions and other private stakeholders who will suffer the consequences of any failure by the industry to compete internationally.
• IDA Ireland and Enterprise Ireland will need to be prepared to act rapidly where the rationalisation of the primary processing sector has a disproportionate impact in areas which are particularly dependent on employment in the sector.

16.5: Facing the current and future challenges for the beef industry

• The beef sector faces profound challenges in both the short and long term.
• The emergence of a strong live export trade to the continent in the last two years poses a competitive challenge to the processing industry.
• It is particularly important that the beef industry should place itself in a realistic position to compete with live exporters for high-grade cattle. It is essential that realistic grade pricing be put in place immediately.
• A strong and well resourced marketing effort led by Bord Bia and supported by all players in the beef industry is required to build upon the positive consumer response to the eating quality of our beef product, and on the ‘green’ and welfare friendly image of our extensive production systems. The objective should be to create a clear premium market in the UK, and in targeted continental countries, for quality assured Irish beef.
• The Committee strongly endorses the Government's stand on the WTO negotiations. The retention of the ‘blue box’ payments and the export refund system are essential to the future of the Irish beef industry.
• The industry must place itself in the best position possible to cope with future market conditions, which will inevitably be more competitive than at present. This will require:
• a major drive for lower costs and better cattle standards at farm level,
• improved efficiency and rationalisation at processing level, and
• a firmly consumer focused marketing effort.
• The proposals made by the Committee on these issues must be seen as the minimum required to secure the future of the beef industry.

16.6: Addressing the challenges facing the dairy sector

• The environment in which the dairy processing sector must operate in the future will be one in which milk supply is limited, at least in the short term, through quotas, while greater trade liberalisation, with consequently lower prices, is likely to occur in the longer term.
• There should be a continued focus on the further development of branded products where there has been considerable success in recent years, e.g. butter and cheese.
• The recent increase in the percentage of milk processed into cheese products, while falling short of national targets, is a welcome development. Cheese consumption is continuing to grow in developed countries in all market segments. Accordingly an increase in the production of cheese must continue as a priority for the dairy processing industry over the next decade.
• The cream liqueur sector is an important outlet for Irish fresh milk and the development of other similar high value niche products should be encouraged. Year round milk supply is vital for this sector.
• The food ingredients sector will continue to be a valuable source of added value and growth in the sector, but this must be supported by much greater R&D investment.
• Further growth in baby food production by the existing companies already located in Ireland should be encouraged and Ireland should be actively promoted as a location to other baby food manufacturers.
• Potential exists for limited volumes of new product development in related functional foods for other age groups in dairy ingredient based products e.g. growing-up milks, adult/sports nutrition, neutraceuticals, etc.

16.7: Addressing the challenges facing the pig and poultry sectors

• The steady increase in imports of pigmeat and poultry products is a matter of serious concern.
• Irish poultry processing industry must seek economies through rationalisation and the development of a franchise for quality differentiated products, including those based on free range and organic production
• Scale will remain an important issue in the pigmeat sector and our plants are still small compared to major European competitors. The Committee therefore welcomes the planned north/south study of pigmeat processing which should address this issue in detail.

16.8: Focusing on Growing Value Added Sectors

• The prepared consumer foods sector has been one of the fastest growing sectors of the food industry in recent years and this trend will continue.
• Every encouragement should be given to Irish food companies to move further along the value added route.
• Partnership initiatives between large Irish food companies and smaller prepared food and food service operations should be encouraged.

16.9: Developing the potential of small food firms

· The further development of small and micro food firms, for example in the prepared foods confectionery and food service sectors, should be encouraged through targeted programmes.

16.10: Developing Human Resources

• If the food industry is to remain competitive it must also be a competitive purchaser of labour in the new circumstances of a highly skilled labour force, in an economy with near full employment.
• Productivity growth, based on economically sound investment in human and physical capital, will be a key determinant of survival in the new labour market.
• Better career structures must be provided, and workflow organised so as to move from part-time to full-time employment to the extent possible.
• The food industry must pay more attention to human resource development with appropriate recruitment, including increased graduate recruitment, and provision of appropriate training programmes.
• A Nationally Accredited Food Industry Training System, benchmarked to the best international practice, should be developed as a matter of urgency.
• A simplification in the bureaucracy associated with recruitment of foreign workers for the sector and provision of appropriate training in their own languages, particularly in relation to food safety and labelling, is also necessary.
• A strong commitment to partnership arrangements is needed in the food industry to enable employers and workers to work together effectively in facing the challenges ahead.

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