Tuesday, December 03, 2019 – 05:30 AM
By Geoff Percival
Almost a third of Irish food sector SMEs have delayed investment decisions over the past three years due to Brexit uncertainty.
Research from PwC shows that 31% of food-related SMEs have stalled investment since the 2016 Brexit referendum in the UK, with areas like production capacity, operational resources innovation and marketing particularly hit.
The research also shows that skills shortages, potential trade tariffs; operational costs such as energy, insurance and rates; volatile commodity prices and embracing the sustainability agenda are holding back company growth.
Overall, however, PwC’s latest food sector review found an optimistic outlook; with 96% of food-related SMEs having capital investment plans in place for 2020 and 88% expecting to generate revenue growth next year. Of those with spending plans, 10% said theirs would amount to in excess of €3m.
With few companies expecting to achieve price increases, margin improvements are set to be derived from advances in technology and operational efficiencies.
“The UK will exit the EU at some point and that will give rise to new opportunities for manufacturing food products in Ireland that may have been supplied from the UK,” according to PwC’s Grace McCullen.
However, while business growth is expected to continue into 2020, a softening in the wider economy is anticipated.
Only 16% of food SMEs feel that the Irish economy will grow further in 2020, with as much as 34% forecasting a decline.
PwC said the majority of food SMEs are focused on Ireland for growth and see expansion into export markets as an area for potential development.
However, a Government official has said Irish SMEs — across all sectors — have underperformed in terms of exporting, with only just over 6% currently doing any business overseas.
“We do not have enough SMEs exporting, but we are looking to get that to 9% within five years,” said Eoghan Richardson of the SME and entrepreneurship policy unit of the Department of Business, Enterprise and Innovation.
Speaking at a regional enterprise conference in Kells, Co Meath, Mr Richardson said internationalisation is one of the big issues for the SME sector, but acknowledged access to funding remains a constraint.
On the same theme, Enterprise Ireland’s regional director for the mid-east and midlands Michael Brougham said: “Companies need to consider really ambitious projects of a pan-European scale — significant global projects. And the other people who need to think about the ambition level are ourselves, the funders, because the maximum you can get at the moment is €5m.”
While smaller companies may still find it difficult accessing finance, Cork-based international dairy, ingredients and flavours business Carbery Group has landed a €78m loan from the European Investment Bank (EIB) to fund its expansion and diversification efforts.
Carbery will use the loan, which has a 12-year repayment deadline, to diversify its range of cheeses and produce mozzarella for export to a number of countries.
It marks the first time the EIB has supported investment in the Irish co-operative sector in 45 years and the first Irish investment under its dedicated agriculture financing programme.
That Carbery has secured the first ever European Investment Bank financing for an Irish agri-foods business is a vote of confidence in Carbery and Irish agriculture,” said Carbery Group chief executive Jason Hawkins.+
Cuisine de France, produced in Ireland
The Cuisine de France brand first came to our shores over three decades ago and has been thriving in the convenience retail sector ever since. NIGEL SCULLY, managing director of Aryzta Netherlands and chief commercial officer for Aryzta Ireland and UK, talks to Maev Martin about how consumers shopping in multiples have also rediscovered the Cuisine de France brand over the past two years.
One of Ireland’s best known and much loved brands, Cuisine de France bakery and food-to-go products are currently available in over 550 locations across Ireland. “We are extremely lucky to have so many key retail partners across Ireland,” says Scully. “Our Cuisine de France brand has been around for over 32 years and has enjoyed very strong customer loyalty, which means that it is a winning formula for both Aryzta Ireland and our retail partners.
“Over the past decade, there was a move to own label baked goods by some large format retail groups, which meant that our brand became more important within the convenience channel where we continued to have excellent support from groups such as Spar, Londis, Mace, Costcutter and Gala. However, a change was accelerated during the pandemic whereby consumers wanted brands they knew and trusted. As a result, we have started to gain penetration again in multiple retail through our partnership with Tesco Ireland and also in the forecourt network through our partnership with Applegreen. We have massively expanded our customer base since moving our brand back into the retail multiples and forecourt channels, and we continue to look for further opportunities to deliver our special products to our customers.”
Aryzta has 23 bakeries across Europe that are fed by over 700 suppliers. Nigel says this vast network of international suppliers means they are at the cutting edge of food innovation,which allows them to gain insight into the latest food trends before any of their competitors. “We are indeed blessed to partner with some of the best and most innovative supply partners within our industry and we are able to use their scale and knowledge to forecast the trends that are expected to become mainstream within 18 to 24 months,” he says.
