Export is ‘biggest
but red flags remain
Ifac, Ireland’s farming, food, and agri-business specialist-professional-services firm recently published its sixth annual Food and Agribusiness Report 2023, and this year’s findings reveal that there are plenty of red flags abound for business owners. Irishfood presents the highlights
According to ifac’s research, while 90% of food and agri-business SMEs have either sustained or grown their turnover – with increased pricing part of the story for nearly half of businesses – net profit has only improved for three in 10 businesses.
Concerning growth, Irish companies have their sights fixed on international markets, according to the report. This is particularly the case for ag-tech and agri-businesses that are seeing a dramatic slowdown in the significant growth in dairying of the past decade. With this in mind, 49% of respondents agree that exports remain a key avenue for future prosperity. In 2022, there was a 22% increase to €16.7bn for Irish exports, particularly food and drink. And while exporting to new markets was identified as one of the biggest opportunities for growth by Irish businesses, the journey to international sales is complex. Topping the list of obstacles faced by food businesses and agri-businesses are sales and marketing challenges (41%) and finding the right distributor (39%).
Evaluating the export opportunity
In the report, Avril Wallace, food and agri-business executive, ifac, says that building a successful export business requires strategic planning and detailed execution, and she outlines a business’s top considerations before exporting to a new market.
1. Assess domestic opportunities
Evaluate whether there are untapped opportunities remaining within the domestic market that could offer comparable benefits.
2. Explore funding options
Investigate available funding sources to support your export venture. Examples include: High Potential Start-Up (HPSU) Feasibility Grant, Market Discovery Fund, Strategic Consultancy Grant, in association with Enterprise Ireland.
3. Conduct comprehensive market research
Undertake thorough market research to gain insights into the target market’s demand, competition, cultural nuances, and regulatory requirements. Working with Enterprise Ireland or Bord Bia (Irish Food Board) can prove invaluable in this regard.
4. Estimate entry costs
Estimate the expenses associated with preparing the business for market entry. Include factors like product adaptation, marketing, logistics, and legal compliance. Talk to other non-competing food or agri-businesses who have walked the walk before you.
According to ifac, the headwinds keep coming for those companies that have managed to navigate the past few years with war, economic uncertainty, inflationary pressures, the energy and cost-of-living crises, and the global pandemic. Of the respondents, 44% are concerned about rising interest rates while personal pensions have taken a back seat. More than half (52%) of business owners do not have a personal pension plan, potentially suggesting the current environment is also harming future financial planning.
Numerous other red flags are emerging for companies that could become more problematic over time:
33% are experiencing late payments from customers;
35% are experiencing short- or medium-term cashflow issues;
35% of respondents’ products or services are discretionary spends and, therefore, could be cut;
26% are experiencing slowing trade or trade not returning to pre-pandemic levels; and
26% are firefighting daily rather than proactively managing the business.
David Leydon, head of food and agri-business at ifac said the findings show that it remains both tough and complex to run an Irish food business or agri-business.
“Our SMEs that are so passionate about producing the very best products Ireland has to offer, are now dealing with a myriad of demands and external factors from recruitment challenges and rising interest rates, to continued cost increases and, in some cases, cashflow issues. Yet for some, their revenues are being maintained or are growing. The sector is also taking action on climate change and it’s clear that export has been identified as the biggest growth opportunity. With a 22% increase in Irish exports in 2022, nearly half of the companies surveyed see exporting to new markets as their route to business growth. This is of critical importance for Irish agri-businesses who, up to now, have focussed on selling services or products to the Irish dairy sector. They need to look much further afield to a bigger international market, because of the slowdown in growth across Irish dairying compared to past years.”
Environment and climate high on agenda
Importantly, environmental, social and governance (ESG) factors are an important part of growing a sustainable business in Ireland for business owners. This includes reducing their impact on the wider environment. And 87% of food and agri-businesses are taking climate-change action by using sustainable packaging, investing in solar or other renewable energy sources, and managing waste and by-products, etc. In addition, 50% have ESG on the senior leadership agenda – a notable increase from 30% last year.