Industry Confident as Food & Drink Exports Reach Record Levels, Bord Bia

According to new figures released today by Bord Bia, the value of Irish food and drink exports increased by 12%, or €1 billion, in 2011 to reach an all-time high of €8.85 billion. For the first nine months of the year, food and drink exports increased at three times the rate of total merchandise exports. As a result the sector accounted for 25% of the rise in total export revenue. Over the last two years, the value of Irish food and drink exports has increased by €1.8 billion or 25%.

Commenting on the figures, Michael Carey, Chairman of Bord Bia stated: "This is an excellent achievement and the industry is to be commended for its strong export performance, which affirms its positioning at the heart of the Irish economy. Global market conditions, reflected in strong commodity prices, remain favourable and exporters are voicing continued optimism about their business prospects for the year ahead. The industry is well on track to deliver on the ambitious targets of Food Harvest 2020."

The 2011 export performance was boosted by global prices for major commodities, a positive supply/demand balance in some key categories, a tentative return to price inflation across most major European markets and reduced volatility in exchange rates. Agricultural commodity prices remain at record levels with the FAO food price index recording growth of 26% during the first 11 months of 2011. A number of key sectors - including dairy, beverages and pigmeat - also recorded higher output. Overall, it is estimated that volume growth accounted for 25% of the rise in food and drink exports. The strongest performing categories were dairy (€2.6 billion), meat (€2.59 billion), prepared foods (€1.5 billion) and seafood (€420 million).

"Among the notable developments during the year are the continued diversification by industry into new markets, with exports to Asia up by one-third, the exceptional performance of the beef industry in achieving an increase in market returns almost twice the European average, and the expansion intentions of producers that assures future growth" according to Aidan Cotter, Chief Executive, Bord Bia. "The meat and dairy sectors account for almost two-thirds of total food and drink exports, and indications that breeding herds are expanding, combined with the lifting of milk quotas from 2015, will underpin export growth into the future", he stated.

The immediate prospects for Irish food and drink exports in 2012 remain positive, although lower volume output availability in some sectors combined with some further softening in global commodity prices from the peaks recorded in 2011 are likely to result in more limited growth potential in the short term.

Among the key initiatives promoted by Bord Bia this year will be the continued development of its sustainability certification programme, designed to help differentiate our exports and enhance market returns. Since its roll-out last May, the carbon footprint of over 13,000 Irish beef farms has been measured as a routine part of the quality assurance scheme, and work is underway to add water footprint and biodiversity measures. A pilot programme for the dairy sector is near completion.

"Ireland has a compelling story to tell in terms of its green and natural environment and our sustainability programme will demonstrate our credentials and differentiate us in a world that is increasingly concerned about climate change and about how we use our natural resources", according to Aidan Cotter.

Meanwhile, next month, over 300 international and 100 domestic food and beverage buyers are expected to attend Bord Bia’s Marketplace International 2012 which will take place in the Convention Centre, Dublin on February 7th. The buyers, which include representatives from retail; foodservice; convenience; on-line; wholesale; catering; distribution and manufacturing channels, will have the opportunity to meet with over 175 Irish branded and private label suppliers during 4,500 pre-scheduled meetings taking place throughout the day. Bord Bia is aiming to secure €15 million in new business from the one day event.

Export Reach

Further changes in the distribution of Irish food and drink exports were evident in 2011. The value of exports to the UK market increased by 6% and accounted for 41%, or €3.66 billion, of total Irish food and drink exports. The value of exports to other European markets increased by 16% or €400 million in 2011 to reach €3 billion, with all major markets recording strong export growth led by the Netherlands, Germany and France. As a result, the share of exports going to the region increased to 34%.

Irish food and drink exports performed very strongly in International markets led by significant growth in dairy, meat and seafood. For the year, it is estimated that the value of exports outside of Europe grew by 20%, or €350 million, to reach almost €2.2 billion.

Positive Prospects – Bord Bia Industry Survey Findings

The results of the annual Bord Bia industry survey, completed in late December 2011, show increased optimism among food and drink manufacturers across all categories. In total, 85% of exporters viewed the prospects for their business in 2012 as good or very good. This compares to 70% in 2010. Almost two thirds of respondents rated their business prospects as much improved/improved compared to a year earlier. In terms of sales prospects, 69% of respondents, compared to 64% in 2010, stated that they had increased their sales forecasts for the year ahead.

According to the exporters, the principal drivers behind this increased optimism include: securing new customers (86%); new product offerings (71%); new markets – geographical or channel (66%); improved competitiveness (59%) and better price prospects (31%).

In terms of challenges, 81% cited difficulty in passing on increases in input costs, compared to 70% in 2010. However, difficulty in securing price increases showed a slight decrease from 75% to 69%. Some 71% listed the focus by consumers on value for money, compared to 65% in 2010 as a concern and competition between retailers fell from 59% to 52%.

The strength of the sector is further endorsed by the impressive employment records – some 42% of respondents stated that they had increased full-time staff numbers over the last year with a further 46% maintaining numbers in full time employment.

