Investors tuck into Ireland’s food and beverage sector

Investors tuck into Ireland’s food and beverage sector

By: Damien
20 Mar, 2021

Ireland’s food and beverage sector has stood up to Covid-19 well thanks to a diversification strategy in recent years. It is now set for further international growth post-coronavirus, which means there are plenty of opportunities for investors.

The level of exports from Ireland’s food and beverage sector last year has been described as “remarkable” – and with good reason. Despite the strains put on economies across the world by the pandemic, Irish food and beverage exports amounted to €13 billion in 2020, compared to €13.2 billion in 2019, according to figures from the Irish food board, Bord Bia [www.bordbia.ie].

Bord Bia says these figures are in part attributable to the diversification strategy that the sector has pursued during the past decade. This has helped Ireland to develop a global reach for its food and beverage exports – indeed, Irish produce reaches more than 180 countries now. Export values of dairy products, along with sheep and pig meat, have increased with growth in the African and the Middle Eastern markets particularly notable.

Indeed, since 2016 – when the UK voted to exit the EU – Ireland’s food and beverage exports have boomed, growing by more than €1.9 billion, an uptick of 16%.

Minister for Agriculture, Food and the Marine, Charlie McConalogue, T.D., has pledged that his Department, along with Bord Bia, will focus on supporting primary producers and manufacturers to support jobs and communities throughout Ireland in 2021.

Chief executive of Bord Bia, Tara McCarthy added that this year will be crucial in driving growth in new and emerging markets.

Quiet M&A

Understandably, M&A activity in the food and beverage sector was quiet in 2020, with many businesses focusing internally, rather than looking to expand. However, some deals did get over the line during the year. For instance, Eight Fifty Food Group – the UK-based food and seafood business formed in 2019 that includes Karro Food Group and Young’s Seafood and is owned by private equity firm CapVest – bought M&M Walshe Holdings, an Irish meat products business, in May.

The deal, for an undisclosed sum, gave Karro its first physical presence in Ireland – demonstrating the attractiveness of Irish businesses.

Drink to that

It also shows there is plenty of appetite for investment into Ireland. Another example of this came in December 2020 when it was revealed that drinks giant PepsiCo had bought two sites in Cork’s Little Island area. The sites, about five acres in total, are thought to have been bought for prices not seen for a pure industrial site since the Celtic Tiger era.

PepsiCo has had a presence in Cork since 1974 and currently employs about 500 people in three locations there.

Drinks – and more specifically alcohol – are one of Ireland’s strengths. Irish whiskey is renowned the world over, and more than 10.5 million cases were sold globally in 2018 – the most since the 1920s – showing its increasing popularity.

Nevertheless, sales were hit hard by the pandemic, falling by €200 million, according to Bord Bia. Alcohol sales overall declined by €1.3 billion – 19% – in 2020.

There were, however, still success stories. Irish Distillers reported that sales of its Jameson’s brand increased 3% in 2020, including in key markets such as the UK and US.

Emerging trends

There are also new food trends to be exploited. For instance, a growing number of people are vegan in Ireland, and companies are looking to capitalise on that market. Indeed, Kobus De Klerk, global VP proteins at food giant Kerry Group, reckons that the vegan market will grow from €23 million today to €39 million by 2024. [www.irishexaminer.com/business/economy/arid-40209821.html]

Often, there is M&A activity at the smaller end in such markets, with artisan businesses buying each other out. For instance, Cork-based vegan restaurant VeganKo, recently bought Robert Christie’s vegan cheese business, and is selling it under a new brand name, My Vegan Butcher. [www.irishexaminer.com/business/economy/arid-40209821.html]

Looking for growth

But with the food and beverage sector showing such resilience over the past year, it is expected to play a significant part in the Irish economy’s recovery from the effects of Covid-19 in 2021 and beyond.

Part of this resilience is the sector’s willingness to embrace technology and the power of the internet. Food and beverage businesses have been taking part in virtual trade shows and partaking in virtual trade missions in the past year, confident of continuing to promote Irish produce to the world.

With online sales becoming ever-more important to businesses in all sectors, Irish companies are at the forefront to make sure they capitalise on the opportunities.

Ireland’s global reputation, as well as the diversified food and drink offering that it sells to the world, means that, should conditions ease around the world, Irish businesses are well placed to grow their market share in global markets.

There does appear to be some confidence in the market too; last month it was reported that Kerry Co-op, which has a 12.3% stake in food giant Kerry Group plc, is considering raising €240 million in a share sale to fund its place in a dairy business joint venture between the companies worth €800 million.

The share sale would amount to about 1.2% of Kerry Co-op’s holding in Kerry Group, although the deal has yet to be concluded with rumours of an overseas company also being interested in the deal.

Why invest in Irish food and beverage businesses

As this shows, for investors, there are plenty of opportunities for investment or acquisition, or to set up a business in Ireland.

Private equity companies are known to be interested in the sector. For instance, Laura Dillon, principal of independent private equity investment group Waterland, recently said in a newspaper column that the group was looking for opportunities in the food and beverage sector, among others in Ireland with an international profile. [www.irishexaminer.com/business/companies/arid-40226354.html]

There are plenty of other reasons to establish a business in Ireland too. For instance, corporate tax rates are at 12.5%, which is a lot lower than many other countries. There is also no shortage of skilled workers, given the prevalence of food and beverage companies in Ireland.

The sector also has government backing and strong trade bodies that have helped to sell Irish food and beverages around the world in recent years, as mentioned earlier.

EU advantage

One significant factor in setting up a food or beverage business in Ireland is that it is part of the European Union. It is now the only native English-speaking country in the bloc, but more significantly it is part of the single market and has frictionless trade with the other 26 members of the EU. This makes exporting food and drink to these countries easy.

Meanwhile, UK companies that want to trade with the EU are finding there are difficulties in that. As the UK left the EU at the end of 2020, it is now out of the single market and finding itself subject to third country rules – which means a lot of extra paperwork and checks have to be completed before products are let into the EU.

But this is also impacting on Ireland – the UK accounts for more than a third of its total exports in the sector, worth about €4.5 billion.

There have been numerous stories since the turn of the year of time-critical foodstuffs getting stuck at ports and rotting in the trailer and European businesses looking elsewhere for imports and exports. The price of some commodities is also rising; bread is set to increase by 9% due to tariffs being applied to flour imports thanks to Brexit, along with other increased costs, according to Food Drink Ireland.

Getting advice

For those looking to set up a food and beverage company in Ireland, or invest in an existing company, then it is crucial to get the right advice.

Those looking to invest should seek out advisers with specialist knowledge of the sector in Ireland – including its history and leading players. Malone & Co Accountants can assist on all the relevant aspects from setting up a company to providing diligence services as part of an M&A deal or funding round in the sector. We can also provide in-depth information to ensure any deal achieves the value hoped for at the outset.

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