Data from the Food, Agribusiness and Beverage Risk Insights Survey 2016 has shown that Brexit is a risk to the competitiveness of food and agribusiness.
Of the companies surveyed by risk management assessors Aon, 58% identify exchange rate fluctuation as one of the top 10 risks they face.
The number one risk identified in the survey, which was selected by 83% of respondents, was the huge volatility of commodity prices.
Brand reputation
The second most important risk identified is the possible damage to reputation and brand that food companies face from issues such as product contamination.
The report cites as an example New Zealand dairy producer Fonterra’s suspected botulism scare in 2013, which resulted in China banning all New Zealand milk powder imports. The financial impact of this hit to reputation is indicated by the €249m impairment charge recognised a year later by Danone because of the damage done to Dumex, its brand in China that was being supplied by Fonterra.
Positives
Food and agribusiness practice leader at Aon and author of the report, Ciara Jackson, said: “The UK’s importance as an export destination for Irish produce means that the collapse in the value of sterling (making Irish exports more expensive) could particularly hurt lower-margin businesses where profits can quickly swing to losses.
“On a more positive note, this is a sector that is rapidly diversifying its export markets, moving up the value chain, and has proven extremely resilient in the face of past challenges.”
Other risks include exchange rate fluctuation, product recall and increasing competition.
The agri-food sector plays a vital role in Ireland’s economy, employing 23,000 people and selling €10.8bn of exports to over 170 countries in 2015.
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