Notes

Meat & Livestock

The combined value of meat and livestock exports grew by an estimated 11% to €2.8 billion in 2011. Increased export revenues were recorded for beef, pigmeat, sheepmeat and poultry, which offset reduced exports of livestock. The value of beef exports is estimated have jumped by 15% or over €200m during 2011 as lower volumes were offset by a strong increase in cattle prices.

A rise of 9% in export meat plant pig supplies combined with a rise of 9% in average pig prices helped to boost the value of Irish pigmeat exports by18% or almost €60m.

Stronger poultry volumes combined with a modest increase in prices resulted in the value of Irish poultry exports rising by 3% to reach an estimated €210m.

A stabilisation in export availability and ongoing strong prices for lambs led to the value of Irish sheepmeat exports rising by 10% to reach €180m.

Lower live cattle and sheep exports more than offset strong pig shipments and despite stronger prices prevailing, the value of livestock exports is estimated to have declined by 16% to €205m.

The prospects for the meat & livestock sector in 2012 remain broadly positive with a tight supply situation both in Ireland and across Europe expected to help maintain strong returns for beef exports. Feed price developments will play a critical role in both the pigmeat and poultry sectors while after more than a decade of decline some recovery is anticipated in the volume of sheepmeat exports.

Dairy Products & Ingredients

Overall, it is estimated that the value of dairy exports increased by 17% to exceed €2.66 billion, helped by stronger prices reflecting strong global dairy demand for much of the year and higher milk production in Ireland.

For most products, European prices increased by 10% to 15% during 2011 with the strongest increases evident in powders and butter. Global prices showed similar trends. The Fonterra auction price for WMP increased by 7% in 2011, which followed a rise of 40% in 2010.

Milk output in Ireland increased strongly throughout 2011 as a combination of good grass growth and high prices boosted output. For the 10 months to October, deliveries were running 6.5% higher. However, deliveries slowed down considerably over the autumn months and for the year a rise of 5% in output is anticipated.

All export destinations showed strong growth, led by other European markets, which increased by almost a third to €880 million. This leaves the region accounting for a third of the total. Exports to International markets also performed well, helped by strong shipments to China, South East Asia, the Middle East, Africa and the United States.

The prospects for 2012 remain generally positive with global demand likely to be sustained at levels well above historical averages. If global stocks begin to build, it will put some downward pressure on prices, although overall market fundamentals remain sound in many regions. The greatest uncertainty exists within Europe given recent economic developments. Following a strong increase in output during 2011, the early months of 2012 are likely to see reduced Irish milk output.

Prepared Foods

The market environment for Prepared Food manufacturers remained competitive throughout 2011 However, the strong cost focus within the sector and an ever increasing focus on product development and expanding the range of customers and markets served helped the sector deliver a commendable export performance.

Overall, export values of products covered under the prepared foods category increased by an estimated 12% to €1.54 billion. Exports of consumer ready products recorded a rise of 7%. The strongest performing categories during the year were value added dairy, meat based products and chocolate confectionery. These helped to partly offset a difficult environment for other categories.

The improved efficiencies evident among Irish manufacturers leaves them in a better position to compete in key markets. However, ongoing high commodity prices, promotional and currency pressures allied with economic uncertainty and accompanying austerity measures, seem set to create a challenging marketing environment for prepared food manufacturers in 2012. However, the strong drive by manufacturers to adapt existing products and develop new ones to meet changed consumer shopping requirements and diversification to a broader range of markets should help export values.

Beverages

The global market for Irish beverages improved during 2011, despite ongoing economic uncertainty, pressure on price levels and intense competition across most major categories. A strong focus on new product development and increased volumes to emerging markets helped to boost trade.

Overall, exports are estimated to have increased by 6% in 2011 to reach almost €1.22 billion. The growth in the value of exports was led by whiskey, which continued to show strong double digit growth while cream liqueurs, beer and cider showed more modest growth. Exports of non-alcoholic beverages increased in 2011, with water and coffee performing particularly strongly.

The prospects for Irish beverage exports in 2012 remain largely positive for 2012 with further good growth anticipated in whiskey exports while cream liqueurs, beer and cider are also expected to grow as new markets emerge to replace lower sales to some traditional destinations. Much will depend on economic developments, particularly in the euro zone, which will have a strong influence on consumer spending. Despite the current economic situation, consumers in many parts of the world seem to be still willing to purchase premium spirits. The sector faces challenges in the form of ongoing high raw material prices, pending legal changes relating to excise on wine based creams and changes to trade classifications for Irish creams.

Seafood

The value of Irish seafood exports showed strong growth in value during 2011 despite volumes falling by a fifth. All categories of seafood put in strong export performances as reduced lower volumes of many species were offset by higher prices and a greater spread of export markets by the sector. Overall for the year, the value of seafood exports is estimated to have increased by 13% to an estimated €420 million.

Download the report in (PDF format: Export Performance 2011 and Prospects 2012