Opinion: Seizing opportunity in a crisis – what’s next for Ireland’s food producers?
By Ross MacMathuna, Accenture (and a former special advisor in the Department of Agriculture, Food and the Marine)
Covid-19 is reshaping how we live our lives and especially how we work with few facets of business and work-life immune, but the food and drink industry has stepped up to the task.
The changes forced upon humanity are rapidly accelerating some long-term underlying trends – especially the shift to digital and online.
While many businesses are fearful for the future, some are looking to the ‘new normal’ as a time to transform, adapt and target new opportunities.
Agri-food producers in Ireland have demonstrated before that they are adaptable and resourceful; now it’s time to step up and find a way to readjust, realign and reassert.
2019 and 2020 had already been challenging for farmers and food producers, even before the arrival of Covid-19. The sector has now – in the short term at least – been impacted by: logistics and transport difficulties; closed marts; and depressed dairy and beef markets.
The day-to-day difficulties individual farmers and processors are facing are also compounded by some very real changes in consumer behaviour.
Shift of purchasing priorities
According to a global Accenture survey of more than 3,000 consumers, conducted in April of this year, we can see that consumers have already begun shifting their purchasing priorities.
For instance, consumers overall said they were currently buying more personal hygiene and cleaning products, as well as canned and fresh foods than they had been two weeks prior — while purchasing fewer fashion, beauty and consumer electronics items.
Not surprisingly, the survey found that the pandemic is causing more people to shop for groceries online. The realignment of purchasing priorities, personal lifestyles and working practices is mandating significant changes to retail and commerce.
More importantly, however, the findings indicate that many of the changes in consumer behaviour are likely to continue long after the pandemic.
Irish consumers are looking at products and brands through a new lens. The impact of Covid-19 will not be temporary; we can look to the most recent recession to see that changed consumer behaviour becomes the ‘new normal’.
Prior to the financial crash in 2008, Irish shoppers were very brand loyal and not as price sensitive as was the case in other markets. Post-crash we saw the rise of discounters and consumers splitting their shopping across different stores to take advantage of special offers. People became more price-conscious and thrifty – and, interestingly, they never reverted to type.
‘Deep discounting’ has become a feature of the retail market in recovery – in recent years volume growth in retail sales was rarely matched by value growth – and data from the Retail Ireland quarterly monitor (for the third quarter of 2019) showed volume growth of 5.1% versus value growth of only 2.3%.
Testing of food-supply chains
Our agri-food supply chains are currently being tested like no crisis in recent history, with the pandemic illustrating just how central the role of a well-functioning supply chain is in society.
There are some good news stories for business; anecdotally some grocers and consumer goods businesses have reported sales during lockdown matching those of previous Christmas periods.
We also know that the dairy processing sector recently passed through its peak throughput for the year. Any disruption to the workforce or to the specialist plant and machinery could still create major difficulties.
So, how can the Irish food and drink sector respond to the challenges arising from changing consumer behaviour on the one hand while managing supply chains in new ways in what will hopefully soon become a post-Covid-19 world?
A digital and analytics backbone is crucial to understanding and meeting consumers requirements.
It is also essential for navigating supply chain complexity, anticipating disruption and quickly developing a response.
This digital backbone will also enable food and drinks companies to be ready to service consumers as the shift towards e-commerce intensifies.
Companies also need to understand how to sustain this increased e-commerce penetration – perhaps through offering price and loyalty incentives to newly-acquired consumers.
All of these decisions and capabilities are enabled only when a robust digital infrastructure is in place. On-farm digital technologies are increasingly playing a more important role in the day-to-day activities; that should continue.
The Covid-19 way of life and work
Working from home or in a different manner, facilitated by the use of online collaboration tools will ‘stick’ – more of us will spend some, or all, of our time in the home office and this online collaboration will bleed over into our social lives as well.
Businesses need to work to preserve the extended workforce, prioritise their physical safety and mental wellbeing and be flexible about what is and isn’t possible right now.
With remote and technology-enabled working likely to become more of a feature of life, allied to high housing costs in Dublin, we may see rural Ireland becoming a more attractive place to live, work and love.
Have a ‘purpose’ and understand the importance of local
Food and drink producers need to focus on understanding their consumers. In recent times we have seen the rise of ‘Generation P’ – a combination of Generation Y and Z consumers, a group that demands that companies have a purpose which goes beyond shareholder value.
One-third of ‘Generation P’ will pay more to companies that stand for issues they care about. 50% of them have shifted purchases away from companies that disappoint them with their words or actions on social issues.
Generation P may soon be joined by other generations, as we have all learned the value of community over the past few months.
There have been some great examples of businesses like restaurants and cafes supporting frontline workers and those cocooning at home and we have seen a number of Irish distilleries – large and small – switch production to make hand sanitiser.
Brand owners need to be conscious of the social position of their brands and how authentic that really is.
The importance of sustainability
We have seen the publication of the EU’s Farm to Fork Strategy, which sets very ambitious targets for the agricultural sector in terms of reductions in fertilisers, antimicrobials and pesticides.
These targets mean that sustainability will need to be front and centre for farmers and processors. I could argue that the strategy starts at the wrong end – and should have been the EU Fork to Farm Strategy – because consumers set the expectations and agenda for processors and, ultimately, producers.
53% of our Generation P consumers are attracted to companies and products that provide credible green credentials, minimise environmental harm and invest in sustainability.
This presents an opportunity for Irish beef and dairy farmers to develop further and validate our sustainability story. But it is also important for primary producers to share in the value they are creating.
The market will make demands but it must also reward those that meet those demands.
The future, while challenging, also presents opportunities for those that are equipped to take advantage. The agri-food sector can once again help drive the recovery of Irish society and the economy.
Managing the new world after Covid-19 by creating a foundation for competitive advantage and growth, with a focus on sustainability, will differentiate us globally as leaders in the future.