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.”
Wholesome by name, wholesome by nature
Long before sustainability was an integral part of business strategy and reformulation efforts focused on helping consumers to live healthier lives, Folláin’s range of traditional preserves was bringing wholesome jams and marmalades to households nationwide. Maev Martin talks to general manager JOHN DALY and company director MÍCHEÁL Ó LIONÁIRD about increasing market share, the pandemic dividend, and new export and
The word ‘wholesome’ is defined as ‘conducive to or suggestive of good health and physical well-being,’ so
its Irish equivalent, ‘folláin,’ is a particularly apt name for one of Love Irish Food’s founding companies. The
manufacturer won no less than nine accolades at this year’s Blas na hÉireann awards, for both its Folláin and private label products, and
also recently received the prestigious Origin Green Gold membership. A love of cooking and a shared passion for preserving traditions is at the heart of the success that Folláin has enjoyed since the product was first brought to
market in 1983.
Mícheál Ó Lionáird’s mother Máirín Uí Lionáird met Eithne Ui Shiadhail while they were working in the honey business in the
early 1980s, and they decided to join forces to make a traditional preserve. “Folláin was born using a 100-year-old grapefruit marmalade
recipe that had been passed down through the generations,” says Mícheál. “Using Eithne’s grandmother’s recipe, my mother and Eithne whipped up their first batch of grapefruit marmalade in my father Peadar Ó Lionáird and Máirín Uí Lionáird’s family factory in
Cuil Aodha in west Cork.”
After a period of hand preparing the fruit and cooking the jams and marmalades, wordspread quickly about their delicious jams and
marmalades and Superquinn came calling, ordering 100 cases of jams and marmalades to sell in their shops. A few years after that
initial success, and to keep up with the demand for their growing range of preserves and chutneys, Folláin moved to a larger,
purpose-built kitchen in Baile Mhic Íre in Macroom, and in 1995 they won their first Great Taste Award for Folláin Strawberry Jam– and they’ve kept on winning ever since!
After nearly 20 years as a family-managedbusiness, John Daly was appointed as general manager of Folláin in January 2020. The
company’s original founder, Máirín Uí Lionáird retired in 2020, while her husband Peadar is still managing director of the
business. Mícheál sister Mairead is also involved in the company, managing its
sustainability strategy, as well as occupational health and safety.
“We also have a strong management team of professionals in the sales and marketing, supply chain, production, technical and quality control
departments,” says John Daly. “This ensures good continuity in the business. I’m a food scientist and have held numerous production and factory manager roles with the Kerry Group and Manor Farm, as well as with family businesses in the Cork area, so it is great to continue working with a strong family-run business that has good brand values.”
Sustainability and seasonality
Sustainability has been an integral part of the business since day one and as far back as 2004 Folláin gave away a free packet of seeds
with each jar. “This was a big success and by the promotion’s end we had given away over 100,000 seeds for herbs such as basil, chives,parsley and thyme,” says Mícheál. In addition, the company’s commitment to wholesome, healthier food led to the introduction of a No Added Sugar range in 2007 which, Mícheál claims, is “just as sweet as the traditional taste our customers come to expect. Today we have
a Nothing but Fruit range of jams and a No Added Sugar range of relishes, to which we’re constantly adding new recipes.”
In 2009, Folláin planted over 5,000 trees and gave one community in Ireland the chance to win 200
native trees for their local area. “This was a small step towards our goal of creating a
greener and more wholesome environment,” he says. “Folláin is wholesome by name and to us that means good food. In the almost 40 years that we have been in business, that commitment is just getting stronger. A wholesome, more sustainable future is what we want to assure and making good food in a sustainable way is how we intend to do it.”
The conserves market is pretty static, but Folláin has managed to build its share in this market and win strong retailer support for its
products on shelf. “The main catalyst for success has been our Nothing but Fruit range or No Added Sugar range,” says Mícheál. “It has been on the market for approximately 10 years, but has seen a significant uplift in sales over the last five years, and an even greater
increase in the last two years. This is a sustainable product in every way – apart from the contents, it comes in a bespoke glass jarwhich is intended for reuse and we encourage customers to use the jar when finished with it and not just put it in the recycling bin.
Retailers have been very supportive of us and have been enthused by our product’s health credentials and by our innovative and sustainable packaging. My mother was keen to ensure that the new packaging reflected the quality of the product within the jar. We therefore hope that it encourages reuse as it is something that consumers would be reluctant to throw away.”
