Food and Drink Focus
July 2010
Energy Costs Still Too High
Ireland’s electricity prices remain well
above the European average. This is a
major problem for an export oriented and
energy intensive sector like food and drink.
The National Competitiveness Council
found that, excluding raw materials, energy
forms a larger component of cost inputs for
the food and drink sector than any other
major industrial sector. At the same time
factory gate prices for food have only risen
electricity prices over the last 12 months a
large part of this is related to a favourable
international price for gas and strong
industry representations to Government on
energy
costs.
These
industry
representations
influenced
the
Commission for Energy Regulation (CER)
Decision in July 2009 which stated “The
Government has made it clear that industry
competitiveness must be facilitated as
by 20% over the last 10 years whereas the
wholesale price of electricity has risen by
66%. This is an embedded cost for
industry for which there is no cost recovery
in the market place. This is devastating for
a sector like food and drink which spends
€300m on energy each year and accounts
for one quarter of manufacturing energy
usage. Industry has invested significantly
in energy efficiency to offset this and FDII
with the Sustainable Energy Authority of
Ireland (SEAI), has also undertaken two
Energy MAP Training Programmes for
members. FDII product associations have
also made detailed submissions to the
SEAI regarding extensions to the scope of
the Accelerated Capital Allowance Scheme
for
Energy
Efficient
Equipment.
Nevertheless faced with such high prices,
it remains a major drag on the
competitiveness of the sector.
much as possible in relation to energy
costs” and also announced a continuation
of the rebate for large energy users for a
further 12 months from October 2009 and
a rebalancing of tariffs between different
categories of customers.
Whilst there has been some reduction in
But these are temporary effects. Lower gas
prices are not a given for the future and the
rebate will be gone after 2012. Moreover
recent CER proposals for the PSO levy for
Oct 2010 – Sept 2011 would mean an
increase of €16/KVA for medium and large
industrial users. Competitiveness must be
regained for the long term and this requires
a fundamental downward shift in the price
of electricity for Ireland’s employment
generators – industries like food and drink.
The focus of FDII and industry generally
must now be on the forthcoming reviews
by the CER of the Capacity Payment
Mechanism and Network Charges to
achieve this. Similarly the infrastructure
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required to achieve EU renewable energy
targets is a long term investment by the
overall economy and must be costed as
such rather than be seen as a shorter term
burden to be borne by industrial energy
users.
Aside from the high cost of electricity,
another key concern for FDII is protecting
the consumer. Last year a number of
business consumers (generally falling into
the
LVMD
category)
experienced
substantial and unexpected increases in
October 2009. An investigation into
complaints by the Northern Ireland Utility
Regulator (a similar investigation is also
being undertaken by the CER in Dublin)
found that “communication to customers
on changes to their tariffs….was unclear or
not timely”, “comparing quotes….is not
always straightforward for customers” and
“some customers find their electricity bills
difficult to understand”. It is very clear that
consumer protection needs to be improved
in the ongoing deregulation of the energy
market. With further deregulation to take
effect from October of this year, it is
essential that the Regulator must take on a
strong market monitoring role in this
regard. Industry needs understandable and
timely information from suppliers to allow
them to make informed choices when
assessing quotations, drawing up energy
budgets and analysing bills. We
understand that the CER will undertake a
consultation process focussed on
consumer protection issues in August. FDII
will engage in this to ensure that this
becomes a reality for industry consumers.
Inside
Page 2 - Salt reduction, FDII meets Minister
for Enterprise, Trade and Innovation,
Eurostat Food Price Survey,
Page 3 - Growing Support for Guideline
Daily Amounts (GDA’s)
Page 4 - What Next For Origin Labelling?
