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.”
Grocery spend on Irish brands has increased by 25% during the lockdown, according to new data released by Nielsen.
It finds that shoppers are spending an additional €35 million on local products compared to the same period in 2019.
The data also shows that alcohol is the fastest growing overall category.
With pubs, bars and restaurants remaining closed, the report reveals that alcohol sales increased by over 66% in the four weeks ending 17th of May 2020, reaching €140 million.
That equates to 22 million litres sold, which is still far below the 38 million litres sold at this time last year both in store and across the hospitality sector.
There was significant growth for stout which accounted for €6 million in sales, as well as cider and gin across both local and non-local brands.
Irish consumers are also opting for local options when choosing their baking ingredients, with sales of Irish produced flour brands up over 217% in the last four weeks, and Irish produced sugar increasing by 65%, both significantly outperforming non local alternatives.
The Nielsen data shows that in the four weeks ending 17th of May, grocery sales in Ireland totalled €1 billion – a growth of 17% compared to the same period in 2019.
Large supermarkets experienced the biggest growth, with value sales up 24% compared to the same period last year, whilst value sales at convenience stores were up by 10%.
As well as alcohol, popular categories over this four week period included frozen food, where sales increased by 35% to reach €19m, as well as shelf-stable food which experienced a 30% surge in demand, reaching €71m.
Karen Mooney, Ireland market leader at Nielsen has said that local shops will continue to play an important role during this pandemic.
“With shoppers less willing to travel further than absolutely necessary, many are turning to the closest local shops to meet their needs. Many shoppers are also actively seeking out local products both for convenience, as the relatively less complex supply chains has meant a wider availability of local products, but also because of greater trust in the safety of local products and the desire to support local producers and businesses,” she said.+