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11_Food & Drink

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11_Food & Drink

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									Food & Drink


           11
               111
                 Introduction
  Introduction




                 Natural Success Story
                 Michael Bell


                 Northern Ireland’s food and drink          drink industry has not progressed as       margin is approximately 2_%. Energy
  Food & Drink




                 sector has a hard-earned reputation        well over the past number of years as      costs and movements in them are
                 for quality and freshness which sits       the sector has in the Republic.            therefore a very significant part of this
                 happily with external perceptions of                                                  percentage and can have a huge effect
                 Northern Ireland as naturally                                                         on manufacturing economics.
                 beautiful and unspoilt.                        ... the sector is one of the               The Government’s announcement
                                                              largest economic activities on           of a £30m rebate last year was a hugely


                 I
                     t’s a charming but rather laid back      the island and is certainly the          welcome lift for the industry . . . and
                     analogy which shows just one              largest area of cross-border            the subsequent withdrawal of that is
                     dimension of what is an extremely                    trade ...                    disingenuous to say the least. Energy
                 complex and competitive marketplace.                                                  costs continue to run approximately
                 Behind the scenes, the food and drink                                                 50% above those of our UK-based
                 sector has been coping with turbulent         This is in some measure due to          colleagues and this is a significant –
                 times.                                     exchange rates and local government        some might even say impossible -
                    Food and drink manufacturing            support. Having said that, we have         hurdle for the sector to overcome.
                 continues to be the backbone of the        many companies that enjoy global               The recent requisition of Safeway
                 Northern Ireland economy. Perhaps          reputations for excellence and which       Northern Ireland by Morrison’s
                 surprisingly, its profile is not           are category champions among many          presents another challenge for the
                 particularly high among local              of the major retailers.                    supply base. Whether Morrison’s
                 consumers, but its importance to              As an industry we enjoy a strong        decides to come here or to sell, either
                 Northern Ireland cannot be                 reputation amongst the best in many        scenario will prompt some supplier
                 underestimated.                            areas.                                     base contraction. Turbulence in the
                    Food and drink manufacturing has           The big challenges facing the sector    market place is always difficult for
                 a long tradition on the island of          include the cost of energy locally. Food   suppliers and, with low margins, food
                 Ireland, both North and South, and         and drink manufacturing average net        is especially sensitive.
                 the sector is one of the largest
                 economic activities on the island and is   Michael Bell

                 certainly the largest area of cross-
                 border trade.
                    In Northern Ireland we have 176
                 food and drink manufacturers whose
                 turnover is greater than £1m. The total
                 turnover of the industry is more than
                 £2,365m and employment today is
                 19,295.
                    It is interesting to chew over those
                 statistics, if you will forgive the
                 shameless pun.
                    Food and drink manufacturing
                 employment has been relatively
                 constant over the past five years,
                 steady at about 19,000. This hides the
                 fact, that in this period, the industry
                 has made huge strides in
                 manufacturing efficiency gain and
                 added value per employee gain, and
                 indeed has faced employment
                 shortages in Northern Ireland, such
                 that the industry is now using numbers
                 of foreign labour.
                    The future for the industry, while
                 tough, is bright, and with sufficient
                 government help could be brighter,
                 although Northern Ireland’s food and

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                                                                                  Introduction




                                                                                                                              Introduction
                                                                                                                              Food & Drink
    The continuing highly competitive
market place, with deflation being a
regular feature over the past number
of years, looks set to continue and,
indeed, deflation appears to be
spreading into other sectors, notably
electronics and automotive.
    However, in food, deflation cannot
continue ad infinitum without some
serious effects. The principal of these
will be the exporting of most of our
food supply chains to third world
countries. While this may have major
cost advantages for retailers and
consumers in the short term, longer-
term problems include security of food
supply, vulnerability to oil price
fluctuations, and bio-security with
issues around disease control and
traceability.
    robably the most important issue
however is sustainability and the
impact of farming activities on the
environment.
    The commercial difficulties facing
Northern Ireland’s farmers and the
agricultural community generally have
been well documented and much work
is being done to arrest – even reverse –
the decline of this all-important facet
of our economy. As farming suffers, so
too does the food and drink sector for
the two are inextricably linked.


