Mr. Aidan Cotter:

I thank the Chairman and members for the invitation to discuss the performance of the Irish food and drink industry in the market environment in which it is operating and the role of Bord Bia in the context of the targets set out in the document Food Harvest 2020. I am joined by my colleague, Mr. Padraig Brennan, who in addition to being our senior business analyst has taken the lead in developing and implementing our sustainability strategy.

The importance of the food and drink sector to the economy has rarely been more evident than in recent years. It has delivered strong export growth at a time when economies and other business sectors across Europe and beyond have struggled to overcome sustained recessionary pressures. The value of food and drink exports has increased by 25% to €1.8 billion during the 2010-2011 period. This was two and a half times the rate of growth recorded in overall merchandise exports. In 2011, the sector accounted for 25% of the increase in the country's total export revenue.

Growth has been driven by a high return from meat, dairy, beverages and seafood. Exports of prepared foods have felt the brunt of the renewed search for value by consumers. Despite this, however, over the two year period the value of exports in that category has still grown by 10%. In addition to a strong overall performance, an increasing diversification of our export base has been evident in 2011. The value of exports to continental European markets increased by 16%, or €400 million, to €3 billion, with particularly effective performances in the Netherlands, Germany and France, all countries in strong positions to weather the economic challenges. The value of exports to markets outside Europe grew by 20%, or €350 million, reaching almost €2.2 billion. In fact, exports to Asia grew by one third and to China by one half, with particularly strong performances evident in dairy, meat and seafood. Despite these developments, the UK remains our principal export market, accounting for 41% of the total of €3.6 billion. The value of our exports in 2012 is being affected by the continuing volatility in markets - about which we have heard a great deal this afternoon - with dairy product prices still some 25% off the March 2011 peak, as mentioned by the Food and Agriculture Organisation, FAO. However, this volatility has been softened by more favourable exchange rates and relatively strong global demand for meat products. Exports are also being affected by the adverse weather conditions, poor grass growth and the rising costs of inputs, with which farmers across all enterprises have to contend. The situation is most acute in the pigmeat sector, whose exports will rise by 10% this year, but the sharp rise in feed costs have left producers facing an exceptionally challenging financial situation.

Despite a slowdown in export values this year, and we do not foresee any growth this year, the underlying trend for Irish food and drink exports remains strongly positive. Recent research from Rabobank suggests that the recent strong surge in global corn and cereal prices is set to have a further upward impact on meat and dairy commodity prices as global output eases in response to higher input prices. These developments will boost Irish exports into 2013 and beyond in an era of high grain prices. Ireland's grass-based meat and dairy enterprises offers a potential competitive advantage relative to other suppliers.

In spite of the overall weakness in the global economy, the growth in Irish food and drink exports over recent years has been helped by favourable global market conditions, strong commodity prices and stability in key currency exchange rates. However, markets have also witnessed significant volatility caused increasingly by unexpected weather events in different regions. In fact, the FAO and OECD regard unpredictable weather conditions as the single biggest reason for the volatility we have been experiencing since 2007. This is set to continue but, nevertheless, the long-term prospects for agricultural commodity remain positive with the latest agricultural outlook of the FAO and OECD suggesting the nominal prices for the decade to 2021 will be 10% to 30% ahead of the average prices in the last decade, with the strongest increases expected in meat and dairy and oils, and we are strong in meat and dairy.

Underscoring such projections are two indisputable facts, an accelerating world population, which members can see in the slide overhead, and a global agricultural base that will struggle to keep pace with the growth in demand. The general increase in the demand for food, which will rise by 40% in 2013, and the growing sophistication in taste of consumers in developing economies must be seen as representing major long-term opportunities for Ireland. In the chart, members can see the map of global buying power has shifted rapidly over the decades from the United States, the EU and Japan to focus on China and India in the decades ahead.

