Irish food and drink exports to the UK remain buoyant, despite period of unprecedented uncertainty, Bord Bia reports

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New figures released in the annual Bord Bia Export Performance and Prospects report 2020/2021 show that exports of Irish food, drink and horticulture to the UK were held to a marginal 5% decline in 2020, valued at €4.3 billion (v €4.5 billion in 2019), despite a period of unprecedented  change and challenge that saw the largest disruption to normal market operation, including continued uncertainty around Brexit and towering pandemic challenges which saw the closure of the UK foodservice market.

Launching Bord Bia’s Export Performance and Prospects 2020/2021 report, Ireland’s Minister for Agriculture, Food and the Marine, Mr. Charlie McConalogue, revealed that the overall volume of Irish exports fell marginally by 2% in 2020, valued at €13 billion (v €13.2 billion in 2019).

Overview of 2020 exports to the UK

  • The UK remains a primary export market for Ireland. In 2020, 33% of Ireland’s total food and drink exports were destined for the UK. 33% were destined to international markets outside the UK and EU, while 34% were destined to the EU27.
  • The UK remains the core market for Irish horticulture and cereals exports, and exports to the UK increased 8%, valued at €207 million and accounting for over 90% of global exports which was €221 million, up 8% from 2019. The primary constituents of this export mix are mushrooms, primary cereals and amenity horticulture.
  • The UK represented 44% of primary Irish beef exports – extensive retail channel demand somewhat counteracted the significant decline in foodservice and held a 1% decline to €836 million. Overall, the value of primary beef exports was held to a 2% decline to €1.9 billion in 2020.
  • Primary pigmeat exports to the UK increased by a notable 3% to €177 million in 2020.
  • The live export sector experienced growth in 2020, up 11% to the UK and valued at €107 million.
  • Covid-19 brought significant headwinds for poultry export prices and the sector was impacted by a 14% decline in exports to the UK.
  • Covid-19 and the closure of the UK on-trade has had a significant impact on alcohol exports to the UK, down 12% in 2020, to €199 million.
  • Although dairy continued its global growth trajectory into 2020, exports to the UK were down 13%, to €831 million. Significant decline in UK foodservice and Brexit contingency planning were contributing factors.

Donal Denvir, Bord Bia general manager, Great Britain, said: “It is really positive to see that Irish exports to the UK remain strong and resilient during this period of uncertainty. Bord Bia has been working tirelessly to support food and drink suppliers in Ireland through the impact of the pandemic and Brexit. Notwithstanding what the future brings, the UK will remain the largest single destination for Irish food and drink exports as we continue to navigate challenges in 2021 and beyond. Our geographical proximity, shared language and shared cultural understanding ensure that the UK will remain a key strategic partner for Irish food and drink exports.”

Global outlook

Launching the report on Wednesday, the Minister for Agriculture, Food and the Marine, Mr. Charlie McConalogue, T.D., said: “Ireland’s food and drink producers faced many challenges on the domestic and international front last year. Despite this, they found a new level of resilience that saw them hold global exports at €13 billion. The marginal dip of 2% is in stark contrast to the towering pandemic challenges they faced including the closure of foodservice, increases in shipping costs, and dramatic consumer behaviour changes as people migrated to working from home. As we look to 2021, my Department, along with Bord Bia, are resolutely focussed on supporting our primary producers and manufacturers as they trade through continued uncertainty to support jobs and deliver much needed economic progress.”

Meanwhile, the chief executive of Bord Bia, Tara McCarthy, added: “Behind the remarkable export performance of our food and drink sector in 2020 are seismic challenges at a strategic, category and channel level.  Last year was a pivotal year of learning for us all and 2021 will be even more significant in terms of how we apply these learnings to rebuild and drive growth in new and emerging markets. The success of the industry’s transition to doing business virtually – from participation at online trade fairs to the development of virtual trade missions – shows that we can, and we will, rise to the challenge of doing business in new and inventive ways. This resourceful approach, coupled with the sectors’ focus on customer diversification over the past decade has now paid dividends and is integral to safeguarding our exports.”

Outlook & Prospects for Irish Food and Drink Exports in 2021: 

Commenting on the outlook for 2021, McCarthy concluded: “For Irish food and drink producers, the global supply demand dynamic for their produce remains positive in 2021 despite global challenges and continued uncertainty as we navigate Brexit and our fragile exit from the pandemic. As we start 2021, exporters are reporting solid order volumes which is a direct result of the strength of trading relationships nurtured over many years. That said, the extra costs and complexities of trade with our largest destination market, as new customs procedures interrupt the smooth flow of produce, will cause significant challenges and should not be underestimated.

“With a return to global economic growth forecast for 2021, we anticipate continued strong global demand for Irish dairy. We expect the global meat supply balance to favour producers, particularly in Asia which has been at the centre of much Irish export growth.  All around the world consumers and customers are increasingly demanding credentials around sustainability that Ireland is well-placed to meet as we seek to differentiate ourselves from competitor exporting nations and to navigate gastro-nationalism in key markets. Our action plans, programmes and priorities for 2021 and beyond are centred on value creation for the full supply chain – from farm to fork. With Bord Bia’s insight driven support, we remain focussed on partnering with this vibrant and resilient sector to pursue global growth in a very different world.”

