OPINION:Target set by Food Harvest 2020 is now clearly within reach, and might even be exceeded

Delivering a €2 billion increase in exports over the last three years, to reach and exceed €9 billion for the first time, represents a highly commendable performance by the food and drink industry.

It suggests the addition of a further €3 billion over the next eight years, to meet the target set by Food Harvest 2020, is now clearly within reach, and might even be exceeded. It is of course not so simple, yet as the industry looks ahead it is worth reflecting upon.

The highest growth potential in the industry has still to be realised, and must await the lifting of dairy quotas from 2015. Should the anticipated expansion materialise in full,

it alone could add a further €1.5 billion to exports by the end of the decade.

The beef sector faces continuing challenges in relation to farm level profitability, yet it too could benefit from a larger dairy herd, while new market opportunities are set to open up once access to the US, China, and Japan is restored. The pigmeat and sheepmeat sectors also have growth potential.

In the beverages sector, the double digit growth in Irish whiskey sales is set to continue and even accelerate, based on current investments underway never mind other greenfield projects reported to be under consideration.

Seafood exports have grown by almost 60 per cent over the last three years and, if current licensing plans to increase production are successful, further significant growth is in prospect.

The prepared foods sector, with its reliance on UK and Euro area markets, has been facing significant challenges, not least the rising cost of ingredients and consumers’ search for value. It includes some of our most successful enterprises, yet significant growth may require new entrants and larger, scalable projects.

The current growth in the industry comes at a time when the world faces the challenge of expanding food production by 70 per cent over this and the next three decades. It must do so to meet the needs of an expanding population, including the shifting dietary habits of the extra three billion people set to join the middle classes in just this and the next decade alone.

World agriculture has been struggling to keep pace; as a consequence global food commodity prices today are double their level of 10 years ago, are on a clear upward trajectory, and are part of the reason behind rising export values. This is a strong growth story to underpin the industry’s own growth ambitions.

However, there are significant challenges. While commodity food prices are high and rising, they have also become subject to a high degree of volatility, driven in particular by unpredictable weather patterns. When prices are falling sharply they can severely shake the confidence of producers, just as they can send equally exaggerated signals when they are rising. Last year commodity prices fell on average by 8 per cent, having increased in the previous year by 23 per cent.

Similarly, for an industry that conducts almost 70 per cent of its trade outside the euro zone, it is subject to all of the uncertainty around exchange rate movements. Last year these moved in our favour, by some seven per cent, but few in the industry will forget the challenge faced when sterling depreciated by 30 per cent against the euro just three years earlier.

Equally, what has been described as the “new normal” in the lives of consumers today raises its own ambiguities, the search for value yet the recognition that food and drink is now also playing an even stronger role in consumers’ lives as the benefits are seen to enhance lifestyle shifts: a focus on local, cooking more often, connecting family and friends, enabling more control over consumers’ health.

The US military coined the acronym VUCA to describe a world or situations characterised by volatility, uncertainty, complexity and ambiguity. It provides an apt description of the global food market today and the necessity for our food and drink industry to manage it.

It is not without success. One of the key features of its export performance has been its ability to meet the growing demand in emerging markets at a time when its traditional markets have been clouded by weak consumer sentiment. Sales to international markets last year grew by 9 per cent, building on a 20 per cent growth in the previous year. Exports to China grew last year by 30 per cent and sales to Asia are now 75 per cent higher than they were three years ago.

It goes without saying that current awareness of Ireland in these markets does not match our export penetration. Yet, this need not be the disadvantage it might seem.

It is important to remember that the success of Irish food and drink should be measured not necessarily by the number of Irish brands on local supermarket shelves, but rather by the extent that local brands incorporate Irish ingredients (Intel Inside): Irish food exporters have chosen predominantly a business-to-business route to market and it is on this that their success should be measured.

Bord Bia’s December survey of exporters showed that 65 per cent of respondents had delivered new products to existing customers, while a similar number had delivered new products to new customers. It reflects an industry that recognises the importance of investing in consumer insight and innovation in order to hold and win new business.

The Irish food and drink industry has much to be proud of in its recent achievements. It will also be keenly aware that there are as many challenges on the horizon as there are opportunities. It is a time to hold its resolve, stay with its current targets and commitments, and continue to navigate its way through what at times can be a particularly hazardous marketing environment.

Aidan Cotter is chief executive of Bord Bia