While a growing world population and an expanding and increasingly affluent middle class in the developing world will lead to increased demand for beef and dairy products in the coming years, this will not necessarily translate into increased exports from Ireland without significant investment in both new product development and process improvement.
Lance O'Brien, head of foresight and strategy with Teagasc, points out that while Irish food exports reached a record €11.1 billion last year, 37 per cent of this went to the UK and Brexit it will require much greater market diversification in future.
But this is not as simple as it might sound. Take cheese for example. “Most cheese produced in Ireland is cheddar and 70 per cent of that goes to the UK,” says O’Brien. “It is a very specialised product and doesn’t really appeal to consumers in Europe and around the world. We need to develop new cheese products and add value to our overall product portfolio. Consumer tastes are changing internationally. They want less salt and less sugar and we have to be able to develop new products that meet that need without compromising on taste and other characteristics.”
There is considerable state support available for new food product and process development, both in the form of direct assistance and tax breaks. The joint Enterprise Ireland IDA Ireland technology centres programme includes three centres specifically aimed at the food sector – the Dairy Processing Technology Centre, Food for Health Ireland, and the recently established Meat Research Centre.
These centres are collaborative entities established and led by the food industry. They employ highly qualified researchers associated with universities and other research institutions who undertake market focused strategic R&D for the benefit of industry.
“The centres bring groups of companies together to collaborate with each other on meeting challenges facing the industry,” says Martin Hussey, a technology centre programme manager with Enterprise Ireland. “By starting with groups of companies we ensure the market focus of the centres. Once companies realise that the can collaborate without compromising their own competitiveness they are very good at it.”
An example of this is in the Dairy Processing Technology Centre. Irish dairy farmers are forecasting an increase in output of 60 per cent as a result of the end of the milk quota regime in 2014 but this all has to be processed. “It would not be sustainable for the industry to have to increase capacity by this amount and the centre has been researching ways to improve processing efficiency which will benefit the entire industry.”
Food for Health Ireland (FHI) was established in 2006 to pre-competitive research in milk's potential role in improving public health. Through an "intelligent milk mining" programme and extensive bioassay screening, the scientists in FHI have identified a number of peptides in milk which are bioactive and have an effect on systems in the body.
“We are conducting extensive research in vitro, in animals and in humans to identify the biological processes where they are effective and to what extent,” says Fiona Lalor, communications manager with FHI. “Our target areas are the elderly, athletes, obesity and diabetes, and infants. We also run a Healthy Cheeses programme which is designed to exploit the aspects which are beneficial for health and naturally present in cheese. We have patented five technologies and have successfully delivered seven commercial licences for our industry partners. These include an ingredient which will help manage blood glucose after eating and a nutrient solution for healthy ageing.”
Derek Henry, head of R&D tax services with BDO, explains that the R&D tax credit is a very attractive incentive to food companies. "It is worth 25 per cent of the eligible expenditure," he says. "That means if you spend €100,000 on R&D you get €25,000 back, and that's in addition to the deduction against the 12.5 per cent rate of corporation tax, making it worth a total of 37.5 per cent."
Even small early stage firms which are not yet profitable can benefit. “Firms can get a rebate of the credit over three years if they are not profitable and this is a very important incentive,” says Henry. “Overall, the R&D tax credit incentivises experimental development of new food products and this is vital for our international competitiveness. For example, in the area of functional foods with health-giving properties the manufacturer has to ensure that they have the same taste profile and characteristics of the standard product which people know and enjoy.”