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Ireland Food and Drink Report Q4 2010
Business Monitor International, Oct 2010, Pages: 63
Business Monitor International's Ireland Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Ireland's food and drink industry.
Ireland’s economic problems have required it to react aggressively to ease its fiscal burden. However, BMI does not believe the country will be rewarded with a more rapid return to growth. Ireland was one of the first country’s to enter recession and it looks like it could be one of the last to leave, with only very modest growth expected in 2011. Beyond 2011, GDP growth of 2-3% is expected. Therefore, although there may be no return to the heady years leading up to the global financial crisis, when a construction boom helped Ireland regularly post growth above 5%, the country is expected to grow at a greater rate than the European average. However, we expect the bulk of this growth to be driven by rising exports and private consumption growth is expected to lag behind the wider economic recovery. The scale of the downturn is expected to have a long-term impact on consumer behaviour, with price sensitivity likely to remain an ingrained feature of the sector for the foreseeable future.
Headline Industry Data
- 2010 per capita food consumption = -2.6%; forecast to 2014 = 0.0%
- 2010 alcoholic drink sales = 0.8%; forecast to 2014 = 2.3%
- 2010 soft drink sales = -2.1% ; forecast to 2014 = -2.6%
- 2010 mass grocery retail sales = -2.1%; forecast to 2014 = 7.2%
Key Industry Trends & Developments
Aldi’s Slow Pace Of Irish Expansion May Hint At Problems For Sector – In what can be seen as a significant setback to the discount sector in Ireland, Germany-based operator Aldi announced in September it is to postpone the opening of a new EUR100mn distribution centre. Aldi has attributed the development to its slow pace of expansion, which has been hampered by the country’s convoluted planning process. BMI believes this revelation means that the expected growth in the discount sector may be lower than we had previously forecast.
Glanbia Still Seen As Likely To Split Dairy And Food Units – In June 2010, Irish food group Glanbia was thwarted in its attempt to separate its dairy division – Dairy Ireland – from its consumer products business after the Glanbia Co-operative Society, which owns 54.6% of the firm, voted against the deal. The Co-operative Society’s unwillingness to pay EUR340mn to take full control of the unit can be attributed to the unit’s recent poor performance. However, the performance of the division has since improved significantly and BMI believes the underlying logic is so compelling that this deal will eventually be done.
Key Risk to Outlook
Consumer spending fails to recover in line with economy – With the Irish economy yet to emerge from recession, it is clearly going to take a long time for confidence to return. There are signs that this process has begun but the domestic economic situation is expected to remain extremely fraught, with high unemployment, an ongoing property-bubble unwind and unavoidable fiscal austerity likely to ensure conditions feel recessionary to most Irish citizens, even once headline GDP growth returns. This could mean that private consumption growth lags the wider economic recovery to an even greater extent than we are currently predicting, putting further downwards pressure on our forecasts.
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