Mr. Shane Dempsey:

I wish to describe the consumer food sector, the ambitious goals set out in Food Harvest 2020 for the sector and the challenges, some of which have been mentioned, that consumer food companies face in achieving these targets. Essentially, prepared consumer food companies produce the products that are to be found in the middle aisles of the supermarket. They cover a series of categories including beverages, ambient, confectionary, cereals, ready-meals and other convenience foods.

The Food Harvest 2020 strategy states that the continued development of value added foods on the home and international markets is key to delivering a sustainable agrifood economy. The idea is that the stronger the cadre of consumer food companies we can create over the next decade, the more value we can retain from the projected output increases of the dairy and meat sectors envisaged in Food Harvest 2020. In addition, because the sector processes a great deal of our domestic raw materials, it supports wealth and employment across communities and towns throughout the country. Our goal must be to take the vibrant SMEs and consumer food companies and create some more international companies and many more exporting companies. That behoves the Government to ensure that conditions are right in the domestic economy to facilitate this growth.

The slide shown here will give members a sense of the diversity of the companies within the consumer food sector. They will note some of the globe's leading food brands alongside Ireland's most well known brands and food companies. In addition, Ireland has a thriving artisan and food micro-enterprise culture. These are prepared consumer food companies and they provide huge growth potential for the future. The commonality between all these companies is the domestic grocery sector and be they international or artisan companies, they require a healthy grocery sector. Indigenous companies use the sector as a springboard for export growth, as my colleague, Paul Kelly, said. Equally, the Irish offices of global companies such as Mars, Nestlé and Coca-Cola also require a healthy sector to generate the sales required to retain investment in jobs in Ireland similar to the investment we talked about in regard to the Kerry Group earlier.

This sector, like many others, is suffering greatly. In 2008 when the downturn started to really bite and sterling depreciated by upwards of 20%, the sector underwent structural changes. The FDII estimates that in the 2008 to 2009 period more than 3,000 jobs were lost in consumer foods. In addition to those job losses, we saw a further downsizing of the footprint of international food companies here and the pressure in the sector remains intense. Consumer sentiment is down and when it is down prepared foods companies suffer greatly.

The third slide outlines the Food Harvest 2020 strategy and how it envisages that prepared consumer food companies will contribute to the ambitious targets within a sector that is called the value-added food and beverage sector. This category includes four main pillars, namely, the infant formula, functional foods, beverages and prepared consumer foods. The strategy predicts that this cohort will achieve a growth of around 40% working off a 2008 baseline. We in the Consumer Foods Council have worked to identify and put figures around the consumer food sector but it is a diverse and dispersed sector. The figures we have come up with we believe understate the strength of the sector and members will note it boasts 265 companies, employs 12,500 people, has a gross output of almost €9 billion and exports of €1.4 billion. It is quite a strong sector and has a good solid base to build a sustainable agri-economy, as envisaged in Food Harvest 2020.

In 2011, the Consumer Foods Council, at the request of the Department of Agriculture Food and Marine's high level implementation committee, sought to establish deliverables specifically for the prepared consumer foods sector and they are outlined on the slide. Those are a 40% increase in output, employment growth of 3,000 net and a 2% increase in business expenditure on research and development. We believe those targets are achievable on the condition that Government and State agencies work with industry to deliver a number of policy interventions in the short term. For me, the success of Food Harvest 2020 should be measured by the number of food SMEs we can transform over the next decade into international companies of scale with diversified export markets and internationally recognised brands. That should be measurement.

The key Government action required if we are to achieve the vision set out in the Food Harvest 2020 is that the Government needs to support the sector by providing access to finance for food companies. Simply put, there is a market failure in the provision of access to finance for prepared consumer food companies. Due to the traditionally longer term returns from investment in food companies, sources of finance such as venture capital are not available to food companies. That in addition to the general lack of available credit, which every sector is experiencing, means that finance is not available for companies willing and trying to expand.

The FDII believes that a sector specific development fund should be established by Government. There are approximately 70 State-run development funds at present but the majority of them are sector specific and focused on technology and high technology sectors. None is focused specifically on food. If we are serious about food and building a sustainable agri-economy, the Government should establish this fund and insist that existing and upcoming development funds have food industry expertise and that they are incentivised to invest in food companies. In addition to supplement these actions, a strong suite of personal taxation incentives should be put in place to increase investment in food companies, and I can outline those at a later date if the committee is interested.