“Due to our scale, we are often the first they will come to in order to work collaboratively on new product development. For example, we are currently working on a very exciting ‘next step’ in the bakery industry with a real market disrupter which will play very closely into our sustainability agenda and our healthy products innovation agenda.”
Authentic baking Nigel maintains that current trends in bakery have been leading consumers back to traditional tastes and values. “Consumers want bread products with high nutritional value that are produced under authentic and timehonoured baking methods,” he says. “In particular, our sourdough products honour the essential elements for authentic sourdough production. We use a live perpetual starter which has been grown, used and regenerated over 30 years, and which gives the Aryzta sourdough product its unique and recognisable flavour. This combination of long fermentation and resting times means that Aryzta has the ability to produce authentic sourdough bread, both efficiently and in high volumes, while adhering to the highest food quality and safety standards.”
Enhancing a food-to-go favourite According to Nigel, Aryzta are seeing a resurgence in consumers wanting and expecting premium ingredients on the food-to-go side of their business. “One of the items we are most famous for in Ireland is the chicken fillet roll,” he says. “It has been the staple diet of many a student or construction worker since I was in college, which was neither today nor yesterday. In our retail partners we not only provide the French demi baguette that is used, but also the chicken fillet used as the filling. For years, we were the market leaders in that space, but our research told us that our consumers wanted more, so in 2020 we took a decision to step change our French bread production at our bakery in Grange Castle in Clondalkin. “This involved the installation of a baking capability that we would describe as ‘next generation French bread’. The aim was to produce the highest quality French bread available on the market today. We then worked collaboratively with our chicken supplier to improve what was already a bestin-class product. “Our team of chefs and New Product Development project managers worked for over a year to produce a specific new crumb coating that enhanced the flavour immensely. Now the consumer can purchase their favourite daily lunch time roll knowing they have the best demi baguette and best chicken fillet on the market, ensuring they get the best all round offer. I would confidently put these products up against any competitive product as being best in market.”
Plant-based options The development of plant-based food is a small but important part of the Aryzta Ireland portfolio. “Plant-based foods continues to be a category that people talk about an awful lot and as a business we had to ensure that we had an offering that could appeal to the consumers of that category,” he says. “That doesn’t mean purely vegans and vegetarians, but also the growing demographic of flexitarians who may decide to go meat-free once or twice a week, so we have developed a range of products to suit that consumer, such as our alternative to the chicken fillet, which has proved very popular, as well as our vegetarian sausage roll. For those morning coffee customers, we have a Cuisine de France vegan croissant, which ensures that everyone can still have their morning treat.”
The perfect accompaniment Nigel describes Aryzta’s Pierre’s brand as “the hot food brand of choice” for retail convenience and foodservice delis, offering a range of premium savoury products that have been tailored to the convenience customer’s palate. “It is more of a business to business brand in the plsense that our retail and foodservicecustomers ask for the products by name as they know the products within that brand will be of the highest quality, hence the tagline ‘everyday made better’,” he says. “We have over 1,000 retail customers buying a Pierre’s product each week, whether that be a chicken fillet, a premium sausage roll, or our ubiquitous spicy wedges, which means there are tens of thousands of daily consumers of a Pierre’s product.”
While Pierre’s, and Aryzta’s coffee brand, Seattle’s Best Coffee, aren’t Love Irish Food brands, they have acted as the perfect complement to their sister brand and Love Irish Food member, Cuisine de France. Since its launch in the Irish market, consumers have been purchasing Seattle’s Best Coffee to consume with Cuisine de France bakery products, as well as some of the hot food offerings from Pierre’s.
“When we launched Seattle’s Best Coffee, in partnership with Starbucks, in 2014 we tried to be a bit disruptive within the industry,” says Scully. “It was our insistence that a great coffee offering needed to be matched by a great food offering, so we designed all our counters to ensure they had ample space for a morning goods offer and an afternoon sweet treat offering. As it wasn’t purely a coffee offer, we were as engaged in ensuring the consumer bought a croissant or donut or Danish product alongside their coffee. “Prior to that, people felt if you had something close by, then that was good enough, but consumer research did not back this up. Where else in a store do you stand for nearly 40 seconds as you wait for a coffee to pour? We therefore felt it was important to put great food within touching distance. We now have over 200 Seattle’s Best Coffee sites across Ireland. However, just like the bakery, our coffee offering constantly evolves and consumers want more. We are currently working on upgrading the machinery we use to provide an even better coffee experience.”
