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Food companies move to secure post-Brexit business

Aug 29, 2018
By John Whelan

As a no-deal exit from the EU by the UK looks more likely each passing day, many executives in the Irish food industry have accelerated their plans to protect their UK market position. The recent snapping up of the UK’s 2Sister Food group by the Meath-based Kepak group is a typical example of the industry's proactive stance to ensure that whatever the outcome of the negotiations between Theresa May’s government and Michel Barnier’s EU, they will be well-positioned to maintain their market share in Britain.

Kepak's acquisition gives them a further five facilities across the UK and described the deal as a "strategic growth acquisition". It said the move would be a hedge against Brexit and currency fluctuations, as well as support its "meat-based, value-added businesses".

This is typical of the strategic decisions being taken by the Ireland's major food businesses to ensure they maintain their UK retail, food service and manufacturing relationships.

The enormity of the unique exposure of the meat industry to Brexit can be gauged from the Bord Bia report that some 50% of all Irish beef exports went to the UK last year, valued at €1.25 billion.

The interconnectedness of the agri-food industry across the UK and Ireland is even more evident in the dairy sector where Glanbia, Ornua (formerly Irish Dairy Board), Lakeland Dairies, Dairygold and the rest of Ireland's dairy industry dominate the British market.

Glanbia's UK division, Glanbia Cheese with headquarters in Cheshire, is probably the outstanding example. It's the largest mozzarella manufacturer in Europe with two state-of-the art manufacturing facilities - one in North West Wales and one in Northern Ireland. They source their milk across the island of Ireland but also across England, Scotland and Wales. Disruption, soft or hard, to the complex supply chains to feed these plants will be a "sobering challenge", according to Jim Bergin, Chief Executive of Glanbia Ireland, who warned in a recent interview that the effects of Brexit could turn into a "crisis situation".

Like many in the industry, he recognises that even if agreement is reached on the UK Chequers proposals, they will no longer be an EU member state after withdrawal on 29 March 2019 and will no longer enjoy the same benefits as all other members. Import tariffs on dairy and cheese of up to 50% could apply to Irish exports to the market in a worst case scenario, but considerable delays along the supply chain to comply with EU regulations at border crossings will be a minimum that can be expected.

Most at risk are the farmers, who are dependent on the processing plants to find new markets, or ways around the cross-border tariffs and customs paperwork. Agriculture Minister, Michael Creed TD, may have to take a leaf out of Donald Trump's book, who recently supported US farmers hit by the Chinese import tariffs on agri-food products with $12 billion in aid. Now must be the time for Minister Creed to lobby for the setting up of an EU-Brexit support fund for the agri-food sector for those countries most exposed, such as Ireland.

John Whelan is an International Trade Consultant, Former CEO of the Irish Exporters Association and Chairman of Food & Drink Business Europe, which will host its annual conference and exhibition in CityWest on Wednesday 5 September 2018.