Irish agribusiness is booming but the cyclical nature of the industry means that an extra edge is needed if the sector is to play its predicted key role in the future. That edge is technology and research
As most businesses continue to struggle in the face of recession, the agri-food sector is increasingly being seen as a key growth area for the Irish economy.
The sector generated €24 billion in turnover last year, with almost €9 billion of product exported, a record year for the sector. In terms of its impact on the domestic economy, it employs about 135,000 people and accounts for 18 per cent of the country’s total industry output.
While the underlying, long-term trend for the food industry is positive – global demand for food is predicted to increase exponentially over the coming decades – the sector is facing some headwinds.
Chief among these is price volatility. A close look at last year’s record-breaking export figures shows that the sharp increase in exports last year was driven by high commodity prices rather than a major increase in the amount of product sold.
The issue highlights a key conundrum for the sector – its inherently cyclical nature.
Already this year global milk prices have fallen in response to an over-supply of milk globally. While this has caused a headache for Irish farmers and food processors, it has also highlighted a key priority for the sector – the need to innovate and produce high-value products.
There is a growing consensus among industry players that Irish food producers need to become less dependent on selling bulk commodities, which are sensitive to price drops, and more focused on developing “value-added” products and ingredients, which demand a higher margin and are more cushioned from commodity price falls. Ensuring Irish food companies continue to produce high-value products and food ingredients requires significant investment in innovation.
As Taoiseach Enda Kenny told a gathering of food industry leaders at the launch of Teagasc’s new technology-transfer strategy last week, Ireland’s food industry needs to be “proactive” in responding to the changing demands and evolving production practices of the food industry.
In this regard the statistics are worrying. While Irish food companies such as Kerry Group and Glanbia have made strides in bringing high-margin, innovative food ingredient products to market, overall spending by Irish food and drink companies on research and development (R&D) is relatively low.
According to figures from Teagasc, spending by Irish food and drink companies on R&D accounts for just 0.6% of sales turnover – that compares to anything up to 25% for pharmaceutical companies.
While the figure for R&D spending by Irish food companies is broadly in line with EU figures generally, the corresponding figure in the UK is 2.5%, perhaps reflecting the largest proportion of smaller food companies operating in Ireland who lack the required resources to invest in research.
It is with this in mind that Teagasc, the national body responsible for research, advisory and training services for the agriculture and food industry, launched a fresh strategy for engagement with the private sector last Thursday. While the director of Teagasc, Prof Gerry Boyle, stresses that interaction with the private sector has always been part of Teagasc’s remit, he admits that the agency has “upped its game” in relation to commercialisation.
As well as the agricultural advisory services Teagasc offers to farmers, it also employs hundreds of people in science-based food research, investing more than €15 million each year in food-based technology and research
“Research is key to innovation,” says Boyle, who is himself an economist, “and we can provide the support required by the Irish food sector to develop innovative value-added products and new processing technologies.”
While it currently engages with about 300 companies annually – past collaborations include a partnership with Dawn Fresh Foods to help lower salt in ready meals, for example – Teagasc is looking to increase industry uptake. Hence an important strand of the new strategy is to make Teagasc’s food research services more accessible to businesses.
To this end Teagasc has announced five new “technology gateways” – different paths by which food companies can access and engage with Teagasc’s research. According to Boyle, this involves a move away from an emphasis on licensing intellectual property to other forms of engagement.
“Traditionally the dominant modes of technology transfers, in all industries, have been through licensing. While these are important, we believe there is also room for alternative methods of collaboration.”
Among the other “gateways” being promoted by Teagasc are research contracts, whereby Teagasc is engaged by a company to undertake a research project; consultancy services, whereby Teagasc’s technology expertise is offered to companies; and the leasing out of “pilot” plants at Teagasc’s centres in Moorepark in Cork and Ashtown in west Dublin – an option that might appeal to companies wanting to try out a new system or production method confidentially without disrupting their own production line.
More than 40 technologies and research projects were showcased at the event last Thursday – these have been collated into a “live database” which will be available online and updated regularly. Teagasc is also investing in its customer relations personnel who will meet regularly with representatives from the R&D divisions of various companies.
Included in the 40 technologies are 15 patents or patent applications, six of which are currently in use by companies.
The remaining projects are high-tech food technology projects, spanning a range of food types and sectors including grains, meats, cheese and dairy and fish products.
Among the applied research projects showcased at Thursday’s event was the development of new formulations for gluten-free and low GI (glycaemic index) bread products, as well as the development of functional uses for the outer shells of grain and other food by-products.
The meat sector is another key focus of research. Teagasc is currently engaged in a number of research projects to develop healthier alternatives to meat products. This includes work being undertaken on reducing the salt content of pork sausages from 2.5 per cent to 1.4 per cent. Similarly, Teagasc is developing an alternative ingredient to nitrates that are contained within some pork luncheon roll products. Research has shown that replacing the potentially harmful nitrates with lycopene, a natural antioxidant that gives food products such as tomatoes their colour, had no impact on taste. The potential this holds for meat producers, many of whom were in attendance on Thursday, could be huge.
The fish and marine sector is another focus for Teagasc. With by-products a major cost issue for the seafood industry due to EU regulations, researchers at Teagasc have devised ways of using waste products such as prawn and crab shells as functional ingredients. Teagasc has already engaged with a number of marine processing multinationals on the development of the product.
As well as targeting multinationals and major food companies, engagement with SMEs is another key priority.
As Declan Troy, head of technology transfer at Teagasc says: “For smaller companies a lot of the science that takes place is at the quality-control and compliance level, rather than at the research level.” Nonetheless, Teagasc offers tailored services to SMEs. It also works closely with Enterprise Ireland, a process which allows Teagasc to target and source high-potential companies which need support.
While Boyle is keen to develop further public-private partnerships, he is realistic about the role Teagasc, a public sector body, can play in the private sector. Teagasc’s role is usually at a “pre-commercial stage”, he points out. “Companies are good at identifying market opportunities. That’s what they do. Our role is to offer a research platform for the development of the products they need. Once the product is brought on stream, that’s when science must hand over to industry.”