Eastern Markets Offer Better Margins
26 February, 2015
The below article was written by John Hood, Invest NI Director of Food and Tourism for the publication Farm Week.
While Great Britain is the most important external market for our food and drink companies and will remain so, particularly for small and medium sized companies which form the backbone of our biggest manufacturing industry, doing business there has become very challenging especially over the past 12 months.
The progress of the big discount chains has led to suppliers seeing margins squeezed as never before. Pressure on costs has become intense. Demands for promotional support have increased and payment periods for products stretched. In such difficult trading conditions companies have probably three courses of action.
First of all, they can review all their costs and seek to drive these down to ensure their competitiveness in Britain. Secondly, they can focus greater resources on creating original products which offer the prospect of higher margins. Finally, they can look at alternative markets abroad to generate greater returns. Invest Northern Ireland has a portfolio of programmes to help companies to compete more successfully and profitably in Britain and other markets. This portfolio include support for new product development, marketing and packaging and cost control.
I am not suggesting that our companies should turn away from the market in Great Britain. Far from it. It is a hugely important marketplace that’s much easier to access. And it will certainly remain our biggest single market well into the future. Companies, both large and small, should, in fact, be assessing all three options listed above to find the right combination to strength competitiveness.
Exploiting opportunities that are developing fast in dynamic markets such as the Middle East, I believe, could provide additional resources that companies could then invest in new product development and marketing.
Now I know that many smaller companies have understandable concerns about doing business in distant markets. But smaller food and drink businesses are already selling strongly in many of the biggest supermarket chains in the Middle East and especially in the United Arab Emirates, a market with very strong ties with the UK and Ireland.
Spinney’s, for instance, the best known supermarket group across the Middle East, currently lists products from around a dozen Northern Ireland companies including smaller businesses such as Free’ist sugar-free cookies from Belfast, Mash Direct’s convenience dishes and meal accompaniments, produced in Comber, and Dromore-based Graham's Bakery is supplying mini muffins and even traybakes.
Other smaller food businesses such as White's Oats in Tandragee, Lisnaskea's Kettyle Irish Foods, Just Live a Little breakfast granola, husband wife enterprise in Portaferry, and Mullin's Ice Cream, Kilrea are also doing worthwhile business there. Classic Minerals in Lurgan has supplied flavoured spring water to clients in Saudi Arabia and Kuwait. Furthermore, Glenarm Organic Salmon, including the new smoked salmon, is served in top hotels in Dubai along with langoustines from Rooney Fish in Kilkeel. And Lisburn's Pure Roast Coffee provides coffee pods to Emirates Airline for its worldwide business lounges.
Significantly, most of these companies employ fewer than 50 people. Of course bigger food companies such as Karro Foods in Cookstown, Irwin's Bakery in Craigavon, Kestrel Foods, also based in Craigavon and Dale Farm, Belfast have good business there.
We've smoothed the path for both large and small companies by helping to broker distribution deals, arranging trade missions and attendance at major trade shows such as Gulfood and by bringing buyers from the likes of Spinneys, LuLu and Al Maya supermarkets to Northern Ireland. The recent visit by our Enterprise minister Arlene Foster to Spinney's will also have enhanced business relationships.
My message to smaller companies in particular is that there are significant opportunities outside the UK and Ireland. Size shouldn't be an issue largely because of the extent of practical support available from Invest Northern Ireland.