The Folláin brand is best known to consumers as a marmalade and jam, but the company has been producing relishes and chutneys for over 15 years, although these have been available predominantly in the foodservice sector. “Our relishes were launched nationwide last year,” says John. In
the Checkout Top 100 Brands 2021, Folláin significantly increased its share of the jams market, and is now the number-two brand. “We want to continue to innovate and adapt home recipes to scaled industrial production and market our product across different categories,” he says. “A key part of our strategy is to leverage our wholesome, natural ingredients and good taste credentials to meet customer expectations with all new
products we produce.
“We have extended our range from jams to fruit fillings where consumers use our fruit when baking or as breakfast toppers, so we
are looking to bring our culinary credentials to any other category that utilises our core competency, which is making good food. We are looking at a number of prepared consumer food categories to see where we can move into next. We are already in jams and relishes, so we are looking at using our learnings from foodservice to see if we can apply that to other prepared consumer food products. There is also a strong export market for our product. We have seen that in the US, Canada and Germany over the past year and we would like to extend our reach to other export markets.” Folláin recently redeveloped its website and is offering an online gifting option for its customers just in time for the busy lead intoChristmas 2021. “While this option has been up and running for a couple of months, we haven’t had a major launch yet, but we are hoping to officially launch it soon,” he says.
Local employer Folláin’s impact as a local employer has been significant. The company current employs 48
people and is planning to increase that number over the next few months. “We are in the
process of diversification at the moment,” says John. “We expanded our workforce by eight people over the last 18 to 24 months as there was strong demand for our products during the pandemic. Our food range was viewed as being a healthy product and a lot of people
switched to healthier eating during the pandemic and we benefitted from that trend.
In addition, most people were having breakfast at home during the pandemic and when they are doing that they are having jam on toast and they choose our product for that.” Most of Folláin’s workers are from the local area and some have been employed by the company for between 10 and 15 years. “We have low staff turnover and a dedicated staff and that is what helped us to move from being a small cottage industry to being the size we
are now,” says Mícheál. “It is also sustainable for the community to have a dependable employer in the area.”
The company decided to open a 3,800 square foot purpose-built facility in 2016. “We built it bigger than our
needs at the time, which was a good call, and since then there has been significant investmentin renewable energy and technology to make
the operation as sustainable and energy efficient as possible. Also, a lot of automationand other efficiencies have been introduced to
the production process.”
As we look to 2022, where do John and Mícheál see the Irish economy heading? “Next year will be a challenging one,” says John.
“There are a lot of unknowns as we navigate this stage in the pandemic. Shopping behaviour has changed dramatically, but one
positive on the horizon is that Irish consumers are embracing local and Irish brands, so we
hope that will continue.”
Like all business owners, they are concerned about energy, insurance and materials costs, as well as the availability of labour over the coming months. “However, we believe that we have the correct package of products and thatwe are agile and flexible enough to react to what the market needs,” says Mícheál. “Global supply chain issues could lead to foodprice increases, so we will need to work
closely with our customers to ensure that we have the right offering for the market.”
As a brand that has emerged from local tonational availability, what message do they have for other local food producers? “The
most important thing for companies similar tous is to make sure that their offering is relevant to the market when it is launched,” he says. “They must also keep costs in check, be as sustainable and efficient as possible, and be lean in all processes.”
New product development
For Folláin, it is all about extending its reach into new grocery retail categories and Mícheál says that the company will be using its strong
presence in the foodservice sector to trial and rollout innovations in the retail channel. “We use our foodservice market to grow our stable of products and some of our nonjam products are available through foodservice,” he says. “We have a lot of new and interesting flavours coming through in the foodservice sector, such as sauces and savoury products. Apart from the changes to the retail landscape, the eating out market has also changed significantly, so we have used the last 18 months to develop new flavours in world cuisine. Those sauces are now being rolled out in foodservice, and if they are successful in that sector, we would be looking to make some of them available in the retail channel.”
AS A FOUNDING MEMBER of Love Irish Food and given that the company currently has a seat on the board of the organisation,
what message does Folláin have for Irish food producers? “Love Irish Food’s main function is to help Irish shoppers make
informed choices in the retail sector and it is now more important than ever to keep purchases local,” says John. “We have received mentoring from Love Irish Food and they have been involved in promotional activity to raise awareness of our brand and our products. I would advise other food producers to join the organisation because I feel that Love Irish Food has a key role to play in the Irish retail sector over the coming years.”