As in other EU economies, Irish farm sector output has been restricted by quotas and other quantity based farm supports under the Common Agricultural Policy so that the rate of output growth over the past decade has been low, increasing by 15% in value terms in the ten year period 1987 to 1997. Numbers engaged in agriculture declined by 18% over this decade.

Fig. 1. Comparative growth rates of the farm and food manufacturing1 sectors in the Republic of Ireland, 1987 to 1997. 1 Excludes miscellaneous foods, tea and coffee manufacture, NACE codes: 1585-1589, of which cola concentrates are a very large part. Source: Census of Industrial Production: all food, CSO, Dublin.

The picture further downstream is quite different with the gross value of output of food manufacture having grown by 45% over the 1987 to 1997 period. The cost of industrial input increased at a lower rate resulting in a 76% increase in the value of net output, an average annual growth rate of 5.8% over this period. Net output is somewhat akin to the concept of value added, but exceeds it in absolute terms as other expenses such as bank interest and charges, professional fees and certain indirect taxes must be deducted in arriving at the value added of the sector (1).

In spite of low growth in the agricultural sector, therefore, Irish food manufacture has continued to progress and develop and achieve impressive performance especially in terms of growth in net output and value added. Gross agricultural output as a proportion of gross output of food manufacture has declined from 62% in 1987 to 49% in 1997. Growth in food manufacture was also reflected in a 10% increase in employment over the ten years, despite normal expected productivity improvements and rationalisations in traditional industries such as beef, dairy and sugar processing. This strong competitive performance of Irish food manufacture conforms with findings of Pitts (2) that Irish food industry output in the period 1990 to 1995 increased by 37%, over five times the EU average of 6.5%, which equates approximately to the rate at which food markets were growing over this period. It also coincides with a more general recovery in indigenous manufacturing in Ireland. Following a decline at an average annual rate of 3.2% between 1980 and 1988, total indigenous manufacturing employment in Irish-owned industry was estimated to have grown at an annual rate of 1.4% between 1988 and 1995 (3).

The progress of the six publicly quoted food companies and the two largest co-operatives was traced for the period 1987 to 1997. The public companies included in the analysis were: Kerry Group plc, Glanbia plc, IAWS Group plc, Greencore plc and Fyffes plc, and the two co-operatives were Irish Dairy Board and Dairygold

These companies have been transformed over the past decade with all of the publicly quoted companies except Greencore increasing size in terms of turnover by more than fourfold between 1987 and 1997. Only in the cases of the two co-operatives were growth rates close to the average for the domestic food industry.

As the main developments in the Irish industry have been lead by dairy processing firms, the comparison with other European firms was confined to the leading dairy firms in the Netherlands, Denmark and UK. As a relatively small European economy and a net exporter of the main animal products, Ireland has often looked to countries such as the Netherlands and Denmark as examples of successful food industries and as having performances to which the Irish industry and Irish food firms could aspire. Accordingly, it seems appropriate in assessing the progress of the Irish food companies to make comparisons with the present status of leading Dutch and Danish firms. Also, as the Irish firms have developed internationally, penetration of the UK food industry has been important for all of the companies. Comparison with UK food companies therefore is also appropriate. The leading dairy companies in each of the three countries were selected for the analysis. The companies studied were: Friesland Coberco Dairy Foods and Campina Melkunie which together account for an estimated 75% share of milk processing in the Netherlands; MD Foods which is by farm the largest milk processor in Denmark accounting for 65% of milk supply in 1997; Northern Foods plc in the UK which in 1997 still owned Express Dairies; and Unigate plc a leading processor and distributor of fresh milk and through St Ivel Foods is a leading manufacturer of spreads, yogurts and desserts.

Table 1 summarises a comparison between the food firms assessed. It confirms the very high growth rates of the Irish firms with only the two Irish co-operatives not having doubled in size in the ten years to 1997, and even these increased turnover by more than any of the non-Irish firms. Over a short period Irish food firms have progressed from a low base to become significant competitors in Europe. The largest firm, Glanbia had a turnover in 1997 two thirds of Freisland Coberco, the world's fourth largest dairy group behind Nestlé, Dairy Farmers of America and Danone (4). Glanbia's turnover in 1997 was of similar size to Unigate, MD Foods and Campina Melkunie. Kerry Group and Irish Dairy Board are larger in terms of turnover than the restructured Northern Foods and the demerged Express Dairies.

The high growth of the Irish companies was achieved through outward investment and penetration of the international food sector, especially the food industry in the UK. Based on 1997 data, the three leading Irish dairy firms were more internationalised, in terms of proportion of activities outside the country, than either of the two large Dutch dairy companies or MD Foods. While as would be expected much of the activity outside Ireland is in the UK, Kerry, Irish Dairy Board and Fyffes have significant international business further afield in Europe, the US and elsewhere. This contrasts strongly with UK companies, Unigate and Northern Foods, whose businesses are almost totally confined to the British and Irish markets.

On the basis of the author's subjective assessment of the extent of product diversification by the various companies, the Irish companies were adjudged more diversified than the Dutch and Danish companies, and more in line with the UK companies. Fyffes, Campina Melkunie, MD Foods, Friesland Coberco and Irish Dairy Board have remained closest to their traditional product bases, while Northern Foods, IAWS, Unigate and Greencore have become the most diversified.

In conclusion the growth of the Irish-owned food sector over the last decade has been impressive by any standards. It has grown its output and especially its value added quite independently of the farm sector. The leading Irish food companies have developed outward more aggressively and apparently more successfully than the main dairy based food companies in the Netherlands, Denmark and the UK. They have achieved this in a relatively short time from a peripheral location and from bases that were small scale. The Irish performance is a challenge to the view that large scale is necessary to compete, grow and develop in the modern food industry. It is also a challenge to the traditional agricultural economic emphasis on efficiency in the food chain with its greater focus on scale economies and less on benefits of meeting market needs. The Irish food sector both in terms of output and value added is enormously larger now than it was a decade ago and a number of the Irish-owned firms have emerged as internationally competitive enterprises that are well placed for further growth in the future.