FDII Presentation to Joint Committee on Jobs, Enterprise and Innovation

7th May 2013

The Irish Agri-food sector

1 in 8 jobs in the Irish economy 690 enterprises (94% are SMEs) Supplies the majority of Irelands €14bn grocery sector €9bn exports in 2012 2/3 of indigenous exports 30% of net foreign earnings €11.5bn purchases in the domestic economy and €1.75bn

payroll

The largest net exporter of beef, lamb, dairy ingredients in Europe

Economy Wide Impact of Agri-Food Growth

Food Harvest 2020 has ambitious growth targets particularly an increase in exports to €12bn by 2020

Direct expenditure in the Irish economy is equivalent to 60% of sales. This compares with 19% for the rest of manufacturing

Export growth in food has and will have a bigger impact on the wider economy than any other sector

FDII Report Sharing the Harvest estimates up to 30,000 jobs if exports targets are achieved

FDII Policy Priorities – Alignment with Agri-Food

Production Priorities Processing Priorities Marketplace Priorities Consumer Priorities

The policy dichotomy in Ireland

Smart Green Growth

Tax food and

packaging

Restrict marketing

Unregulated retail buying

power

Financing Difficulties

EnvironmentConstraints

High input costs – energy, waste

Financing Expansion and Renewal in the Food Sector

High capital cost sector with relatively low margins over time Requires medium to long term financing facilities that are

currently not available Existing grant aid levels, constrained by state aid, are not

sufficient to build the capacity required for export growth and enabling technologies to boost productivity– State Aid Map 2014-2020 now being negotiated– Food-sector specific funds (NPRF / EI)– Innovative approach to Capital Gains Tax relief to

incentivise reinvestment in the sector– Maintain R&D tax credit and strengthen for SMEs

Manufacturing Cost Competitiveness

Food and Drink accounts for 25% of industrial energy use

Electricity 15 – 25% higher than UK sister plans and gas differential is even higher

15/20% increases last year and again this year There is a direct relationship between cost

competitiveness and jobs – maintaining existing jobs and creating new jobs – A focus on network / pass through charges– Revisit the PSO levy and the Capacity Payment

Mechanism

FH2020 Growth Targets for Meat Sector

Beef – 40% growth in output value Pigmeat – 50% growth Sheepmeat – 20% growth (Sector view is potential for 45%)

Irish Meat Export Performance2010

€m2011

€m2012

€m2012/2010

%Beef 1,573 1,860 1,900 +21%

Pigmeat 336 396 457 +36%

Sheepmeat 163 191 205 +26%

Meat – Key Issues

Growth in output volume (animal numbers) – jobs dividend

Maintaining our specialist beef herds (sucklers) critical

Marketplace differentiation – QA, grass-fed, sustainability credentials

International market access very important

Policy: CAP, WTO, FTAs

Real threat from upcoming Free Trade Agreements (FTAs)

On-farm productivity (BETTER Farms, BTAP, STAP)

NPD & EPD investment

Dairy: the potential for real growth

Production has been limited by milk quota since ‘80’s– But cumulative productivity gains throughout this period– That cold not be realised

Quota expires in 2015– 30 years of productivity gains can now be realised

Supply environment is positive– Global population is growing– Consumption of dairy products is growing by double digits

in developing economies– Ireland can gain market share

What does growth look like

Value of Dairy Exports € 2.7 bn– Dairy products is 30% of Agri-Food Exports

– 27,000 people employed by industry

We produce 5.5 bn litres of milk EU 27 139 bn litres (3%)

– From 1.1 million cows EU 27 23.1 ml cows (4%)

50% growth projected by 2020 2.75 bn litres extra milk

50% extra processing capacity New dairy sites under development

200,000 extra cows Increased farm productivity

Prepared Consumer Foods Diverse, innovative & consumer-focussed

Value Added Food and Beverage Targets in FH 2020

Value-added Food and Beverage sector ranges from infant formula and functional ingredients through to alcoholic beverages and prepared consumer foods

“On the basis of available data the Committee believes that, working from a 2008 baseline, that growth of 40% in the added value output of the food and beverage sector is achievable by 2020.” Food Harvest 2020

PreparedConsumer

FoodsBeverages

Infant Formula

Functional Ingredients

Significant economic contribution

Prepared Consumer Foods make a major contribution to overall food sector.

Entire contribution is not captured in CSO data

Industrial Local Units by Statistic, Year and Industry Sector NACE Rev 2

2008

Companies 265Persons Engaged 12,468Gross output €8,981 mExports (excl beverages) €1,400 m

Growth Deliverables for 2020

Metric 2020 deliverables

Output Growth 40-45% (with targeted support)

Employment Growth +3,000 approximately

Business Expenditure on R&D

+1% (2%)

Overcoming challenges

Increasing investment in PCF companies– Sector specific funds

Shaping the domestic grocery sector– Competitiveness– Grocery sector code

Health, Obesity and consumer lifestyles– Livewell

Innovation and new product development

Conclusions

Big and important Irish based sector with large domestic and export markets and strong linkages to the wider economy

FH 2020 is the national strategy for the sector and is expansionary in nature

The industry faces barriers to growth – these urgently require faster policy implementation in certain instances and a reconsideration in other instances

Get this right and the growth potential will result in up to 30,000 jobs