Food and Agriculture: A Value Chain Analysis

Output of food and drink in Ireland was €25.7 billion in 2018. Figure 3.1 shows that Ireland’s output of food, drink and tobacco was the sixth largest in the EU 27 in 2017 (the latest year available using Supply and Use data). Most of the food and drink production in the Irish economy was by subsidiaries of foreign-owned MNEs. Irish-owned firms produced €9.8 billion of this output while €15.9 billion was produced by foreign-owned MNEs. This chapter focuses on the output of the domestic sector.

The largest output of domestic food-producing firms was dairy products. At €3.4 billion, it accounted for almost a third of domestic firms’ production. Domestically-owned firms produced €3.2 billion worth of meat products. These firms also produced €721m worth of prepared animal feeds. This was mainly used in the agricultural sector in Ireland. The remaining product categories were worth €2.5 billion.

Figure 3.3 illustrates the detailed composition of dairy products produced by domestic firms. The most significant dairy products produced are butter (30.2%), cheese (24.2%) and milk and milk products (23.9%) such as milk powder. Proteins and other compounds such as whey, casein and lactose account for 17% of total domestic dairy output, indicating that the Irish dairy industry is becoming more reliant on non-traditional outputs. Other dairy (4.8%) includes products such as ice-cream, yogurt and buttermilk, which constitute a relatively small percentage of the Irish dairy industry overall.

Irish-owned firms in the food and drink industry spent €7.6 billion on intermediate inputs in 2018. At €4.9 billion, live animals and animal products (such as cattle and raw milk) accounted for the largest share of these inputs. The accuracy of the product breakdown of the remaining items should be treated with caution. The second most important product input was food products at €1.1 billion.

The total export value of Irish firms’ output of food and drink was €7.2 billion. This indicates that 73% of the food and drink produced by domestic firms are exported. At €2.8 billion, dairy was the largest product category to be exported. Meat accounted for €2.7 billion of these exports. The third biggest category was other food products (€500m). The remaining food product categories were below €500m in value and added up to a total of €1.1 billion.

Food and drink products produced by domestic firms were exported to 159 countries in 2018. Figure 3.4 displays the data for the top ten export destinations. The United Kingdom (UK) accounted for €3.2 billion worth of exports of food and drink produced by domestic firms. This accounted for 44% of such exports. Most of these food exports to the UK went to Great Britain (86%) while 14% of exports to the UK went to Northern Ireland. The Netherlands accounted for €710m of exports produced by Irish firms while €491m worth of exports went to France. The United States was the destination for €420m of food and drink produced by indigenous Irish firms while exports to Germany amounted to €389m. Exports of food and drink products produced by Irish firms to Italy and Belgium were €219m and €205m respectively. There were €153m worth of such exports to China and €148m to Spain. Exports to the remaining 149 countries accounted for €1.3 billion. Map 3.1 displays the destination countries of exported Irish food and drink products.

While output of food and drink by Irish-owned firms was €9.8 billion, not all of it was produced by the food and drink industry. Irish firms outside the food and drink industry produced €239m of food and drink. These firms were mostly in the wholesale industry. Similarly, Irish-owned firms in the food and drink industry also engaged in non-food production. This mainly consisted of €186m wholesaling and €13m research and development (R&D). Another €10m of R&D was undertaken by affiliates within the same group as domestic firms in the food industry. Most of this R&D was related to dairy products and was often in collaboration with Teagasc and Irish universities.

There were 1,352 domestically-owned food and drink producers in Ireland in 2018 and they generated around €2.2 billion in GVA. An additional €7.1 billion was generated by just 53 foreign-owned MNEs. For Irish-owned firms, 44% of their GVA is profit and 56% is wages. The foreign-owned corporations have higher profits than those of domestic firms, but their total wage bill is lower: their profit is 84% of GVA. These foreign-owned corporations are substantial enterprises and produce for the international markets for food and drink in their Irish factories. They pay over €1.1 billion (46%) of the €2.3 billion total wages paid by food and drink manufacturers in Ireland, and employ just under 40% of the 52,591 workers in the sector.

Between the taxes paid by the corporations, and the PAYE on their workers' income, the government receives €293m from domestic firms and over €877m in taxes from the food and drink industry as a whole.

As is clear from their inputs and outputs, the 'domestic' corporations have a significant international dimension. They import and export large volumes of food in production, but their ownership and investment are also highly globalised. They have significant foreign shareholders, and they invest in operations in other countries.

Some Irish corporations, including public limited companies and others, are partially owned by investors abroad. Once a company is at least 50% Irish it is classified as domestic, but in some cases a large minority is foreign-owned. In 2018, over 10% of the profits of domestic corporations were paid as dividends to investors in other countries.

Domestic corporations own subsidiaries in other countries and receive a return on that investment. They include other food producers abroad, and producers of other goods and services. In addition to their profit of €1 billion in Ireland, domestic food and drink corporations received almost €0.5 billion in investment income on direct investment from abroad in 2018.

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