Irish food exports grow, but face tough new challenges

- Last updated on GMT

Related tags: Bord bia, European union, Euro, Currency

Ireland's food and drink industry had a good year in 2003, at least
on export markets. The latest data from Bord Bia, the Irish food
board, show that exports were 2 per cent higher in 2003 than the
previous year despite weaker demand conditions, adverse currency
movements and intense price and product competition in all markets.

But maintaining this good performance in the future - with changes to the Common Agricultural Policy, the expansion of the EU and rapidly changing consumer trends - will be a major challenge for Ireland's food and drink manufacturers, the food board said, and one which will require them to react more quickly to the needs of consumers.

The value of exports increased to €6.67 billion in 2003, an excellent performance given the predicted 7 per cent decline in the total value of Irish goods and services for the year, according to Bord Bia​.

The performance would have been better still if not for the significant adverse impact of currency exchange rates on Irish exports. This is mainly due to the fact that 40 per cent of the country's exports were to the UK, with a further 30 per cent going to other countries outside the euro zone.

When the value of exports is adjusted for the appreciation of the euro against sterling, the dollar and other currencies, the underlying growth in exports is nearer 10 per cent, Bord Bia said.

"While future currency movements remain difficult to forecast, the prevalent view is that the euro will continue to appreciate against both sterling and the dollar for the first half of 2004, making trading all the more challenging for Irish food and drink companies,"​ the food board said in its annual review, published this week.

Particularly badly hit by the currency appreciations were prepared foods, exports of which fell by 5 per cent to €1.52 billion in 2003, mainly due to the fact that 77 per cent of exports in this category are sold to non-euro countries. The value of exports would have risen by around 4 per cent at constant currency rates. But Bord Bia said it expected to see prepared food exports return to growth in 2004 as a result of an acceleration in the rate of new product development, moves into new markets and tighter cost control.

Exports of dairy products and ingredients were more robust, rising 5 per cent to €1.6 billion during the year, despite a poor performance in the first six months as a result of weak worldwide demand. Again, Bord Bia is expecting 2004 to be a good year for dairy producers on export markets, despite the challenges of coping with reduced intervention support, the impact of new EU entrants and exchange rate uncertainty. There are also significant opportunities, particularly for value-added ingredients in the functional foods and flavourings sectors.

As for beverages, exports rose by 8 per cent during the year to 8 per cent to €1.02 billion due to strong performances in key markets including the UK and the US. Perennial Irish favourites such as cream liqueurs, spirits and beer were the principal products driving sales growth in this segment, and the gradual recovery in the global economy throughout 2004 should continue to favour exports of these products, in particular to less developed retail markets, Bord Bia predicted.

Exports of fruit and vegetable products declined 3 per cent to €180 million, reflecting the price pressures from UK retailers on fresh Irish mushrooms and increased activity from Dutch and Polish producers, while exports of meat and livestock increased by 5 per cent to almost €2 billion, driven by a strong performance in beef (+8 per cent) which helped offset declines in lamb (-12 per cent) and pig meat (-7 per cent).

Michael Duffy, chief executive of Bord Bia, said that the good performance in difficult conditions was a testament to the "determined measures"​ to face up to the challenge taken by Irish food and drink producers during the year - measures which would need to be kept in place, and refined, in the current year.

"Looking forward to a post CAP environment, cost competitiveness will continue to be an imperative but it must be matched by investment in the marketplace,"​ Duffy said. "A clear understanding of consumer needs and the drive towards convenience, new product innovation and development and effective marketing are the elements which will enhance market penetration for Irish exporters in 2004."

The opportunities to be taken in many of the new EU Member States this year was also highlighted. "CEEC markets account for a relatively small proportion of Europe's GDP, but they are forecast to grow ahead of most mature European markets, making them an attractive proposition. Poland is the key market in the area. Its economy is three times the size of its nearest rival, the Czech Republic. The retail grocery markets in the regions of Poland, Hungary, Czech Republic and Slovakia are estimated to be worth €160 billion."

Bord Bia will help Irish producers face up to these and other challenges this year with a number of initiatives, including a brand programme for consumer foods, drinks, dairy and speciality food products designed to help Irish companies protect their brand positions, target European buyers and expand their foodservice offerings.

Related topics: Market Trends

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