Salt Reduction in Processed
Meats
FDII's processed meat salt reduction group
met with the FSAI recently to discuss the
progress of the category in the salt
reduction campaign. The FSAI have
undertaken a survey assessing over 100
products (ham, bacon, sausages,
puddings and burgers), both retail and
branded, for salt content. Analysis of the
results is ongoing and a final report is
expected in June.
across all sectors, before publishing
updates to their commitments table in
September. FDII will continue to work with
members to reduce salt content where
technically possible and, where that is not
possible, in gathering the evidence to
prove it to the FSAI.
FDII meets Minister for
Enterprise,
Trade
and
Innovation
A FDII Consumer Foods Council delegation
met with Minister for Enterprise, Trade &
Innovation Batt O’Keeffe last month. The
meeting's focus was to brief the Minister
and officials on the scale and economic
importance of Ireland’s consumer foods
sector.
The delegation focussed on
industry’s views on retail buying power and
the need for a robust and legal Grocery
Sector Code of Practice, backed by an
Ombudsman.
Minister O’Keeffe referred to his
appointment of John Travers as the new
facilitator in the Grocery Code consultation
process. We will be working with the FDII
Consumer Foods Council and FDII Food
Processors Group (FPSG) to frame a
response for our forthcoming meeting with
Mr Travers.
Initial results suggest that the work of the
FDII group is ahead of the curve in terms of
reductions made and the FSAI were highly
complimentary, urging these businesses to
be standard bearers for the category.
FSAI expressed concern at companies
who had not yet signed up to the campaign
through the FDII group and also at the retail
sector where it appears that reductions
have not been as progressive. These areas
of the industry will be focused on more
rigorously in future.
Overall, FSAI will be writing to all
companies involved in the programme
Other issues covered in the meeting
included
cost
competitiveness
(energy/waste), credit availability, Mercosur
trade agreement concerns, R&D and the
need for a co-ordinated approach across
Government to dealing with the food
industry.
Eurostat Food Price Survey
Out of Date and Inaccurate
Analysis of the recent Eurostat food price
report clearly shows that the information is
out of date, taking no account of high
levels of food deflation over the last year in
Ireland, the embedded high cost of doing
business at supplier and retail level and the
2
impact of a major weakening of the Euro in
recent months.
The comparisons drawn between the
different countries in the EU-27 fail to take
account of their different stages of
economic
development:
A
fairer
comparison would be with wealthy
Western European countries such as
France, Germany, Belgium, Austria, Finland
where the differential with Ireland is much
less than the headline figure.
The Euro-stat report also relies on out of
date 2009 information. Over the last year,
no other European country has
experienced food deflation to the same
extent as Ireland(-7%). A number of
European
countries
have
actually
experienced low levels of food inflation.
Thus up to date 2010 price data would
show the Irish prices have closed the gap
with the European average by 8%
approximately compared with 2009.
Comparisons with the UK are even more
stark. Over the last year our 7% food
deflation has been accompanied by 3%
inflation in the UK a 10% narrowing of the
gap. Similarly the £Sterling average
exchange rate to the Euro for 2009 (used
in the Eurostat calculations) was 0.8914p
which compares with 0.811p at the end of
June 2010 - a 9.9% strengthening of
sterling, in other words a further 9.9%
narrowing of the gap.
Report after report has highlighted the high
cost of doing business in Ireland – labour,
transport energy and waste costs, service
charges and rents remain among the
highest in Europe and the subsequent
impact on pricing – there is no
acknowledgement of this in the report.
The above points clearly demonstrate that
the Eurostat headline figures are greatly
exaggerated and out of date. They do not
reflect the reality of the Irish grocery sector
in mid-2010.