Sectoral Analysis

Dairy:

  • Dairy continued its growth trajectory into 2020 delivering a 3% uplift in the value of exports to €5.2 billion; the second year that dairy exports exceeded the €5 billion mark. This growth was achieved despite commodity price reductions for key elements of the export mix, including butter.
  • Dairy is the most geographically diversified category of all the major Irish food and drink exports. 49% of all dairy exports are destined for markets outside the UK or the EU27.  Exports to these markets was the key growth driver in 2020. In terms of product categories, very strong growth was achieved in specialised nutritional powders and other key powders (including SMP, WMP and casein).
  • Butter performed ahead of expectations despite significant commodity price decline and the impact of a 25% tariff in the US. Butter exports were worth €961 million in 2020, the most valuable of all the dairy sub-categories, albeit just marginally ahead of cheese exports (butter exports were worth €961.4 million while cheese exports were worth €961.3 million)
  • Exports of cheese increased slightly (+1%) to reach €961 million. Cheese exports to Asia, North Africa and to the EU27 accounted for the largest portions of growth, underlining the success exporters have had in diversifying markets for Irish cheese beyond the UK.
  • SMP prices and demand globally were strong throughout 2020, delivering value growth on the same export volume as 2019.
  • Specialised nutritional powders had a positive year, with growth to traditional and new markets. Exports in this category were worth €956 million.

Meat and Livestock:

  • The second largest category in Irish food and drink exports, the meat and livestock sector, delivered a resilient performance in 2020 with a 2% increase in total value to €3.4 billion. A significantly challenging year for beef exports was offset by strong growth in the value of pigmeat and sheep exports while the live export sector also experienced a return to growth in 2020.
  • In a year of unprecedented challenge, the value of primary beef exports was held to a 2% decline to €1.9 billion in 2020. This decline was due to the well documented pandemic related disruption in the core destination markets for beef, alongside continued challenges in access to mainland China. In the UK – which represented 44% of primary Irish beef exports – extensive retail channel demand somewhat counteracted the significant decline in foodservice. Beef consumption in the EU declined by 2% in 2020 due to the closure of the foodservice channel for the majority of the year and changing consumer habits. Having gained market access in 2018, Irish beef exports to China were disrupted from May 2020 due to an import suspension. It is worth noting that in the first five months of 2020, Ireland’s beef exports to China were €23 million, representing a 134% increase on same period 2019. The trajectory had been very positive prior to the import suspension in May 2020.  
  • Sheepmeat values increased 12% to €356 million in 2020. Tighter supplies of sheepmeat globally and an improvement in demand in key EU markets drove this increase.  A decline in UK sheepmeat exports to EU27 markets also created an opportunity for Irish produce during 2020.
  • Primary pigmeat exports increased by a significant 14% to €586 million in 2020. 41% of all Irish primary pigmeat exports are now destined for Asia, with China accounting for the majority. Increases in the value of pigmeat export to Japan and Vietnam occurred also, as demand for Irish pigmeat outstripped supply.
  • Following a year of growth in 2019, poultry exports declined by 2% in value in 2020 to €152 million but volume increased by 4%. Covid-19 brought significant headwinds for poultry export prices and the sector was impacted by a 14% decline in exports to the UK which was offset somewhat by a 16% increase in International markets to €43 million.

Horticulture:

  • Horticulture and cereals exports increased by 8% to €221 million in 2020 with the UK being the core market. The primary constituents of this export mix are mushrooms, primary cereals and amenity horticulture. The value of mushroom exports rose by 14% to €115 million.

Seafood:

·       2020 saw adecline in the value of primary Irish seafood exports of 10% to €443 million. This was due to the disruption of exports in the shellfish category normally destined for the foodservice channel in key EU27 markets and in Asia.  However, there was a significant increase in seafood exports to Africa in 2020 representing a success story for the pelagic category.  

·       The Trade and Cooperation Agreement struck between the EU and UK at the end of 2020 will reduce Irish and other European fishing vessels access to UK waters. Over a five year period to June 2026 the quota available in those waters will reduce 25%. This will likely have notable effects for the Irish fleet on pelagic and prawn catches, a significant proportion of which are currently sourced in UK waters.

Prepared Consumer Foods (PCF):

  • Prepared consumer foods (PCF) exports in 2020 were worth €2.5 billion, representing a 4% reduction year-on-year due to channel disruption brought on by the pandemic.   The PCF category includes meal solutions, confectionary, non-alcoholic beverages, ingredients and value-added meat, seafood, and horticulture. It is a category which is highly responsive to consumer behaviour change.
  • The largest part of this category, and the source of the largest decline, is value-added meats (VAM). These products are supplied almost entirely to the foodservice channel. VAM exports were worth €648 million in 2020, a 14% decline on 2019.
  • Meal solutions – the subcategory providing pizza, ready meals and soups to the retail channel – in contrast had a strong year growing 8% in value to be worth €506 million. This growth reflects the strong and sustained retail demand throughout 2020, and illustrates the contrasting fortunes of retail and foodservice channels in 2020.
  • 68% of all PCF exports are destined for the UK market, making this sector one of the most Brexit exposed.

Alcohol:

  • Covid-19 has had a significant impact on alcohol exports. Alcohol exports overall were down 19% in 2020 to €1.3 billion.
  • Notwithstanding that decline, the value of alcohol exports remains 12% higher than they were pre-Brexit in 2016 underscoring the scale of the growth trajectory in this category in recent years.  The majority of the decline can be accounted for by declines in the value of exports of whiskey (-€205m), cream liqueurs (-€53m) and beer (-€51m).