2021 has been a turbulent time for the food industry, with Brexit-related adjustments, continued Covid-19 lockdowns and rising commodity prices. Róisín O’Shea, Head of Food and Beverage at Bank of Ireland, gives Maev Martin his perspective on how food companies are doing.

Róisín O’Shea joined Bank of Ireland in 2019, and his role is to bridge the gap between the food business and the bank.

“The Bank of Ireland is unusual among Irish banks, in that it hires people from a wide range of industrial backgrounds to advise them on these industries,” says Róisín.

“If a food business is looking for a loan or wants to grow further, I would attend the meeting and provide the bank with an understanding of what is going on with that business, rather than just looking at the financials. I look at its competitive set , its marketing plan and its operations.This is something I can bring to the bank, as I have worked in the food industry for over 23 years.

Róisín has held a number of senior business positions, including Field Sales Manager, Marketing Controller, Business Unit Manager and Commercial Director, in both indigenous and multinational consumer goods companies, such as PepsiCo, Valeo Foods , Carbery, Boyne Valley Foods and Robert Roberts Ltd. .

Her most recent role in the FMCG industry was at Boyne Valley, where she was the commercial director of her sports nutrition brand, Kinetica.

“I have worked as a key account manager for many years so I understand the FMCG market and the food retail industry and the importance of the relationship between retailers and suppliers” , she says. “I also understand how difficult it can be to manage this situation, especially at this time when the market is experiencing rising costs on all fronts.”

Bright prospects despite the costs

The Food and Agriculture Organization of the United Nations’ Global Commodity Basket, which covers a wide range of foods, has increased by 29% for 2021.

“For example, wheat has increased by 29%, sugar by 38% and vegetable oils by 71%,” explains Róisín.

“In Ireland, energy prices are rising and the impact of oil costs is being passed on to packaging costs. Some costs on carton are up 45%, so it’s a very challenging environment for food companies. Despite these pressures, Bank of Ireland is very optimistic about the outlook for our food customers, who have seen strong growth in leading sales this year. Turnover is doing well, and this is partly linked to the ability of Irish producers to implement import substitution following Brexit. Many medium-sized manufacturers are winning new contracts.

“However, their percentage margin has eroded due to raw material costs, and that’s a tough long-term position. Suppliers were able to back it up for a while – and they were reluctant to approach retailers with price increases – but, in the end, they had no choice. We have yet to see these price increases materialize in terms of the consumer price index, indicating continued challenges in the supply chain.

“Our advice to food businesses would be to build resilience into their business model. We are in a volatile environment in terms of costs, and I think that will remain so for the next few years – particularly from a food point of view, as we are increasingly confronted with the effects of climate change – so the models must be resilient in terms of liquidity and cash flow, but also in terms of positioning to face longer-term risks,” says Róisín.

“In terms of liquidity and cash flow, the Bank of Ireland sees many businesses in the industry using bill discounting as it gives them a flexible source of funding to deal with the pressures of the supply chain. When it comes to resisting longer-term risks, the Sustainable Energy Authority of Ireland [SEAI] offer a free energy audit for businesses, where they send someone into a business to see how they could increase their energy efficiency,” she adds.

“This is something we encourage all of our customers to consider as it helps increase their long-term resilience. Some operators who may have considered sustainable energy products a few years ago and felt that the return on investment was too long are re-examining them now, in terms of the current return on investment and the current energy crisis, so this is an area that we see developing at the moment For large multinationals and our large local multinationals, this is a priority essential, and this is increasingly affecting the world of SMEs.”

Brexit boosts

A boost for Irish food producers has been one of the ripple effects of Brexit as businesses source closer to home and keep their supply chains more manageable.

“I have seen import substitution in a number of sectors, including in the distribution model, where some products would have been sourced directly from the UK, and now there is an opportunity for the distribution model to respond to a need in the Irish market and to grow.” both on sales and cash margins,” says Róisín. “We have also seen a number of SMEs, in particular, win private label contracts within Irish retail.

“However, at the moment, SMEs are facing capacity challenges. Many of our customers are planning to increase their on-site capacity, whether in terms of warehousing or new lines, and the focus is increasingly on automation due to the staffing issues they are facing. . I think the pressures on capacity have been widespread during the pandemic, but some sectors of the food industry were already struggling before the pandemic, so many companies are responding, first, to the increased orders that are coming, but they are receiving more and more demand from continental markets as a result of Brexit, and as capacity increases in the industry, this will pay dividends and increase the value of the sector.

Róisín says the extent to which the UK will implement border controls on Irish goods is the big unknown.

“For many Irish products, we send small varieties and large volumes to the UK, which makes customs controls less of a problem for exports than for imports, where you send a large variety and low volume,” says -she.

“I think the operators are largely very well prepared and have contingency plans in place. However, there is no doubt that import controls, if implemented, will be difficult for small delivery quantities. »

food waste

Food waste and how companies respond to this challenge is an area where we will see a lot of development over the next two to three years, according to Róisín.

“As food prices rise, there will be more emphasis on adding value to the food we have,” she says.

While the current focus is on energy costs, the bank also sees a lot of work being done on packaging and product launches in the flexitarian and plant-based sector.

“There are some very exciting developments in areas like the mushroom sector, where we have a strong indigenous industry that is responding very well to this trend,” she says. “Mushrooms are a low food consumption product that is fantastic from a health point of view.”

Extend shelf life

While we see a lot of innovations in packaging that help extend shelf life, especially in terms of nanotechnology research, to help manage understanding of when a product is past its best time to eat, Róisín points out that this technology is not yet commercially available.

“That means right now it’s about doing a lot of little things – things like best before dates, clean preservatives to extend the shelf life of products, using datasets to predicting consumer behavior and forensic analysis of factory waste,” she says.

“Interesting to see Morrisons in the UK offering a sniff test on milk, rather than having an expiry date. Seven per cent of all fresh milk in the UK is wasted, and this is a proposition to tackle that. There is also an increasing focus on the waste generated in the production process, which can still be very high, so the question is how this waste can be reused to become a value rather than a waste stream.

Mega-trends remain

Róisín notes that, despite the pandemic, megatrends such as health and wellness, the rise of the flexitarian consumer, and own-brand products are still here.

“In fact, interest in health and wellbeing has increased during the pandemic, and it’s encouraging to see a number of strong launches in the sector by Irish companies set up over the last couple of years,” says -she.

“At Bank of Ireland, we understand the food business very well, and we know that commodity increases have always happened, and that good operators know how to adapt to these challenges. We bring an understanding of this cycle to more term, as well as an understanding of the challenges food businesses are currently facing.”

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