Growing Support for Guideline Daily Amounts
(GDA’s)
In 2006, the European food industry came
together to develop a consolidated system
of nutrition labelling known as Guideline
Daily Amounts (GDA’s). The purpose of this
scheme was to harmonise nutrition
labelling across Europe and to ensure a
clear, effective and concise nutrition
labelling scheme was available on all food
and non-alcoholic beverage products in all
European Member states. Since then GDA
labelling has been rolled out on a voluntary
basis by the food industry across the EU
and has received the support of many
retailers.
that they found GDA labels useful when
making a purchase. Research into
consumer attitudes to food labelling
conducted by the Food Safety Authority of
Ireland (FSAI) and published in December
2009 found that 61% of respondents
would prefer to see nutrition information
labelled per portion size. The research also
found that over 54% of survey respondents
indicated that the GDA system of labelling
was the most informative compared with
39% of respondents who indicated that
they found the traffic light system the most
informative.
consumer needs by legislators. The EU has
Unlike other labelling systems GDA’s offer
at a glance detail on the quantity of energy
and nutrients such as fat, saturated fat and
sodium/salt contained in the food. They
offer this information based on the
recommended portion size. GDA’s can be
used to take the guesswork out of how
much a consumer is eating in order to stay
healthy. The traffic light model has been
proposed by a number of organisations as
an alternative to the GDA system. Traffic
lights are overly simplistic. The nutritional
composition of a food is complex and it’s
place in the diet cannot be reduced to a
single colour. With traffic lights, people are
being told what they should and should not
eat – they are too judgemental. GDA’s are
a more rounded system which provides the
consumer with all the necessary
information to make an informed decision
in line with their dietary requirements.
Here in Ireland the prevalence of GDA’s on
shelf has been increasing steadily. FDII
have been surveying the incidence of GDA
labelling on-shelf since January 2008. We
have seen a steady increase in the level of
GDA coverage on branded goods with the
most recent survey indicating that 78% of
branded goods in Irish stores now carry
GDA labels. There is an even higher
proliferation of GDA labelling on private
label goods. From an average of 65% of
private label coverage in January 2008
retailers now top 95% GDA coverage on
private label goods. Retailers supporting
the scheme include Tesco, Supervalu,
Superquinn, Aldi and Lidl.
which were tabled in Parliament that called
GDA’s have also been acknowledged as
the labelling system best suited to
Regulation in the European Council and
undertaken to consolidate all existing
legislation
on
food
information
to
consumers. Accordingly the European
Commission has made a proposal, which
included a provision for mandatory GDAs.
This must now be agreed by the European
Parliament and the Council of Ministers. In
June this Food Information to Consumers
Regulation was debated in the European
Parliament and MEPs voted in favour of
including
mandatory
Guideline
Daily
Amount labelling on pre-packaged foods.
They also voted to reject amendments
for traffic light labelling.
The food industry will continue its voluntary
initiative to achieve full coverage of GDA
labelling across it’s range of products in
advance of the introduction of legislation.
This is a milestone which retailers are close
to achieving and in order to maintain the
positive momentum which industry has
built up behind GDA’s we must ensure that
this
objective
is
seen
through
to
completion. Incorporation of GDA’s into
legislation still faces another couple of legal
stages. These will come in the form of vote
on the Food Information to Consumer
final draft legislation from the European
Commission.
So far the voluntary roll-out of GDA’s has
been a massive success. Both the
European Commission and the European
There have been a number of research
studies carried out across Europe into the
effectiveness of the different labelling
systems with most favouring GDA’s.
Millward Brown research, conducted on
behalf of FDII in late 2008, found that 74%
of Irish consumers found GDA’s easy to
use while 87% of respondents indicated
Parliament have accepted that they are the
best route forward to improved consumer
information on nutritional labelling. FDII and
the food industry across Europe will
continue working to ensure that this
momentum is maintained and reflected in
the legislation on food labelling
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What Next For Origin Labelling?
This month the European Parliament voted
in support of extending mandatory country
of origin labelling to all meat, poultry, dairy
products and other single-product
ingredients, as well as meat, poultry and
fish when used as an ingredient in
processed food. A question mark remains
over whether they voted for a feasibility
study before such rules would apply.
If they did, such a study will have to
address the balance between apparent
consumer preference for origin labelling
and the technical and logistical difficulties
faced by industry in providing such
information.
