The Dramatic Change of Operations Management of Irelands Food and Beverage Industry - Essay Example

The Dramatic Change of Operations Management of Ireland's Food and Beverage Industry What are the major changes that several driving factorscontributed on Ireland's food and beverage industry INTRODUCTION Together with the trend of the new generation, Ireland had also broadened their horizons when it comes to what they it and consume everyday. Based on the article in Australian Government entitled Food and Beverage to Ireland, Irish consumers are becoming more interested in new foods and traditional eating patterns are changing. Convenience, novelty, value and quality are all important. With higher disposal incomes, there is greater demand for ready-made food, takeaway food, restaurant dining and diversity of cuisine types. The food and beverage industry in Ireland is worth around A$30 billion, accounting for nine per cent of gross domestic product (GDP) and eight per cent of total exports. The sector employs 47,000 people directly in over 650 companies; agriculture employs another 110,000 people. Ireland has undergone significant changes since the beginning of the 'Celtic Tiger' phase in the early 1990s. Notable has been the development of the information and communications technology (ICT) sector and that Ireland now has the second highest GDP per capita in the European Union (EU). According to John Linnane, a lecturer in food production in his article, A History of Irish Cuisine, Food production inevitably was the principle preoccupation of the mass of the population and, as it was in most societies of that era, it took up most of their working day. Evidence for agricultural activity during the centuries BC is rather surprising, for periods up to 200 years the level of agricultural activity seemed to have declined then increased and declined again. During the periods of decline the consumption of meat and dairy products increased. Periods of forest clearing for agriculture were followed by periods of secondary re-growth of the cleared forests and a return to dependence on livestock, hunting and gathering. This intermittent cycle of forest clearing and planting lasted up until the 3rd century AD when a dramatic expansion of permanent agriculture occurred. Aspects of social changes include domestication of variety of animals, the clearing of forests, plus the collection of wild edible plants for immediate use, cultivation or storage. Approximately 5,000 years ago this extended to the cultivation of a variety of edible grass seed and leaf plants. The best example of this kind of agriculture in Ireland where the evidence still exists to this day is the Ceide fields in County Mayo, considered to be more than 5,000 years old. The establishment of single-crop production (oats and barley) is believed to have occurred in these fields, which in turn led to long-term storage and elementary processing of food. Alongside and following the establishment of crops, the rural controlled grazing of animals also began. With these dramatic changes came the creation of relatively stable family units. The increase in the quantity and dependability of the food supply somewhat loosened the natural restraints of starvation, disease, and similar forces that held in check the potential growth of the population which began to expand rapidly, and the Irish moved toward a civilisation which had its own political organisations dominated by the Druid Priesthood and the Ruling Class. As the food and drinks sector depends upon the interests of agriculture, fisheries, research, retail, manufacturing and export markets, it faces a number of government agencies which were related to the above sectors. This offers a number of problems and priorities according to IBEC. The industry keeping in view the above problems, was lounging for a single window approach with the government regarding its business. This is the thing they feel that is necessary for the survival and in future thriving of the industry. Even the critical sector agriculture which provides food security for the people depends on this industry to make good profits. The system is capable of sustaining manufacturing base, if government supports the acts that increase production. A police on trade regarding the food and beverages is needed for sustenance of the development of the industry. Government can assist the industry with a programme which identifies and develops and supports the Irish food and drink companies to produce world class brands in this domain. Industry says that it recognised the need for the innovation and research and called for government assistance in the policy framing. The framing of the policy includes coordination between universities and other institutions. (Active Media, 2006) The present paper will critically review the operations management of Ireland's Food and beverage industry and its factors that directly affect its changes. Such driving forces include globalisation and the overwhelming diversity of food and beverages as well as customer expectations and enlargement of EU. GLOBALISATION Due to globalisation the big companies which are facing stiff competition from their smaller rivals were trying to enter new markets in other countries. This increased the competition between companies in Ireland and this posed threat to some companies' existence. The new challenges made the food companies to improve their product quality and competitiveness in the marketing. Changes in the food and beverages industry due to globalisation were not only in turnover and employment and the range of food products offered. The range of products offered increased due to the globalization, limiting themselves to conventional food items will not fetch them good customers and revenues. Due to globalization, food and beverages industries not only compete for market share but also try to operate in larger socio economic context in which their strategies are capable of affecting the welfare of the people of the area they work. The Finfacts Team stressed in their Thursday review of Irish Independent entitled Irish Business News and International Stories that "our (Irish) open economy, EU membership and the US boom all helped shape our (Ireland's) success. In their interview with the author Michael J O'Sullivan who covers both globalisation and Ireland's place, makes the point that Ireland is a very globalised economy, but in peculiar ways. It began when, out of desperation, Ireland embraced international investment flows and free movement of profits at a time when it was far from fashionable to do so. The country then became an enthusiastic supporter of both European economic union and the single currency. This involved adding an international currency to its international investment and profit regime and, more recently, an international labour force as well. So Ireland is one of the most open economies in the world, with trade flows in and out equal to 150pc of output (GDP). This makes it officially one of the most globalised economies in the world. Yet this comes, not from a flow of goods and services developed and produced in Ireland, but from a flow of investment by outside companies which then export goods and services. DIVERSITY OF FOOD AND BEVERAGES Food is now traded on a global basis. The variety and availability of food is no longer restricted by the diversity of locally grown food or the limitations of the local growing season. Between 1961 and 1999 there has been a 400% increase in worldwide food exports. Some countries are now economically dependent on food exports, which in some cases account for over 80% of all exports. (CIA World Fact Book) One of the tenets of Bushmills' Spirit of Slow Food recognizes that food [is] a language that expresses cultural diversity, and they also seek to educate members about the global traditions of the table. Certainly an event showcasing the culinary traditions of Ireland would reflect and honour these important Slow Food tenets. (Fireba, 2004) The food and beverages sector occupies the 8 percent of Irish exports and the sector contributes to Ireland's traditional strength. The amount spent by food and beverages companies on electricity in 2001 was 144,000 pounds and it increased from that year regularly. The increase in payment of electricity bill is due to increase in productivity, which is a result of diversity in the industry. The energy input costs increased to 2.7 percent of input costs from 2.4 percent in 2000. This increase is due to increase in number of products, which amounts to diversity. When the different products which are being produced due to diversified activities increase their productivity and market the percentage of energy costs in the input costs may decrease and the profitability will increase. The companies which are not capable of increasing market for the diversified products available in international cuisine, French and Chinese restaurants had to face the stiff competition from their competitors and their cost affectivity was negative. Diversity has also influenced Ireland to have a vibrant agricultural economy. This is reflected in the fine fare that Ireland has to offer today. By the 17th Century there was a diversity of culinary traditions along with social status. The peasantry relied mostly on diary products and oats for their nourishment while the well to do, relied more on meats and alcoholic beverages. By the 18th Century the cuisine of the wealthy became more varied with a greater French influence. As the 19th Century approached, the potato was the main staple of one third of the population. After the Great Hunger, potatoes and oats were still the main staples of the Irish diet. Toward the end of the century, the first processed foods where introduced. Although the food in Ireland at this time was nourishing, it was mediocre in taste and presentation. Restaurants and eating-houses were on the increase in the cities. However, their menus often shied away from traditional dishes because they were thought as 'famine foods'. In the latter part of the 20th Century, the food in Ireland became markedly better. A new generation, of chefs emerged in Ireland making rapid advancement in the Culinary Arts. They brought back and air of confidence, a realm of creativity and established themselves in the world their marvelous preparation and presentation of food. Today, the cuisine in Ireland is often fresh, creative, and tastefully presented. Gone are the days of the unimaginative, bland, overcooked meat and potatoes. Fresh seafood, such as, salmon, trout and shellfish, and many others are locally caught and prepared fresh to the table. In addition there is a bountiful supply of fresh locally produced vegetables and meats. A Full Irish Breakfast is very hearty and delicious. It can often sustain you throughout the day. This meal generally consists of eggs, rashers (bacon), bangers (sausage), baked fresh tomatoes, fresh mushrooms, white pudding, black pudding, fresh fruit, brown bread, or toast, or scones, with a bit of butter and marmalade. Add some juice, a pot of tea or freshly brewed coffee with cream and a bit of brown sugar and you truly have a meal. Many of the soups are a puree of sorts or a broth, served piping hot, and delicious. Broths were used in early times in Ireland, some included oatmeal and vegetables. Along the coastal areas seaweeds were included. Many hotels and restaurants offer a Carvery Lunch. This is a hot meal, served cafeteria style, usually including hot potatoes, vegetables, a couple of choices of meats with gravy, a selection of breads, and deserts. Dining in Ireland can be an Epicurean delight. Often the food is fresh in all respects. The seafood can especially wonderful. Naturally raised lamb is used in many recipes from Irish Stew to Roast Leg of Lamb. Beef is the traditional Sunday roast, and is still prepared in many homes to this day. Potatoes are still an important part of the Irish diet. Potato in Irish is 'pratai', translated as praties. The hospitality of the Irish is unsurpassed. This custom goes back to ancient times the Brehon Laws declared you must share hospitality with the bard or stranger who knocks on your door. In the earliest of times, the Irish enjoyed home brewed beverages. The favorite was Mead, a honey wine that