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Food and drink market in Ireland

The Irish consumer sector remains one of the most challenging in Europe, with price-consciousness still the dominant theme, although there are some signs that the sector may be starting to bottom out. During recent months retail sales data from the national statistics authority have been showing stagnation rather than significant decline as was the case in 2008 and 2009. This improvement in retailing sales figures can be partly attributed to the end of the deflationary operating environment that has characterised the sector for the past two years. This has positive implications for our food and drink forecasts and suggests that sales in many sectors may now start to climb gradually rather than continue on a downward path.

Headline Industry Data

- 2011 per capita food consumption +0.6%; forecast to 2015 +6%
- 2011 alcoholic drink sales -4.9%; forecast to 2015 +7.2%
- 2011 soft drink sales -0.5% ; forecast to 2015 +5.4%
- 2011 mass grocery retail sales +2.0%; forecast to 2015 +8.9%

Key Industry Trends & Developments

Irish Food And Drink Exports On The Up Again - According to newly released figures, export sales of Irish food and drink expanded by 11% during 2010 to reach EUR7.9bn. The agri-food sector is vital to the Irish economy. The increase was attributed to a more stable consumer environment, reduced exchange-rate pressures, and rising global prices for most agricultural commodities. This is welcome news after exports declined by 12% in 2009 to come in at EUR7.12bn because of the weakening of sterling against the euro and difficulties in the global dairy sector.

Irish Performance Dents Britvic's Results - UK-based soft drink producer Britvic has posted a net loss for its latest financial year to the end of September 2010 after being forced to write down the value of its Irish operations. The firm took a charge of GBP104mn on its Irish unit, reflecting the significant deterioration in the businesses earnings and prospects since it was acquired in 2007. Despite an increase in volumes, Britvic's Irish revenues dropped by 6% while earnings before interest and tax (EBIT) fell by 42.4% to GBP6.8mn. A massive drop in profitability over the past two years explains the need to write down the unit, with the charge suggesting that the business is now worth less than half what Britvic paid in 2007.

Key Risks to Outlook

Rebalancing of the economy towards exports - Our outlook for Ireland's long-term growth requires a rebalancing of the economy towards exports. We are fairly optimistic that Ireland will continue to see its economy bolstered by the export sector, which, in our view, stands to benefit from the fairly solid economic recoveries being seen in three of its largest export markets - the US, Germany and the UK. However, if demand in any of these core markets fails to deliver the momentum we are currently expecting, then our Irish economic outlook may need to be revised downwards.

Consumer spending fails to recover in line with economy - A second risk is 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. While there are signs of improvement in the consumer sector, the domestic economic situation is expected to remain extremely fraught, with high unemployment, an ongoing property-bubble unwind and unavoidable fiscal austerity likely ensuring conditions feel recessionary to most Irish citizens, even once headline GDP growth returns.

by S. C.
24 may 2011, World News > Europe