For Ireland as a significant exporting
country, to the tune of over €7billion, we
must be careful not to introduce measures
which would lead to the re-nationalisation
of markets, which can only limit our access
to over 540m European consumers.
Similarly, we must remember that origin
labelling is not a matter of food safety and
to suggest otherwise simultaneously
undermines the EU’s stringent food safety
framework and misleads consumers.
However, there is little doubt that country
of origin can be used voluntarily as an
effective tool to promote Ireland and its
products. Aside from the multitude of
marketing tools to hand such as quality
assurance schemes and logos, there are
regulatory avenues which can be explored.
The Protected Geographical Status
Framework which includes PDI, TSG and
PGO logos are woefully misunderstood
and underused. These are already in place
to protect the reputation of regional foods
and eliminate the misleading of consumers
by non-genuine products.
While issues of free trade are
fundamentally important, there are also
significant technical and logistical
considerations especially around the origin
of prepared consumer foods. Many
businesses operate international supply
chains, purchasing according to the best
price, quality and availability on the world
market. This flexibility is required for many
reasons such as seasonal availability of
products or crop failures. Many of these are
unforeseen (e.g. sourcing of ingredients
from country “A” due to extreme weather
changes in country “B”) and the constant
changing of food labels to reflect this will
lead to higher costs, as well as rising food
and packaging waste. Small and Mediumsized Enterprises (SME’s) will be
particularly disadvantaged. In summary,
mandatory country of origin labelling
across all food sectors would deny the
market reality of a highly integrated and
complex European food and drink industry
while at the same time limiting both
consumer choice and adding cost.
Aside from such logistical issues, those of
simple practicality remain. Is origin the
place of first production, collection,
manufacture or final transformation? With
the globalisation of markets, ingredients
are obtained from all over the world. For
example, what is the place of origin of a
“Fruit Yoghurt” made with Irish Yoghurt but
using Pineapple from Costa Rica and
Spanish Oranges? There has been
suggestion that the “primary” or
“characterising” ingredient should be
given, but in a caramel and nut chocolate
bar which ingredient gives the product it’s
intrinsic character?
And so, what of the consumer? Already the
amount of information that must appear on
labels is substantial and posing problems
around space and legibility. As a study
carried out in January 2010 by the United
Kingdom Food Standards Agency (FSA)
reveals, designation of origin is not a
primary concern for consumers (“though
consumers are aware of country of origin
labelling, this information is not a main
concern when shopping”). In addition,
although 75% of consumers said they
would like to see origin labelling on packs
in the December 2009 FSAI study on
“Consumer Attitudes to Food Labelling”,
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only 3% said it was the reason they
checked labels, with durability details and
nutrition information being far more
important.
Another issue is that "origin" means
different things to different consumers. The
reasons why consumers are interested in
origin are varied (e.g. climate/environment,
animal health, political, job creation within
the country, taste, religion, health). To
address all of these requirements by
labelling with origin is in many cases not
possible.
Which leads us as industry representatives
to first ask our Regulators, why do we
always revert to labelling? Off-label
information, for example via websites, in
the shop (e.g. barcode scanner) or via other
communication tools (e.g. free telephone
service numbers, leaflets/flyers in the
supermarket), could be more helpful in
providing the information for those
consumers that are interested in the
provenance of the products. This would
clear up space to allow that information
which is really important to consumers to
be given in the clearest possible manner.
FDII advocate that the consumer should
not be misled and that through consistent
enforcement by Regulators combined with
a responsible approach by industry, the
current legal situation with regard to origin
labelling for the majority of consumer food
products is adequate and appropriate.
Contact Us
FDII is a business sector within IBEC
Paul Kelly, FDII Director
[email protected]
Cormac Healy, MII Director
[email protected]
Michael Barry, IDIA Director
[email protected]
Shane Dempsey, Head of
Consumer Foods
[email protected]
www.fdii.ie
01 605 1621