  As an industry we enjoy a
  strong reputation amongst
    the best in many areas
                                           essential to survival.                 looking at ways to add value, pushing
                                              Northern Ireland’s food and drink   up margins and building new
   PWhile external factors have            sector is learning to be as keen and   ‘customer delight’ into our product
combined against both, these are also      lean as it is green.                   offers.
sectors that are working hard to              Costs are kept tight so that
change themselves. Traditional at the      companies can cope with the low        Michael Bell is executive director of the
core, each has found change difficult,     margins that are commonplace in the    Northern Ireland Food & Drink
but they recognise that change is          industry. But we are increasingly      Association

                                                                                                                                113
                 Overview
  Overview




                 At the Heart of the Economy
                 Tim Brannigan


                 A decade ago few would have                    He instances competence and              opportunities by developing new
  Food & Drink




                 foreseen the extent and rapidity of         forward thinking among the industry’s       products and understanding the
                 the changes that the province’s             leaders as the key components in            importance of good marketing. This
                 food sector would undergo during            driving the food sector’s fight for         has ultimately made our industry
                 the course of ten years.                    survival.                                   stronger and more sustainable.”
                                                                “Northern Ireland’s food industry           The province’s big food processors


                 T
                         he arrival of the UK multiples in   has had to adapt quickly to changing        – such as Moy Park, Dale Farm, and
                         the mid-1990s was the first in a    circumstances, but its continued            Linden Foods – have led the industry’s
                         series of developments that have    strength is a tribute to those within the   response to new market conditions
                 completely transformed the industry for     industry,” he says.                         with an outward looking
                 producers, processors, and suppliers           “Right across the supply chain           determination.
                 alike. As the UK’s big supermarkets         people have had to seek out new                Dale Farm chief executive and CBI
                 quickly embedded themselves into
                 Northern Ireland’s retail landscape,
                 they not only brought fresh                  Continuing Excellence
                 opportunities, but also new threats.
                     Globalisation and the ever-changing                                                    The awards were established in
                 demands of the consumer have created                                                    1970 and are judged by its 22
                 further turbulence in the sector and                                                    members who visit various
                 precipitated major restructuring in an                                                  restaurants throughout Northern
                 industry that has long been central to                                                  Ireland during the course of the year.
                 the prosperity of Northern Ireland.                                                        Paul Rankin is delighted to receive
                                                                                                         the award for the second time. “All of
                                                                                                         the staff at Cayenne work hard to
                   ... a very stable and robust                                                          offer customers the ultimate dining
                      part of our economy ...                                                            experience. This accolade is
                                                                                                         testament to their dedication and
                                                                                                         hard work. The fact that we have
                    As Michael Bell of the Northern                                                      received the award on two occasions
                 Ireland Food & Drink Association                                                        demonstrates our consistently high
                 (NIFDA) states, the food industry,                                                      level of service and first class food.”
                 along with its sister sector the drinks                                                    Celebrity chefs Paul and Jeanne
                 industry, has always been at the heart                                                  Rankin have picked up many other
                 of the province’s economy, employing                                                    accolades for their Cayenne
                 around 20,000 people and producing
                                                                                                         restaurant. For instance, it has been
                 close to 7% of the province’s gross
                                                                                                         placed in the top 10 restaurants in
                 domestic product (GDP).
                                                                                                         the UK in the Time Out’s guide to
                    He also notes that whereas the new
                                                                                                         eating and drinking in Great Britain
                 economy took its toll on other
                 traditional industries, most notably                                                    and Ireland - the only Northern
                                                              Paul Rankin
                 textiles, the food industry has managed                                                 Ireland restaurant to make the list.
                 to sustain employment levels and grow        Paul and Jeanne Rankin’s award-               Other awards include that of ‘Best
                 output. This resilience, the NIFDA           winning Cayenne restaurant in              Restaurant in Ireland’ from the
                 executive director says, can be              Belfast has won yet another prize for      Jameson’s Guide and the ‘Bib
                 attributed to a number of factors.           its quality cuisine, having been           Gourmand’ from Michelin.
                    “The island of Ireland as a whole is      acclaimed the ‘Best Restaurant 2004’          Cayenne has also been named as
                 a very strong food and drink                 by The Grub Club.                          one of the UK’s best restaurants by
                 manufacturing entity, not least because          Cayenne, on Belfast’s Shaftesbury      The Observer Food Monthly
                 of some simple fundamentals. We’re           Square, is the only restaurant in the      magazine, which said that “the
                 blessed with a moderate climate,             history of the awards to have              atmosphere in Paul and Jeanne
                 there’s no heavy industry or nuclear         received the prize on two occasions,       Rankin’s restaurant is just as hot and
                 industry, and our products therefore         as the Rankins also received the           modern as the menu”.
                 have an international reputation for         award in 2000.
                 being clean and wholesome.”

