91% of Irish F&B producers make progress in preparedness for Brexit

Over 91% of Irish food and drink companies have made progress in relation to Brexit preparedness over the past 12 months, according to a new report released today by Bord Bia.

For Irish companies continuing to operate in the UK, 55% said that growing sales within the UK market will be a priority while the remaining 45% of companies plan on maintaining sales. This is up from 36% and 41% respectively in 2019.

Findings from the 2020 Readiness Radar report also show an evolution of Brexit preparedness. Last year the majority of Irish food and drink companies said they had developed contingency options for holding stock in response to Brexit, and while stockpiling is still an important factor, 2020 results show that customer relationships have progressed to more commercially-focused conversations focusing on future contract arrangements in the post-transition period, custom duties and the importer of record being identified.

“Covid-19 has been the catalyst for Irish food and drink companies to realise how robust their plans are for Brexit, with 91% of food and drink companies showing continued preparedness,” said Shane Hamill, Bord Bia’s Strategic Projects Manager. “What is clearly evident is the resilience and determination of the Irish food industry to meet market challenges, with an increased eagerness to evolve conversations with UK customers on key issues relating to supply chain logistics.”

37% of Irish food and drink is exported to the UK, amounting to trade worth £4.95 billion in 2019, as it continues to be the single most important market across almost all food categories.

He added, “We share this trusted partnership with the UK because of a long standing, interdependent relationship that goes back centuries. Valuable skills in risk management have been learned by the Irish food, drink and horticulture industry as a result of Brexit.

There’s evidence that the industry has been better able to manage the impact of Covid-19 because of the intensified focus on strategic planning that was implemented to manage Brexit over the past three years. In fact, the data shows that there has been an increase in optimism in the industry towards the impact of Brexit compared to 2019.

“While companies are proactively preparing for Brexit and working towards mitigating risk and reducing the potential impact to their businesses, there is no doubt that their future trading relationship with UK customers should continue to be addressed as a priority.”

In March this year, Bord Bia launched the Readiness Radar, an online risk diagnostic tool developed to assess industry thinking and performance around a number of priority challenges, which include Covid-19, Brexit, Challenges to Market Diversification, Sustainability Pressures, Consumer Insights & Innovation, and Talent Management.

Readiness Radar Covid-19 results:
Average industry preparedness for Covid-19 was reported at 46% by respondents, an impressive figure given the speed at which the pandemic hit. In all, 45% of respondents reported having formally embedded continuity plans, while a full 72% have carried out identification and assessment of critical single source suppliers. 69% had undertaken vulnerability assessments of their most critical suppliers.

All sectors have focused their attention on supply chain, which may have been driven by Brexit, as the data highlights a high level of investment by the industry in identifying and assessing critical single-source suppliers. A number of facilitated interviews were undertaken by Bord Bia as part of the Readiness Radar, and through these it was noted that Covid-19 may have aided collaboration in the supply chain, as producers and customers worked together to navigate the myriad of complex issues that the pandemic has led to.

As Ireland begins to emerge from lockdown and faces into a different post-Covid-19 world, it is clear that existing risks in relation to Brexit – not least Ireland’s geographic island location at the edge of Europe – have not gone away. 80% of respondents, however, have recorded high or moderate confidence in their ability to manage customs processes.

In terms of importance, Covid-19 was ranked top on the risk registrar by all respondents, followed by Market Diversification and then by Brexit. This suggests that a broader, more holistic response to risk is taking shape in our industry, supplanting the more compartmentalised approach that would have been pervasive just a few years ago.

When companies whose turnover is less than €1m (32% of total respondents) are removed from the data, Brexit is revealed as a higher priority. This could be due to smaller manufacturers having less exposure to the UK market, or less maturity in terms of their ability to develop and implement a Brexit management strategy.

Bord Bia GB Manager, Donal Denvir, (pictured) said, “Overall the data shows higher levels of confidence and preparedness for Irish food and drink manufacturers. The fact that Irish companies are pushing to continue to grow sales in the UK while managing Brexit, and also feeling confident with diversifying to new markets, shows the strong impact that three years of customs, currency and supply chain preparedness training has had on the industry.”

Readiness Radar Brexit results:
• Just over half of respondents (55%) stated that they were planning to grow sales in the UK, and the remaining manufacturers (45%) stated their plan was to maintain sales in the UK
• According to over 50% of respondents, future contract agreements, payment duties (tariffs), updates on Brexit, and price are the most common and recent UK customer discussion topics along with increased levels of stockholding and the Importer of Record being identified
• 46% of respondents have identified an external customs agent to hire for doing business with the UK, similar to the 45% reported in 2019
• Over half (51%) of respondents have calculated or estimated the cost of customs compliance and 55% identified their logistics partners as being willing or able to act as their customs agent for the UK market
• 8 in 10 respondents (83%) feel comfortable identifying the tariff classifications for their products
• 72% have carried out identification and assessment of critical single source suppliers
• 69% had undertaken vulnerability assessments of their most critical suppliers
• 59% say their logistics partners are registered as a trusted trader/ AEO (Authorised Economic Operator)
• 38% of respondents have reviewed their contracts with UK stakeholders to include Incoterms

In the three years since the 2016 Brexit Referendum result, Bord Bia has continued to provided regular preparedness programmes and capability development services to complement services in the areas of market diversification and expansion for Irish food and drink companies.

Denvir added, “What is clear from this Readiness Radar is that while companies across the food and drink industry in Ireland feel exposed to significantly changing global market factors, COVID-19 has enabled them to conduct more in-depth planning and analysis, with an emphasis on employees, customers, supply-chain contacts, stakeholders, and business assets, and they are therefore more prepared for the complexities of Brexit. In this sense Irish food and drink manufacturers are ahead of the curve.”

Readiness Radar Sustainability results:
In terms of sustainability, results of the report show that manufacturers could be in a better position to succeed into the future if they set out plans to tackle climate issues, futureproof their business and leverage proven sustainability credentials as a source of competitive advantage. Plastic packaging (60%), health and nutrition (40%) and water usage (37%) were rated the most significant source of sustainability risk by respondents.

Over the past eight years, Origin Green has been a leader in sustainability, helping to bring competitive advantage to the Irish food and drink industry and forging a reputation for innovative leadership internationally. It is apparent that Origin Green verified members are more aware and prepared for future sustainability risks.

It is also very clear from the Readiness Radar data that Origin Green verified members are deriving value from the programme, with 98% stating that Origin Green is helping them mitigate sustainability risk.

Responding to new EU and national policies, emerging consumer behaviours and industry expectations emerging from COVID-19, Brexit, Diversity and Inclusion and other challenges will ensure that Origin Green continues to position Ireland’s food and drink as a global leader in sustainable food production, acknowledged by trade and consumers alike.