LEADERSHIP
‘Ireland can build on the positive reputation of its grass-fed beef when competing with meat from Brazil or parts of Latin America’
Shelman, who is director of the Agribusiness Program at Harvard Business School. “However innovation can be as simple as changing the packaging to reflect consumer desires for quality, traceability and cleanliness. People buy packaging as much as they buy the product inside.”
Ireland’s advantage We need to better market our competitive advantages, she continues. “Grass-fed beef retails at US$36 a pound in New York. That is the market potential for Irish beef. Yet Irish grass-fed beef is sold with very little branding to UK and European markets. “Similarly, in the dairy sector, Kerrygold is a fine brand but it only
really extends to butter in the consumer’s mind, and only applies to a limited number of markets. Yet there is a keen interest amongst consumers around traceability of dairy products, particularly infant milk formula.”
Shelman appreciates that the short-term difficulties of exchange rates and competitiveness have badly affected the food and drink industries. “That issue of competitiveness is coming at a time when consumers are very concerned about price,” she says. The increased competition is not just happening on export markets but also on the small domestic market where multiples dominate the purchasing decisions.
“One of the big problems facing the Irish food and drink industry is the size of the domestic market and increased competition in that market, which leaves very little room for investment in building international brands and on innovation,” she adds.
Huge potential Nevertheless, Shelman is optimistic about the future. She says world demand for food will grow by 70% by 2050, led mainly by the growth in populations and also increasing incomes in the likes of India, China and the rest of Asia. She says Ireland is very small in terms of the industry and points out that food giant Nestlé has 70 billion Swiss francs in sales every year, while Ireland has €7bn. Two big challenges facing the global industry are land and water, she concedes, but Ireland has a strong hand here.
“Right around the world water is becoming a scarce resource and
Ireland has a plentiful supply of water, for a tiny proportion of the world’s land. “The Irish food and drink sector also has the advantage of proxim-
ity to a large market in western Europe, which has a favourable impression of Ireland as a green, clean place. Ireland needs to find a way to maximise its advantageous position close to these large mar- kets in the UK and the continent of Europe.
“One thing consumers care about is the source of their food 28 UCD BUSINESS CONNECTIONS
products and supermarket buyers are looking for what the con- sumers want. Ireland has a green perception amongst buyers and consumers. They know Ireland exists and that it is green. They hold an image of Ireland as having attributes that they want,” adds Shelman. This traceability element is an important part of the vision of the
‘Pathways for Growth’ report, which proposes a working title ‘Come See Us. We’re Open For Inspection’, based on the premise ‘We are natural and we can prove it’. While in the longer term, markets such as India and China should be a target for Irish food and drink companies, in the shorter term Europe is where the focus should be, argues Shelman. “Supermarket buyers need to know that they can jump on a plane
to Ireland and see where the food product is produced. Even if they do not get on a plane and visit, it is important that they have the per- ception that they can do so. “Everybody is looking at Asia right now. To have a leading dairy brand in India or China with billions of consumers is a very attrac- tive prospect for many companies but is clearly not feasible given the size of Irish companies,” she says.
Co-opetition The Irish food and drink sector, which suffered from a sales decline of 12% last year, needs to co-operate rather than compete in order to bring about the innovations required to attract modern consumers, explains Shelman – a strategy she describes as “co-opetition”. “If Irish companies are competing against each other in European food and drink markets they will not have the resources to innovate and build brands. It’s like two members of the same family bidding against each other to buy a property – which my friends tell me is something that can happen in Ireland!” ‘Pathways for Growth’ also stresses the importance of brand build- ing based on customer feedback as a means of capturing greater market share, she points out. Part of the preparation of the report involved bringing in the leading chief executives in the Irish food and drink sectors whose efforts will be critical to the successful imple- mentation of AgriVision 2020, which is being prepared by the Department of Agriculture, Fisheries and Food. “It is important that these leaders bring back the interest and passion in top-quality food and drink,” she says. “The current setbacks in sales and the increase in competition are a blip on the long-term trend of greater demand for foodstuffs inter- nationally as a result of rising populations and rising incomes in vast markets like India and China,” continues Shelman. The outlook for meat and dairy products is very positive, she
believes. “People will always have a demand for meat and people will always have a demand for milk.”
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