114
                                                                                                 Overview




                                                                                                                                      Overview
Northern Ireland chairman David              technology and increased                     industry as a whole can move forward




                                                                                                                                      Food & Drink
Dobbin sums up the climate succinctly.       manufacturing capability, and a further      together.
    “It’s a case of gearing up or clearing   £10m on developing a state-of-the-art           “We have a cluster of companies in
out,” he says.                               innovation and product development           Northern Ireland that I believe helps
    “Our customers are getting stronger      centre to drive its product range            us to maintain competitive advantage,”
and larger as we see consolidation on        forward.                                     he says.
the high street and in the food service         “We’ve done all that and we still say        “As staff migrate from one firm to
sector. The enlargement of the               we have a lot to do,” he says, “but we       the other and share best practice, it
European Union, the outcome of the           feel we’ve made a good start.”               helps to keep the industry on its toes
world trade talks, and the review of            ‘Innovation’ and ‘adding value’ are       and ensures that we remain
the EU’s Common Agricultural Policy          also the key terms at Wilson’s Country       competitive. It also has its advantages
will present additional challenges for       Vegetables in Portadown, where               in creating critical mass.”
which we need to be prepared. Either         founder and chief executive Angus               Mr Bell is adamant, however, that
you compete in that environment and          Wilson has had to counter low-cost           the government must play its part in
succeed or you’re going to have to           competition from outside the province.       augmenting what is already an
leave the sector altogether.”                                                             inherently strong sector and one that
    The companies that will survive, Mr                                                   has often been neglected.
Dobbin says, need to take a global                ... the food industry ...                  “Despite our significant input, we
view and play to their strengths.             has always been at the heart                have been disappointed with the
    “Any company that’s going to thrive       of the province’s economy ...               outcome of both the government’s
in this environment is going to have to                                                   Strategy 2010 document and the
be much more competitive, much                                                            Department of Agriculture and Rural
more market focused, and more                    “We in Northern Ireland can’t match      Development’s Vision report,” he says.
inventive and innovative in terms of         the scale of our counterparts in Great          “We think that this needs to be
trying to differentiate what they’re         Britain who are often dealing in five to     addressed and recently in developing a
offering against a crowd,” he says.          ten times the quantity,” says Mr Wilson.     Food Strategy Group with the
    The recent performance of Dale               “The efficiencies of their larger        Department of Enterprise, Trade and
Farm, which is wholly owned by               operations mean that in many                 Investment we have raised a number
farmers’ co-operative United Dairy           instances they can pack product at           of criticisms.”
Farmers, is a testament to Mr                lower cost.”                                    Not least among the industry’s
Dobbin’s strategy.The company                    The Wilson’s Country Vegetables          concerns is its failure to receive due
anticipated changes in the dairy             response to their larger competitors’        recognition, whether it’s from the
processing sector and shifted its focus      advantage has been to focus on               government or from the general public.
accordingly from commodities to              regional and added-value products.           Mr Bell is optimistic, however, that the
value-added products.                        They tailor these products, mainly for       perception will soon change.
    “Dale Farm has doubled the size of       the local market, through a strategy            “We have between 200 and 300
its sales in the past four years and         that to date has proved successful.          businesses forming a very stable and
decreased its reliance on commodity              “We have ways of adding value and        robust part of our economy and this
sales, which now account for just 40%        trying to regionalise our products,” says    needs to be reflected in the support we
of sales, compared with 80%                  Mr Wilson. “For example, there is more       receive,” he says.
previously.                                  demand for our fertiliser-free potatoes         “We need a clear and decisive
    “Consumer product sales have             in the home market than in Britain           strategy from the government that
quadrupled over the same period and I        because the Irish like dry potatoes. It is   translates into action.”
think that growth is a sign that we          in areas like these that we have to             With this and all the other key
must be doing something right.”              differentiate and add value.”                components in place, Michael Bell
    Dale Farm’s restructuring, which             As the food sector has become            insists, the sector once written off as a
has been achieved against a                  more outward-looking, attitudes              ‘sunset industry’ can maintain the
background of paying the best possible       between regional competitors within          Northern Ireland food industry’s
price for milk to its shareholder            the province have also changed. Dale         position on the world map.
suppliers, has been expensive, Mr            Farm chief executive David Dobbin’s
Dobbin concedes.                             assertion that the company two miles         Tim Brannigan is a freelance journalist
    The company has spent £30m on            down the road is “no longer regarded
acquisitions, £20m on re-equipping           as the enemy” is echoed by NIFDA’s
itself with better information               Michael Bell, who believes that the

                                                                                                                                        115
                 Overview
  Overview




                 A Massive Contribution
                 Tim Brannigan


                 In a region that has had more than        and the problem of high fuel costs has      social as well as economic role.
  Food & Drink




                 its fair share of bad news, the food      been well-documented. Predictably,              “Many of the jobs we’re providing
                 and drinks industry stands tall as        the issue of the lack of attention from     give employment for educational low
                 one of the shining lights of the          the government in Northern Ireland is       attainers, which is an important part of
                 Northern Ireland economy.                 also an area of concern to the industry.    a mixed economy,” says Mr Bell.
                                                                                                           He says that his association’s