was both potent and delicious. Ales were also brewed. The Brehon Laws established rules for the sales and operation of the Ale Houses. In the late 17th Century, tea was introduced in Ireland and became very popular, but expensive. In rural Ireland in the mid 1800s, there was a major increase of tea drinking. Small shops of grocers were established in the towns and villages. The grocers exchanged butter and eggs for tea and sugar. Today, the Irish drink more tea per capita than any other nation. Whiskey in Ireland dates back to the 12th Century. When the Normans invaded, they could not pronounce the Gaelic 'Uisce Beatha' 'Water of Life'. Instead, they used the word 'fuisce' which became whiskey. Whiskey has been an Irish drink for centuries. It is thought that the Monks brought the distilling techniques from Europe. The first commercial whiskey distilleries were established in Ireland during the 18th Century. Kilbeggan Distillery was founded in 1757. Jameson was founded in 1780, Bushmills in 1784 and Powers in 1791. During this time a formal distillery licensing was introduced and taxes were levied. Irish distilleries declined over the years through acquisition or failure. By the early 1960s only four distilleries were still in operation and distilling in Dublin had ceased altogether. In 1988 Pernod Ricard of France acquired Irish Distillers, the largest producer in Ireland. Eight centuries of tradition were gone. The only Irish-owned, independent, Irish whiskey distillery established in the 20th century is Cooley Distillery. Although some whiskeys are stilled made in Ireland, many of the companies are no longer Irish owned. However, the whiskey in Ireland still flows. Stop at any Pub along your journey and there will be a whiskey bottle on the top shelf just waiting for you to take a dram. Beer is still a favorite beverage for the mass population. There are ales, stout and microbrews. Irish Breweries are located throughout the Republic of Ireland with most being in Dublin. Northern Ireland also has a few. The most popular beer in Ireland is Guinness, brewed at St. James Gate, Dublin. It is often said 'the closer you get to Dublin the better the Guinness' and there is probably some truth this. Other noteworthy malt beverages include Smithwicks, Kilkenny, Murphy's and Beamish. Ciders are also popular. So, no matter what your preference may be, there is something for almost everyone from a nice cup of tea to a wonderful pint. CONSUMER EXPECTATIONS The food consumer has been the primary driver of many of the changes currently being observed in the way products are perceived manufactured and marketed. Consumers today are concerned with healthy eating and convenience and have a much sharper attitude towards price and value. This trend is set to continue. Technology will continue to alter radically the way consumers' lives are led and new opportunities and challenges for food manufacturers will be created. These will arise primarily from rising expectations in terms of quality and value for money and a demand for innovation and variety stemming from affluence and sophisticated tastes. Changing lifestyles will continue to support greater demand for convenience foods. Increasing numbers of working women reduced leisure time and the decline in the traditional family unit are contributing to an erosion of traditional patterns of eating. The growing demand for convenience is contributing to the rapid growth in food service. The importance of food service is such that retailers have entered the market and demand for meal solutions will continue to rise. This trend towards the sale of complete meals to be consumed at home is already evident in many European markets and is aimed at meeting consumer demands for convenience. It also responds to growing health concerns. The market for home meal replacement looks set to experience growth across European markets and is likely to be taken on by the multiple retailers in particular. In this case the retailer assumes the responsibility for designing food products to meet consumer needs and contracts directly with the producer. This is a significant increase in responsibility by the retailer within the food chain which is further extended when it offers the time-pressed consumer meal solutions and supplies all of the components in an easy to assemble format. Over the next number of years the role of retail and food service will increasingly converge and boundaries blur as the home meal replacement market continues to grow. (Department of Agriculture and food, 1998) ENLARGEMENT OF EU The scale of Ireland's success also owes much to membership of what is now the European Union. Although some of our European friends have pulled a few dirty tricks at times, an operation in one part of the EU essentially has the same privileges as in any other part. A membership card for this giant market helped compensate for being small and surrounded by water. The EU may be one reason why Ireland's regime has been so unusual. Small Asian countries - the original "Tigers" - do not have automatic access to large markets. They had to open those markets themselves, and make their countries so attractive to foreign investors that it outweighed having no significant home market of their own. Unlike us, they have been obsessed with building their own technological abilities and piling up financial assets. The privileges of EU membership also help explain why the Irish model seems of most interest to the new member states. In trying to adopt Irish strategies, especially low taxes, they are meeting even more resistance from the big, rich, comfortable states of the original Community than we did. Now that we are rich ourselves, we may be tempted to join in attempts to curb the activities of new member states. That would be a mistake. It will always be in our interests to have the EU as open as possible, inside and out. According to the Department Of Agriculture and Food, the enlargement of EU also caused expectations of Irish beef production to decline by at least 1% annually from 1999 onwards. Export beef sales will similarly reduce by some 10 0 tonnes between now and 2006. If the value