As Mr. Paul Kelly and a number of my colleagues have said, the domestic grocery sector is the springboard for growth for consumer food companies. Unfortunately, the domestic grocery sector is in intensive care at present and its prognosis is not good. This is due to the imbalance of power in the sector, which Deputy Ó Cuív and others have mentioned. Large retailers are also suffering but they are able to offset the costs and risks of this recession back onto suppliers and producers. The introduction of a statutory code of practice and an adjudicator is essential so that all stakeholders can benefit from the grocery sector now and into the future. Without a grocery sector code of practice, retailers will be able to continue to abuse theirde factodominant position.

With a sector in such difficulty and with such low margins, it is vital that the Government does everything in its power to reduce costs and boost competitiveness. Future policies, such as VAT increases, the mooted packaging tax or any other consumption taxes are to be avoided. These would have the effect of further depressing consumer sentiment.

At present, we are seeing many retailers draping themselves in the Irish flag to monetise the consumer's admirable desire to buy Irish and support local jobs. This is a disingenuous practice and it should not be allowed. The Government should insist that large retailers meet a number of concrete criteria before they can claim to support Ireland or the Irish food supply base in their advertising and marketing. Full compliance with the code of practice should be the basic requirement, but retailers should also be made to prove to Government or a Government agency that they abide by prompt payments legislation by paying all their suppliers within 30 days before they can utilise the Irish flag or make such claims. This is vital for small businesses that are suffering and cannot afford to extend the credit terms demanded by retailers.

Another key issue for consumer foods companies is branding. Reputation is a huge part of that. These are vital selling points for consumer foods companies. The obesity crisis is a major societal challenge for Ireland. However, the Government must ensure that its approach to obesity does not damage the reputation of Irish food companies. We believe one can address the obesity issue by working and engaging with industry to achieve health objectives. Where the Government or its agencies do not engage with industry on these issues, bad policy generally follows. I do not need to remind the committee of the Broadcasting Authority of Ireland's, BAI, recent creation of a children's advertising code that will ban the advertising of cheese to children, a key population group that suffers from calcium deficiency. Food and Drink Industry Ireland, FDII, made many attempts to meet the BAI to discuss this issue but we felt our submissions were generally ignored.

The Department of Health is currently examining a proposal to introduce a 10% excise duty on soft drinks. The committee should make no mistake that this is the thin end of the wedge. The Minister for Health has informed industry that he will attempt to tax other nutrients such as fat, saturated fat and sugar in general. Unfortunately, there is no evidence that such taxation, whether on a nutrient or product basis, reduces obesity. In our view, tax is a fiscal measure affecting wealth and not health. In addition, this would be a regressive tax affecting people who spend a higher proportion of their household budgets on food and, generally, come from lower socioeconomic groups. In other European countries, such as Denmark and Italy, the political systems have unanimously agree to rescind taxes on saturated fat and sugar.

The solution to obesity is too complex to be solved by a tax or advertising ban. It will only be solved through collaboration between all stakeholders, including industry and Government. I ask the committee, as policy makers, to insist on policies that engage with industry and do not damage the sector's competitiveness.

The Department of Agriculture, Food and the Marine has invested more than €7 million of taxpayers' money for the Irish universities nutritional alliance to carry out world class health population research into the Irish population. This is the envy of the rest of the world. However, these data are being actively ignored by the Department of Health and other Government agencies tasked with creating health policy. This should not happen. These data are considered world class and should be the basis for our health policy.

The consumer food sector is fast moving and must adapt to rapidly changing consumer demand. Innovation, therefore, is the lifeblood of the consumer food sectors. However, spending on research and development and innovation in the sector is low, despite the availability of generous grants. Our members tell us uptake is low because the engagement process is too cumbersome for small companies. We propose that the Government task Enterprise Ireland with appointing an innovation network manager who would focus on connecting food companies with available appropriate funding. This model has worked in other sectors, such as software and tech.

The prepared consumer food sector is eminently placed to deliver growth. The industry has a clear strategy to align with Food Harvest 2020 goals. Part of this is an alignment with Enterprise Ireland, Bord Bia and other State agencies. That is key. We ask the committee to support the sector, across the issues I have mentioned, in its plans for growth.