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Irish Food and Drink Industry Optimism

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Irish Food and Drink Industry Optimism

Irish Food and Drink Industry Optimism
January 21
13:54 2011

Irish food and drink manufacturers across all categories are more optimistic and showing a more positive outlook, according to Bord Bia’s recent food industry survey. In total, 70% of exporters involved in the survey viewed the prospects for their business in 2011 as good or very good. When asked to compare their prospects to a year earlier, 56% rated them as better.

In terms of sales prospects, 64% of exporters had increased their sales forecasts for 2011. When asked the source of new business generated over the last year some 76% increased business with existing customers, 34% won back business with former customers, while 18% developed business with new customers.

Employment levels have generally held up well, although figures vary by sector. More than one fifth of respondents have increased full time staff numbers over the last year, with a further 61% maintaining employment levels.

Respondents also highlighted a number of key challenges facing their business including the value of the euro against the pound; pressure on consumer spending; changes in purchasing behaviour; and competition between retailers. The reaction by manufacturers to these challenges has focused on cost control, efficiencies and a review of their customer portfolio which has seen more than half of respondents increase their expenditure on business development over the last year. These measures may also be seen in the context of the difficulty cited by 75% of respondents of securing price increases even as ingredient costs rise. Critically it highlights the need for continuous innovation as consumers embrace the ‘new normal’ in their search for value. Some 62% of respondents listed changing consumer purchasing behaviour with a focus on value for money as a key challenge for industry.

As a consequence, Irish exporters now appear to be in a better position to deal with the ongoing movements in exchange rates. The results of the survey suggest that 82% could sustain an exchange rate with the pound at 1€ = 85p in the long run with 62% able to sustain their business if the rate was between 85p and £1.

Finally, the current strength of global food markets is providing a benign backdrop for the industry, particularly for the primary sectors. The FAO food price index reached an all-time high in December at 215 points, slightly higher than the previous peak in 2008 but as much as 25% higher than in December, 2009 and more than double its level, at 90 points, in 2000. Looking ahead, the growth in world food prices is expected to remain high by historical standards while varying across commodities, with the strongest growth expected in cereals. Ireland’s grass-based livestock production systems should be well positioned to cope with these price pressures (from an input perspective) and even improve relative competitiveness.

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