The development strategy presented in Food Harvest 2020 clearly articulated the ambition evident among all stakeholders in the sector and achieving predicted growth of 42% in the value of food and drink exports - to reach €12 billion - undoubtedly requires a co-ordinated effort by all those involved if it is to be delivered. Having gone more than one fifth of the way towards reaching the target, the sector has shown it has both the ambition and the expertise required, and it remains well on track. Bord Bia's work in supporting industry build exports is illustrated by initiatives such as Marketplace 2012, when we brought 500 buyers from around the world to the Dublin Convention Centre in February; and the 4,500 business meetings with 160 Irish food companies. Images of that are on the overhead slide. Working through our Shanghai office, we facilitated a trade mission led by the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, with five sectorial itineraries across 11 cities and visiting some 13 food factories in China. In fact, exports to China are continuing to grow. Having grown by 50% last year, they have grown by over 40% in the first six months of this year. We also continued to work with 70 leading high-end supermarket and food service customers across Europe on behalf of the beef industry. We work with the Departments of Agriculture, Food and the Marine and Foreign Affairs and Trade to achieve access to key potential markets for the industry in the United States, China and Japan. Bord Bia's own commitment to supporting the growth objectives of Food Harvest 2020 is expressed in Pathways for Growth, the inter-disciplinary five year development programme initiated in 2010, which is based on the report of the same name, also by Professor David E. Bell and Mary Shelman of the Harvard Business School and launched at our leadership summit in 2010. At annual follow up summits in 2011 and 2012, Bord Bia has, following consultation with leaders across the industry, rolled out work programmes for each of the main areas identified in the regional report. We have published three updates on our progress, as can be seen in the slide overhead.

We have focused our efforts on the five areas outlined in the slide and I will mention each of them rapidly. Under the entrepreneurship programme, a collaboration between Bord Bia, Enterprise Ireland and Teagasc led to the launch of Food Works in March 2012, a mentoring and support programme for entrepreneurs. Food Works provides a clear pathway for the development of the next generation of scalable, export-driven food companies. It is envisaged that 15 entrepreneurs will enter the first phase every year and, by the end of 2015, a pool of 45 dynamic start-ups will be up and running.

At least 20 of these are expected to be high potential companies.

The Bord Bia education programme, which commenced in 2009, has developed considerably over the intervening years. Every year the Bord Bia marketing fellowship allows 25 graduates with industry experience to complete overseas assignments for Irish companies as part of their MSc in marketing practice with the UCD Michael Smurfit School of Business. The food export graduate programme involves an 18-month placement of graduates in Irish companies in association with IBEC. The food industry strategic growth programme allows industry professionals to enhance their long-term career opportunities through leadership-defining projects.

A key goal of the education programme is to retain graduates in the industry, developing the next generation of executive talent. Feedback from companies indicates direct and long-term sales benefits from participation in the marketing fellowship programme. While the programme is primarily about nurturing talent, its second year has, to date, generated sales of €7.9 million with €20 million anticipated by 2014. Similar returns are envisaged through the third and fourth programmes.

Our insight and innovation team has expanded in the past 12 months, allowing it to significantly increase the flow of services to Irish companies. Over this time, it has also piloted two crowd-sourcing projects with industry clients, leveraging online communities to seek out deep consumer understanding and insight. In addition, the team has hosted five inspiration expeditions, which help inspire and motivate companies through exposure to new product and service ideas in other markets. Investigation of innovation opportunities for the Irish dairy industry in less developed markets began in 2011, with ethnographic research in South Korea, Indonesia and Vietnam capturing by living with families the lifestyle, food culture and dairy consumption habits of consumers. Research projects conducted over the past year have delivered insight into broad consumer trends in areas of interest to Irish industry, including European sports nutrition, the future of health and wellness and understanding evening meal consumption.

Co-opetition, a word introduced in the early 1990s by professors at Yale and Harvard, is the concept whereby companies that compete in some areas can collaborate in others. We introduced this in the Pathways for Growth programme in 2010. While Ireland is a significant player in the world market as the largest net exporter of beef in the northern hemisphere and accounts for 10% of the world’s output of infant formula, its annual food and drinks turnover is €9 billion, a mere fraction of the turnover of some of the largest food and drink companies in the world. We need to have scale in the marketplace and achieve economies. Co-opetition is designed to get companies to work together at different stages of the supply chain from costs right to the marketplace. Irish food and drink companies increasingly recognise the value of strategic engagement with each other to secure new markets, manage larger contracts and reduce overheads. We have engaged with more than 110 Irish food and drinks companies and developed, assisted or supported 20 individual co-opetition projects in the past year. These covered areas such as promotion, procurement, market access, logistics and mentoring.

In June 2012, Bord Bia launched Origin Green, a national sustainability development programme that is designed to help Ireland become a world leader in sustainably produced food and drink. The programme recognises that sustainability is increasingly becoming a major component of the commercial strategies of leading retailers, food service companies and food manufacturers. Most have set out clear strategies and targets to enhance the sustainability of their supply chain over the coming decade. They view sustainability as helping them boost the efficiency of their supply chain while also driving brand reputation and securing supplies over the longer term.

