Since 2008, predictions for the prepared consumer foods sector have been uniformly glum. This year, however, there are signs of a recovery, even though it is unevenly distributed around the country. Unfortunately, the domestic grocery sector, upon which consumer foods companies depend, is spread across recovering and non-recovering regions and is likely to remain flat overall in 2014.

The sector will continue to enjoy export growth as companies diversify markets while continuing to target Britain — its key market. Thus, the sector will likely face a dual recovery; those companies focused on exports will see growth, while those focused on the domestic economy are likely to continue to face challenges.

In early 2014, we expect the government to publish legislation to introduce a statutory code of practice in the grocery sector. The immediate introduction and effective enforcement of the code will be critical if it is to have any effect on fair trading practices in the sector.

As the new regulatory framework is introduced in the coming months, FDII will continue to work with the Department of Enterprise to ensure that the code is effectively enforced.

The grocery sector has been changed forever by the recession. The consumer is likely to remain conservative and value-driven in the coming years. They will continue to carry out multiple weekly shops between retailers in the search for value even when spending more freely on other consumable goods. This is likely to continue to drive two established trends in the sector: an increase in market share for discounters and in private label market share across grocery.

The discounters’ increase in market share will plateau some time, but probably not in 2014, even if the economy recovers strongly. This will increase pressure on other retailers who will have to decide whether to continue to try to compete on the basis of price or some enhanced shopping experience.

Another facet of the consumer’s life will shape the environment for consumer foods companies in 2014: their health. Increasingly, the consumer is demanding products that enhance their health and meet the demands of modern living.

FDII members will be working together to make a significant contribution to reducing obesity in Ireland through reformulation, the promotion of workplace wellbeing and other cross industry initiatives. It’s essential that this whole of society approach is adopted by the Irish government, rather than the introduction of one-off and unproven policies such as food taxation or advertising restrictions based on unsound evidence.

Food labels

In 2014, all consumer food companies will have to adapt their labels to meet the requirements of the EU’s Food Information to Consumers Regulation — the most fundamental change in food labelling in 30 years.

This regulation will set out mandatory requirements and will see the replacement of the ubiquitous GDA label with reference intake labelling.

On a positive note, consumer foods exports are likely to continue to grow. The food industry has encouraged the Department of Agriculture to develop a sector strategy for the prepared consumer foods sector. This is an essential step in ensuring the diverse sector has a co-ordinated policy roadmap to help achieve its Food Harvest 2020 targets.

FDII’s consumer foods council believes that the sector can achieve a 40% increase in output by 2020 and support up to 10,000 jobs directly and indirectly by this time. However, to ensure that we translate the anticipated dairy and beef output increases into increased value added products, we need a strong cadre of consumer foods companies ready to add value, innovate and ultimately employ people across the country.

Sources of finance

The central part of this strategy must be to connect good companies to viable sources of finance. Like all other sectors of the economy, credit is tight.

However, other sources of finance, such as venture capital, do not view food companies favourably because, while they provide good return on investment, they do so over a longer period of time. Unfortunately for food companies, State-sponsored funds are not geared towards this sort of investment and food companies are chronically underrepresented.

FDII has long called on the government to establish a sector specific fund involving relevant State agencies, international fund managers with food company experience and senior industry players. We see this as a key step towards ensuring prepared consumer foods companies can reach the ambitious goals set out for the sector in Food Harvest 2020.