Mr. Shane Dempsey:

I thank the committee for the opportunity to present today. I am head of consumer foods. I would like to take a few minutes to describe the prepared consumer foods sector to the committee, its potential for jobs growth and the challenges facing prepared consumer foods companies. These companies produce the products found in the middle aisles of the supermarket. They cover categories such as beverages, confectionery, cereals, ready meals, ambient, chilled and other convenience foods. The two things companies in this sector need to achieve sustainable jobs growth are finance and fairness in the domestic grocery sector. I will touch on these issues as I progress through my presentation.

The important strategy document all my colleagues have mentioned is Food Harvest 2020. It states that the continued developed of value added foods on the home and international markets is key to delivering a sustainable agrifood economy in Ireland. My two colleagues mentioned the increase in output. We need consumer foods companies to translate this into jobs and innovative products to retain as much value as possible from that and to create as many jobs as possible. That is a key challenge for this jobs intensive sector, which is regionally dispersed, and it will benefit the economy greatly.

This slide outlines the types of companies in the sector, which include some of the largest global brands and Ireland's leading food companies aligned with a healthy cohort of food microenterprises located around the country. The commonality between all these companies is the domestic grocery sector. The indigenous companies and exciting microenterprises we see regularly use the sector as a springboard to export growth, to which Mr. Kelly referred. Equally, the Irish offices of global companies such as Nestlé, Coca Cola and Mars require a healthy domestic grocery sector as well to generate the sales required to retain investment and jobs in Ireland and to attract further investment from headquarters in terms of research and development and shared services locating in Ireland. Unfortunately, due to our lack of cost competitiveness over the past number of years and to power imbalances in the domestic grocery sector, the number and scale of international food companies in Ireland has reduced and many food companies have shed jobs since 2008.

That has put us back slightly in the context of the ambitious targets outlined in Food Harvest 2020. The strategy predicts that prepared consumer food companies can achieve a 40% increase in output from the baseline in 2008 but that is dependent on us getting our policies right and getting the domestic grocery sector operating correctly for food companies.

In 2010, the Consumer Foods Council, of which I am head, launched its sectoral report entitled, Feeding the Recovery. The statistics outline the importance of the sector, the number of companies operating within it, the 12,000 persons engaged in it, gross output of €8 billion and exports worth €1.4 billion. We believe the figures are slightly understated because consumer foods companies within the meat and dairy sectors are included in the meat and dairy figures as opposed to these figures, which refer to a miscellaneous grouping of companies. However, they still show the significant importance of the sector.

The key Government action these companies require if they are to achieve the ambitious targets set in the strategy is to provide access to finance for them in order that they can expand their capacity. There is a market failure in regard to finance in the sector and due to the traditionally longer investment returns from food companies that Mr. Kelly mentioned, sources of finance such as venture capital are not available to them. We believe that a sector specific development is required. There are approximately 70 State-run development funds, many of which are sector specific and focus on technology, but none is focused on food. If we are serious about food, we need such funding to address the gap.

The domestic grocery sector is the springboard for growth for prepared consumer foods companies. However, the sector is not providing that springboard at the moment due to the recession and the imbalance of power in the grocery sector. Large retailers, therefore, have been able in the past few years to offset the costs and risks of the recession against suppliers and producers. We await the introduction of a statutory code of practice and an adjudicator. This is essential in order that all stakeholders, including the consumer, can benefit from the grocery sector. It is vital that the Government does everything in its power to reduce costs and boost competitiveness. Future policy such as VAT increases, the mooted packaging tax or any other consumption taxes such as a tax on beverages should be avoided as they will have a further depressing effect on consumer sentiment, which is greatly damaged the sector currently.

One other area of key importance to consumer food companies is their brand and reputation. There have been a number of attacks on them over the past few years. The obesity crisis is a major societal challenge for Ireland and for consumer foods companies. The Government parties must ensure their approach to tackling this key challenge does not damage the reputation of Irish food companies. These companies take their responsibility seriously and they have been, and are, seeking to collaborate with Government and the Department of Health to achieve health objectives. However, currently, the Department is examining a proposal to introduce a tax on food products. Officials previously considered a 10% increase in excise duty on soft drinks but now they are moving on to other categories. The taxation of food is being seriously considered by the Department, despite the fact that there is no evidence that taxation reduces obesity. We have said for a long time that tax is a fiscal measure affecting people's wealth, not their health, and it is also regressive. Recently, Denmark's political parties unanimously agreed to rescind their saturated fat, VAT and sugar taxes. As early as last month, they repealed a tax on soft drinks introduced in the 1930s as part of a suite of measures aimed at stimulating their economy, particularly in the border regions where cross-border shopping has increased over the past few years in response to increased taxation.

The solution to the obesity problem is too complex to be solved by a tax or advertising ban. These measures will not improve obesity rate or generate the health care savings envisaged but they have been shown in other countries to damage industries, economies and cause job losses. Obesity will only be addressed through collaboration between all stakeholders, including industry and government. We are asking the Government to engage with industry on this key issue.

The consumer foods sector has the potential to create sustainable, high quality jobs dispersed throughout the economy. The increase in global demand for food, increased output in the meat and dairy sector and Ireland's reputation as a food industry are positives for this sector. However, the issues of access to finance and buying power must be addressed, otherwise this potential will never be realised.