of exports is to be maintained a switch in sales to the EU of some 100 0 tonnes and increased exports of higher-valued packaged meat cuts are required. In addition to the problems previously mentioned - falling consumption and re-nationalisation of EU markets - the sector's ability to meet the challenge is inhibited by its lack of competitiveness particularly at slaughtering and primary processing level. However cheese production still only accounts for 19% of whole milk utilisation in Ireland and for only 1.5% of total EU cheese production (while Ireland's share of EU milk is 4.5%). In contrast butter production (including butteroil) accounts for 57% of Irish whole milk and at 153 0 tonnes accounts for 8.5% of total EU butter production. Therefore Ireland continues to have a relatively low utilisation of milk to cheese and a relatively high utilisation to butter. With this, year 2005 proved to be a very challenging year for European Union most especially to Ireland. This is because 10 new states joined the Union and this affected the companies of food and beverages mostly as the new entrants first take benefits of joining the union. As Ireland did held presidency for the first part of 2004 it played a major role in expanding the EU from 15 to 25. The measures were taken for smooth transition. The food and beverages industry in Ireland was affected in next year due to new entrants and the competition the companies of those countries posed to the companies of Ireland. The confederation of the food and beverages industry met the representatives of Ireland and explained the challenges that are faced by the food and beverages industry. As the companies in the Ireland also posed the same problems as the other companies the representatives understood them mostly. This has built the situation that made the future measures regarding the revival of food and beverages industry in Ireland and Europe. CONCLUSION The global food and drinks industry moves so rapidly that up-to-date market knowledge and information is crucial. Irish companies hoping to break into global markets can benefit enormously from the services that the Government and other social sectors offer. It can help existing exporters foster new contacts and expand their businesses further. Today that the face of the industry in Ireland is changing, personal health and wellbeing continues to be a dominant driver affecting consumer choice. The saying 'You are what you eat' as well as "from Farm to Fork" has become widely adopted. In the past, food was simply for sustenance and enjoyment. Consumers over the last decade have acknowledged the need for foods to not only maintain their normal health, but also to help reduce the risk or delay the onset of some diseases such as cardiovascular disease and cancer. Today food is recognised as a key determinant to one's overall physical and emotional wellbeing. Consumers are demanding more knowledge about the products they're consuming. The need for traceability or the ability to track any product from the original farm on which it was first produced through the processing, distribution and retail stages to the final consumer is vital in ensuring that consumers can enjoy Irish food and drink products with complete confidence. Increasing levels of sophistication in consumer tastes and demands have raised consumers' expectations of quality and variety regarding premium and indulgence. Probably the most important factor lending to the growth of premium and indulgent products has been the increase in disposable incomes and accompanied economic growth throughout the 1990's. At the same time, falling average household sizes and changes in work patterns also contributed to growth in premium and indulgent food and drinks markets. Small speciality food producers have capitalised on this trend by focusing on the more discerning consumer who prioritises quality, authenticity and taste. The food industry continues to explore new markets which will help position Ireland's food and drink industry as innovative, progressive and high quality in the minds of international buyers and consumers. Another noticeable consumer trend has been the demand for quick options. Consumers have increasingly busy lives with little time to prepare food from scratch. Ready-prepared ingredients and ready-to-eat foods are now in huge demand. Some organisations feel prestigious to introduce ISO 9000 management system. Some feel that it amounts to lot of paper work or involves office work and was believed in the early days of introduction that it was more bureaucratic than attaining the actual goal of customer satisfaction. But the managers who do paper work or analysis of the activities of the firm will be able to know about the lapses and strengths of the organisations. This makes customer expectations reach the level of management and the decision taking was possible according to the wishes and desires of the potential customers. Today, in the operations of Ireand's Food and Beverage Industry, keeping up to date with the market is crucial in their role to assist Irish companies compete in global markets REFERENCES December 1998. Report of the Food Industry Development Group. The Department Of Agriculture and Food. November 17, 2006. http://www.agriculture.gov.ie/index.jspfile=publicat/foodindustry/fir.xml Active Media, 2006, industry news, The food and drink innovation network, November 12, 2006 http://fdin.co.uk/news/index.phptype=related&news_article_id=17929749 Finfacts Team. August 2006. Thursday Newspaper Review - Irish Business News and International Stories. November 17, 2006. http://www.finfacts.com/irelandbusinessnews/publish/article_10006954.shtml Fireba. June, 2004. Last Year's Winning Scholarship Essay. November 17, 2006 http://www.slowfoodforum.org/showthread.phpt=337 (No date). Food and Beverage to Ireland. Australian Government. November 17, 2006 http://www.austrade.gov.au/australia/layout/0,,0_s2-1_CLNTXID0019-2_-3_PWB110763932-4_-5_-6_-7_,00.html (No date). Food Trade. CIA World Fact Book. November 17, 2006. http://www.toseeka.com/search.phpq=Food+Irish&t0=&type=source=google_s+005+069_keyword_Food_Irish Read More