                 T
                        he figures for the industry are                                                members are passionate about food
                        impressive. Annual turnover is       ... demonstrated continuous               and drink manufacturing. “It’s a very
                        £2.3bn and, if farming is taken               growth ...                       strong industry here in terms of global
                 into account, the sector produces                                                     competitiveness and we’ve got an
                 around 6% to 7% of Northern                                                           industry with a superb reputation in
                 Ireland’s gross domestic product             “The government has tended to            terms of quality and standards.”
                 (GDP).                                    focus on other directions and that has          Within the food and drinks industry,
                     However, many people remain           had a negative effect on the entire         the soft drinks sector – which makes
                 unaware of its true significance, says    private sector and not just                 up around 10% of the industry – is
                 Michael Bell, executive director of the   manufacturing,” says Mr Bell.               generally considered to be innovative
                 Northern Ireland Food and Drinks             The government’s attitude needs to       and enjoys high margins.
                 Association.                              change, he believes. It should focus on         The view from one of the leading
                     “The food and drinks sector is a      supporting the food and drink industry      soft drinks makers in the Northern
                 real success story for Northern Ireland   because there are a “huge number of         Ireland remains optimistic.
                 but we do not get the recognition we      issues to be addressed”.                        John Barrett, chairman of Coca-
                 deserve despite making a massive             Despite the lack of attention, the       Cola Bottlers (Ulster), describes the
                 contribution to the economy.              industry has demonstrated its               soft drinks market as ‘matured’ but
                     “The food and drinks sector is the    resourcefulness. The strength and           still offering the prospect of strong
                 backbone of the Northern Irish            resilience of this sector is perhaps best   growth. The soft drinks market is
                 economy – there’s no other way to say     underlined by figures which show that       healthy at the moment with annual
                 it.                                       in 1996, there were about 26,000 jobs       growth of around 3%.
                     “We have a good industry here         in textiles and 21,000 in
                 which is rising to the global challenge   manufacturing. Now, eight years later,
                 and is meeting that challenge,” says Mr   there are 19,500 in food and drink            ... one of the shining lights
                 Bell.                                     manufacturing and fewer than 7,000 in            of the Northern Ireland
                     He feels that trading in Northern     textiles.                                              economy ...
                 Ireland presents unique difficulties.        Further, industry leaders are keen to
                     Being on an island on the periphery   point out, these are long-term reliable
                 of Europe throws up logistical issues,    jobs and often they have a crucial             “The key factor in the market is the
                                                                                                       movement of consumers towards a far
                                                                                                       more diverse and varied portfolio of
                                                                                                       non-alcoholic beverages,” says Mr
                                                                                                       Barrett.
                                                                                                          “This trend has been prevalent
                                                                                                       across the entire food and drink
                                                                                                       industry over the past ten years and
                                                                                                       soft drinks is no exception. The
                                                                                                       development of the category in the
                                                                                                       past decade has been phenomenal,
                                                                                                       with water, sports, and energy drinks
                                                                                                       growing quickly to form significant
                                                                                                       sales volumes.”
                                                                                                          There is still a lot of potential
                                                                                                       growth left in the water market, as the
                                                                                                       per capita consumption in Northern
                                                                                                       Ireland is still well below the European
                                                                                                       average.
                                                                                                          “Consumers want products that will

116
                                                                                            Overview




                                                                                                                               Overview
                                                                                                                               Food & Drink
 Oldest Whiskey Distillery in the World
 The Old Bushmills Distillery at           in 1885 and undergoing several            whiskeys, of which the best-known is
 Bushmills in Co Antrim claims its         changes of ownership. It was acquired     the world-renowned Bushmills Irish
 record status from a seven-year           in 1972 by the Irish Distillers Group,    Whiskey, as well as the classic
 licence to distil issued in April 1608.   which itself was taken over by the        Bushmills Black Bush and, since
     The distillery has had an eventful    Groupe Pernod Ricard.                     1996, Bushmills Malt, a 16-year-old
 history, having been destroyed by fire       Bushmills produces many fine           rare single Irish malt whiskey.


help them to do specific things as well       The outlook for the soft drinks        Barrett.
as taste great,” says Mr Barrett.          sector – one of the most exciting areas      “Looking across the globe at other
“Whether it’s to help them perform         of the food and drinks market -           markets, we can see that there are
better during a match or give them a       remains extremely positive. As            many more new beverages and drinks
boost during the day, these drinks have    consumer lifestyles change and            which have yet even to show
found a place and a role in changing       develop, they provide the incentive for   themselves within Northern Ireland, so
consumer lifestyles.”                      companies to innovate.                    there is definitely more opportunity
    However, Mr Barret maintains that         “The category also offers retailers    out there for growth.”
reports of the death of the carbonated     strong margin potential and has
drinks market are “tremendously over-      demonstrated continuous growth even       Tim Brannigan is a freelance journalist
stated”. In fact this area of the market   when other categories such as alcohol
is enjoying a very bouyant time.           have experienced declines,” says John

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Lanyon Building, Queen’s University Belfast

								
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