Investing in innovation Aryzta continues to grow its customer base for both its Cuisine De France branded business and its private label customer business. It also continues to invest in premiumisation. “Three years ago, we recognised that consumer tastes and expectations were changing when it came to bakery products,” says Scully. “Customer focus on nutritional value has increased significantly, with increasing demand for fibre, seeds, grains, and most of all, sourdough. With strong year-on-year growth in demand for high-end, specialty breads, this was clearly a sector with a lot of relevance for us. From our Grange Castle site, we continue to increase our bakery capacity to serve a growing number of Irish and UK customers.”
For example, Aryzta had to invest heavily in new equipment at its plant in Grange Castle to produce the ‘next generation’ white French “Customer focus on nutritional value has increased significantly, with increasing demand for fibre, seeds, grains, and most of all, sourdough.” Meet the Maker Fresh bread that Cuisine de France is offering in the market today. “In 2019, we were the first in Europe to purchase new equipment that allows the dough to be shaped in a ‘stress-free’ way, which has an amazing impact on the taste and structure of the bread,” he says. “It has been so successful that the second European installation is currently underway in our factory in the Netherlands, which shows that Aryzta is investing in best in class all over Europe, not just in Ireland and the UK.”
According to Nigel, the most recent investment is even more significant, and will allow for greater research and development into new products for the “ever more complex tastes” of the Irish and UK consumer. “Recent years have seen demand for sourdough grow significantly to the point where we had to invest in order to keep up with customer and consumer demand, so we are delighted to announce that we are in the final stages of completing the installation of a new speciality bread manufacturing plant at Grange Castle,” he says. “This investment, which includes a significant expansion of our state-of-the-art live sourdough starter plant, will result in the doubling of capacity for the production of sourdough and speciality breads, and we can expect to see those products in our customers’ stores in the coming months.”
New Product Development Apart from the new plant in Clondalkin, Aryzta Ireland are currently working on a range of “premium treat products” within the Cuisine de France brand which will allow consumers to have that “little bit of luxury” in their day. “Within that range we will have some premium donut products and some premium Danish products and they will be introduced to the market in the second half of this year,” says Nigel. Regarding that perfect accompaniment to any Cuisine de France treat, Aryzta are looking to trial Seattle’s Best Coffee iced drinks, following on from a trend that they identified in coffee shops such as Starbucks. “This is not something you would normally get in a forecourt or high street retail setting, so we want to do something different and add incremental sales opportunities to stores, while bringing customers into the category that don’t normally purchase coffee,” he says.
A robust supply chain Nigel describes the Aryzta supply chain as “one of the most robust supply chains in the industry”. While the pandemic was “hugely challenging” and changed how they approached business, the feedback they received from their customers was that they were “one of the best” in terms of continuation of supply. “That is something we take great pride in,” he says. “It is a credit to our distribution and supply chain team members that, in the middle of what was a very scary time, they remained singularly customer focused, and often times the management team were in the freezer picking cases to ensure that we didn’t let our customers down.”
While Brexit had many implications for their business, the ability to get products was not one of them. “Due to the length of time that it took to finalise Brexit we had enough time to change how we brought products in,” he says. “For example, for products that were UK manufactured, we were able to find a move to a European supply base, and for the products that came through the landbridge, we were able to find alternative routes. Once again, this was a great collaborative effort on behalf of our product, quality, and supply chain teams.
According to Nigel Scully, the Cuisine de France brand’s membership of LIF has been extremely positive in reinforcing the quality credentials of the brand. “It also helps to highlight the fact that a lot of our key products such as our white French baguette bread, our range of donuts, our apple pie, and some of our morning goods, are all locally produced in Ireland, using Irish ingredients. This became increasingly important to shoppers, so that they could support local during the pandemic, and it also resonates with our retail customers.” Cuisine de France joined Love Irish Food in early 2021. “We have been involved with a number of Love Irish Food campaigns over the last 12 months, both in-store and through their social media platforms,” he says. “And Love Irish Food were very supportive when we launched new products. Consumers will continue to support Irish businesses, so having the Love Irish Food logo on our products is a great selling point. We would definitely recommend membership of the organisation to other producers, and we look forward to continuing our association with Love Irish Food in the future.”+