Research: 75% of Irish food businesses expect revenue growth in year ahead
Author: Stella Meehan
Date: 27th April 20201
Small and medium-sized Irish food businesses (SMEs) are optimistic about their growth prospects, according to new research by Love Irish Food and PwC, which found that 75% of companies operating in the sector are anticipating their revenues to increase in the year ahead.
The 2021 Irish SME Food Barometer reveals that this optimism is echoed by a favourable outlook for the Irish economy with 65% of companies confident the economy will improve over the next 12 months.
This is despite challenges related to Covid-19 and Brexit, up from just 16% in late 2019.
However, some caution is in the air as these positive economic growth forecasts are tempered by 22% of companies who believe economic growth will decline in the year ahead.
Speaking at the survey launch, Owen McFeely, director, PwC retail and consumer practice, said: “With the prospects of the reopening for our economy over the coming months, the research reveals cautious optimism for business prospects for Irish food SMEs.
Executive director of Love Irish Food, Kieran Rumley, said: “Notwithstanding a difficult trading environment, it is encouraging to see evidence of optimism amongst food sector SMEs regarding the potential for their own company’s performance in the sector, reflecting factors they feel a greater degree of control over.
“However, volatile commodity prices now clearly pose a new and significant threat to companies, especially in the context of Covid-19 related costs imposed on such businesses more recently,” he added.
“It is unlikely that SMEs will be able to shoulder the burden of these additional costs for long and may eventually be forced to pass these on as consumer price increases.”
Positive sentiment from SMEs
Separately, the positive sentiment expressed in the new research findings indicates that there will be a significant uplift in the levels of capital investment made by food and beverage companies, following a significant stall during the pandemic.
69% of respondents stated that they will not delay investment over the coming 12 months, compared to 62% who said they did delay such investment in the last 12 months, representing a dramatic turnaround. Furthermore, 20% of respondents confirmed that they are planning to launch new products or services to drive business growth in 2021.
A total of 11% will enter new markets. Other activities to drive business growth include implementing operational efficiencies (19%) with a further (11%) aiming to achieve growth by investing in digital strategies.
Potential price increases
Almost one in ten (8%) will seek price increases, up from 6% last year, highlighting the ongoing challenge for many Irish companies who are grappling with tight margins and cost competitiveness.
The growth of volume at the expense of value, continues to place huge pressure on the food manufacturing sector. The impact of Covid-19 (58%) is the greatest threat for the food and beverage sector, according to the SMEs surveyed, fuelled by economic uncertainty, and associated labour issues.
Volatile commodity prices (43%) are also a significant threat for food and drink SMEs. The research indicates that this is likely a reflection of uncertainties in global and local supply chains. Almost one in four (24%) are concerned about Brexit.UK market.
Despite the varied challenges posed to the sector by Brexit, the UK is the most important export market for Irish food businesses, followed by the European Union, according to Love Irish Food.26% of respondents to the survey said that the UK continues to be their most important market.
Notably, almost a quarter (24%) stated that more than one-fifth of their company’s revenues in 2021 will come from trade with the UK compared to 19% in 2019.69% consider the Republic of Ireland their most important territory for growth.
Environmental sustainability remains high on the agenda for Irish food and drink SMEs with 60% of those surveyed stating that the importance of having an environmental sustainability strategy in place has increased this year. In addition, over half (57%) of companies confirmed that they have a sustainability plan in place to make improvements throughout 2021.
Key areas of investment include energy consumption (22%), packaging reduction (18%) and water usage (16%).Recent PwC global research indicated that 55% of consumers agreed that they buy from companies that are conscious of protecting the planet, and agreed 54% agreed that they buy products with eco-friendly packaging.
For grocery shopping, in particular, consumers across the board say that they’re willing to pay a price premium for healthier options (55%), local produce (50%) and sustainable packaging (46%), regardless of shopping online or in-store.
Owen McFeely concluded: “A key opportunity for the sector is the area of sustainability. Consumers have become far more sophisticated when it comes to sustainable choices. “Irish Food SMEs are and will be dealing with customers who want to know what they are doing to play their part to protect our environment. Building a sustainable business is not a passing fad.”
“Knowing what consumers now value and changing the business model will define their long-term sustainability and growth.”
Our biggest challenge is the lack of labour and we’re not the only business facing this issue
What is your background?
In the 1990s, my husband, Willie Allshire, and I bought a 17ac farm here in Rosscarbery and started keeping a herd
of free-range pigs. We probably have the oldest free-range pig herd in Ireland.
From 2000, we started producing our own range of free-range sausages and dry-cure bacon, which we sold under the Caherbeg brand name. Drinagh co-op was our fi rst customer. Then in 2001, we bought the Rosscarbery Recipes brand.
How has the business evolved?
Today we have 110 pigs in our herd, with 12 sows. We have our own processing facilities here on the farm, which allows us to really focus on quality. It’s something we’re obsessed with. All pork products that come from our own herd are still sold under the Caherbeg brand.
For the Rosscarbery Recipes brand we source pork cuts from Staunton Foods in Timoleague and some beef cuts from ABP in Bandon.
A member of Love Irish Food, we’re now selling (mostly direct) to customers in Dublin, Wexford, Waterford, Limerick, Cork and Kerry.
What is your flagship product?
Our range of Rosscarbery black and white pudding is very much our fl agship product and biggest seller. We also produce bacon, sausages and gluten-free pudding. Everything we do on both brands is dry cure and the finished product is 98% pork. After completing
their Leaving Certifi cates, our two sons, William and Maurice, decided to join the business. Maurice developed our latest product, Rosscarbery Irish Biltong, which is a cured and air-dried beef snack. It’s a healthy snack, with 50% protein.
Is the “free-from” trend here to stay?
In my view the “free-from” trend is one that’s here to stay. I have mixed emotions on it, particularly when it comes to gluten-free because you have people who are genuinely diagnosed with coeliac disease and others who just go on a gluten-free diet. We launched our gluten-free pudding in response to demand from coeliacs, but since then, the “freefrom” section has grown considerably.
What is the biggest challenge for an SME artisan food business?
Our biggest challenge is the lack of labour and we’re not the only business facing this issue. By that I mean there
appears to be a serious shortage of people who are genuinely interested and passionate about working in an artisan food business like ours. We might start our day at 5am but a lot of people just aren’t interested in starting their day at that hour.