Markets are tough, competition is razor sharp and margins are shrinking all the time. How is Ireland’s food and drink sector going to cope with the challenges that face it? Part of the answer comes down to investment in research.
There is a strong correlation between commercial success and investment in research. Willingness to invest opens up opportunities that may not have existed otherwise and companies need to recognise this, says Prof Michael Gibney, director of University College Dublin’s Institute of Food and Health.
“The international food industry is very competitive and changing quickly and it needs research,” he says. “If the industry wants to be competitive in the future it is going to have to invest in research. It is not as if the universities alone were saying it, Forfas and the advisory bodies are saying it,” he adds.
Certainly investment is being made in this quarter and at substantial levels. Even as far back as 2007 the food sector spent €85 million on research according to agricultural advisory body Teagasc, but this is eclipsed by more recent expenditure.
The Kerry Group announced in the autumn of 2012 it would invest €100 million in a single project, a new campus in Naas for the Kerry Global Technology & Innovation Centre. It plans to have 900 people working there when fully commissioned by 2016. It will become a focus for the company’s extensive research effort in ingredients and other food related technology.
And earlier this month Glanbia unveiled another huge project, a high-capacity dairy plant requiring an investment of no less than €150 million. Its new Belview plant on the Kilkenny/Waterford border is being established to benefit from the lifting by the EU of the long-standing milk quota limits. These have pinned back Irish milk production to 5.5 billion litres, but when New Zealand opened up its production capacity its volumes rocketed from about five billion to over 18 billion litres a year, says Dr Keith O’Neill director of life sciences and food commercialisation in Enterprise Ireland.
“The food industry is critical to Ireland,” he says. It generates almost 10 per cent total exports and 50 per cent of indigenous company exports. It sustains between 36,000 and 46,000 jobs, 9 per cent of employment and exports are shipped by the diverse food industry. “The whole production chain is worth €2.4 bn. Food is a really strategic place for us,” he says.
It is also an important sector for foreign direct investment. Three of the world’s top four infant formula companies have production plants here and shipments from Ireland account for between 10 to 12 per cent of global production of these products. Other big companies such as Heinz have plants here and collectively these companies generate exports worth billions.
International firms know the value of research and many establish plants here because they know Ireland has a substantial, in some cases world class, research infrastructure that is willing and able to provide support services. Whether foreign-based or Irish, investment in research helps these companies stay competitive and allows them to innovate. This helps them to respond to changing consumer demands and concerns such as sustainability and the sector’s impact on the environment. Research and innovation helps all companies face these challenges.
“If we take Irish industry, companies that invest a large per cent in research and development generate high exports and high added value,” says Rosemary Sexton, manager of dairy, functional foods and ingredients. “There is a clear correlation between research and exports. This is seen in many areas and is more true of food. If you want to generate international sales, that really means investment in research and development.”
It would be wrong to assume research was accepted as a requirement by our indigenous producers and service companies that support the multinationals. Research is not a natural part of the industry here for Irish SMEs, says Declan Troy, assistant director of research at Teagasc and director of technology transfer. Too many companies view food as a commodity rather than as a subject for research, he suggests. So Teagasc developed a technology transfer strategy and supports SMEs to look at research to grow their companies. “It is getting companies to innovate or at least become compliant,” he says. “The food technology transfer strategy enables all those players from the smallest company up to the Glanbias and Kerry Foods and international companies to engage with us.”
Before technology transfer becomes an issue there is the need to have an internationally recognised research system ready to support those with good ideas. The head of Teagasc’s food research programme, Prof Paul Ross, said the organisation has expertise in a wide range of areas: “There are very few research centres that can do the farm to fork range of research activities.”