Retailers are looking for suppliers that can align with their commercial strategies and offer them a point of difference. Bord Bia research with 20 leading customers across Europe highlighted the significant opportunities that exist if the Irish food and drink sector can demonstrate its commitment to delivering continual improvement in terms of sustainability. Origin Green aims to effectively add proof and assurance to our sustainability claims while providing the evidence for which our export customers are looking.

Successfully delivering Origin Green will help the industry create a point of differentiation with key customers that will strengthen business relationships and improve the market position of Irish food and drink products. There is also a strong correlation between the measures needed to improve environmental sustainability and those needed to reduce production costs and improve profitability at both farm and manufacturing level. The Origin Green programme builds on existing work being undertaken at primary production level and it is intended that a target of 75% of Irish food and drink exports will be sourced from signed-up members to the programme before the end of 2014. Origin Green is a voluntary business-to-business programme built upon a commitment from participating food manufacturers to develop a sustainability plan, in conjunction with Bord Bia. Firms will sign up to a new sustainability charter and set out clear targets in key areas such as emissions, energy, waste, water, biodiversity and corporate social responsibility, CSR, activities.

Once approved, successful members will be entitled to use the Origin Green logo as part of their trade marketing, communications and customer relations. Each year, participants will be required to submit independently verified progress reports. Such verification is critical to ensuring marketplace credibility. Bord Bia has retained the SGS Group, the world’s leading inspection, verification, testing and certification company with 70,000 employees and almost 1,400 offices and laboratories worldwide to act as the independent verifier for Origin Green.

Bord Bia will promote, communicate and develop trade awareness of the Origin Green programme among buyers, international media and relevant stakeholders in key export markets. An international targeted communications programme is under way to build awareness of Origin Green and Ireland as a source of sustainably produced food. In September, Bord Bia hosted 31 journalists from across Europe on a dedicated two-day sustainability itinerary. At the end of this week some 15 Irish food and drink companies will participate at SIAL Paris, the world’s largest food and drink trade show, under Bord Bia’s Origin Green banner for the first time.

The response from the food and drink industry to date has been very positive with some 70 companies registered to participate in the programme. Between them they represent more than 50% of Ireland’s food and drink exports. Over the past week, the first five companies have received formal approval to become full members of Origin Green with a further 15 expected between now and the end of the year.

Origin Green will also act as the means of communicating the sustainability programmes being rolled out at farm level through Bord Bia’s quality assurance programmes. Since May 2011, over 29,000 members, 91%, of Bord Bia’s beef quality assurance scheme have participated in a sustainability - a carbon footprint - survey, developed by Bord Bia in conjunction with Teagasc, as part of their regular farm audit. Ireland is the first country to assess the environmental performance of farms on a national scale, making it a world leader in this regard. The audit results provide a unique selling point for Irish beef in key export markets. From a farmer’s perspective, reducing carbon footprint improves efficiency and thereby enhances profitability.

Similar farm level programmes are planned across the entire range of primary agricultural production. A pilot programme for the dairy industry was initiated in 2011 and a national scheme, equivalent to that operational in the beef sector, will be implemented in 2012 and 2013. Work is under way to complete a pilot programme for Irish poultry with other meats, grain and horticulture to be included in this programme over the coming 12 months. The development of Origin Green to build Ireland's brand reputation around green credentials is one of the four key strategic priorities for Bord Bia over the next three years. In addition, we will be focusing on enhancing competitiveness, promoting exports and building a vibrant domestic market for the agrifood sector.

The export prospects for the Irish food and drink sector remain positive over the medium to long term with price levels for agricultural commodities set to increase further. However, volatility in the international marketplace is likely to pose ongoing challenges. The Irish food and drink sector is well placed to avail of opportunities as they emerge in developing markets while it has also shown a strong ability to further enhance its position in developed markets across Europe, which leave it well placed to deliver on the targets set out in Food Harvest 2020. Bord Bia’s pathways for growth programme, developed in conjunction with industry, will work to equip the industry with the necessary talent, market insight and marketing ability in pursuit of these targets.

I thank the Chairman and the members of the committee for affording me the opportunity of addressing them today. My colleague, Mr. Padraig Brennan, and I are happy to address any questions. Before we do, I would like to show a short audio-visual clip featuring Saoirse Ronan who worked for us pro bono to promote the Origin Green programme to our stakeholders.