FOOD companies seeking to boost revenue are most likely to launch new products and services in the coming year and least likely to raise prices, according to new research.
The survey by PwC and the non-profit body Love Irish Food found most executives at small and medium-sized food enterprises are optimistic of growth in 2020.
Some 88pc of the approximately 70 executives polled said they expect to grow sales, including 34pc who expect to see more than 10pc gains in revenue next year. By contrast, 10pc expect revenues to remain the same and only 2pc foresee a decline.
When asked to choose what activities beyond organic growth would drive revenue gains next year, 22pc said they would launch new products and services, 19pc would seek operational efficiencies, 15pc would grow new markets, and only 6pc would raise prices.
“The survey highlights evidence of optimism among Irish SMEs around growth into 2020, notwithstanding a difficult trading environment,” said Love Irish Food executive director Kieran Rumley.
“There are considerable challenges in areas such as availability of skills across the board from operational to technical to management.
“This in turn highlights the need for a greater take-up of available apprenticeships in the industry.”
When asked what level of investment they intended to make in 2020 to grow their business, 63pc said under €500,000, 17pc €500,000-€1m, 6pc €1m-€3m, 10pc over €3m and only 4pc nothing.
“It’s encouraging to see that the majority of survey respondents are looking to invest in their companies in the coming year,” Mr Rumley said. “For certain food sectors, this represents a significant growth opportunity, specifically for those import substitution sectors.
“However, behind these positive signals there remains the worrying inability of Irish food producers to recover adequate costs, forcing them to continue to operate on even tighter margins.”
When asked if they had delayed investment because of Brexit-related uncertainties, 31pc said yes, 69pc no.
And the vast majority, 84pc, said they have an environmental sustainability plan in place and will use it to improve green efficiencies in 2020.
Mr Rumley said: “Food companies are taking the sustainability challenge seriously with many planning to invest in initiatives to improve the environment. This, together with the strong regional dispersion of the food industry base, contributes greatly to overall sustainability.”
More than half of top Irish food and drink SMEs anticipate a decline in sales revenues this year due to ongoing Covid-19 impacts on their businesses, according to research conducted by Love Irish Food.
The not-for-profit organisation, established in 2009 to help safeguard the future of Irish food and drink brands, found in a survey undertaken in Q2 and early Q3 of this year, that a third of its SME member brands expect sales to fall steeply (by more than 15%) in 2020, with 54% believe their sales value will be down overall while 41% of member brands expecting their business to be up, year on year, and with 5% seeing no change.
Almost half (44%) of the association’s SME members said the decline in sales will result in their businesses employing less staff as the industry emerges from the pandemic, with 46% expecting to retain the same level of staff and a further 10% expecting to increase employee numbers post Covid-19.
Separately, over half (51%) of Love Irish Food’s SME membership are experiencing greater short-term cash requirements than in 2019, an ongoing challenge for many who are struggling with narrow margins and cost competitiveness.
Despite the challenges curtailing growth prospects for many food and drink SMEs, 62% of Love Irish Food members believe 2021 will be a better year for their businesses than 2020.
Meanwhile, a significant cohort (46%) of respondents said they have experienced enhanced retailer support throughout the pandemic.
Kieran Rumley, Executive Director, Love Irish Food said: “The global health pandemic brought about by the spread of Covid-19 has been an unprecedented challenge for our industry and the scale of the issues we face continue to evolve at a significant pace. As a material contributor to our local and national economies, the Irish food industry faces significant uncertainty, not just as we emerge from the pandemic, but also in the face of Brexit. Irish branded food suppliers have worked hard to maintain continuity of supply to the retail trade and will continue to do so as it faces the prospect of a hard and complex Brexit. Maintaining food brands on shelf during this period will be a key challenge to the industry.
“In recent months Irish food brands are increasingly being supported by shoppers. Brexit will bring further complexity to an industry already over burdened by the Covid-19 fallout. Love Irish Food calls on Irish shoppers to continue to increase their support for locally produced food brands to ensure a strong, vibrant and independent food supply to Irish supermarket shelves at a vital point in our economic history.”