Kepak and The Future of the Irish Beef Industry - Case Study Example

THE REVIEW OF KEPAK AND THE FUTURE OF THE IRISH BEEF INDUSTRY Student Name: Student P number: Module: Module code: Submission deadline: INTRODUCTION Toward the end of the year 2010, economic difficulties had taken a toll on Ireland. Precisely from the late November 2010 it was paramount that major action be taken. Both the EU and IMF ware in talks with the Ireland government to ensure that the government remained in a state of solvency. As a result, the Ireland government was granted an €85 billion loan in a bid to restore investors’ confidence. These events were succeeded by the publishing of a recovery plan by the Ireland government. The publication was dubbed The National Recovery Plan 2011-2014. Other than detailing on food alongside agribusiness, the publication emphasized on a significant increase in outputs and exports all aimed at steering Ireland from the economic difficulties (David Damien & Mary 2011). ANALYSIS OF THE ORGANIZATION Beef in Ireland is a major contributor to its economy, Ireland’s economy. As a result, there are major qualities that were in demand like the animal welfare assurances, grass-fed beef to mention but a few from all its customers. Ireland is strategically located within a large and affluent European market share. However, under scrutiny, Irish beef industry and Kepak’s future was always under threat due to their incompetence when it came to utilization of overcapacity. The estimate for the failure to utilize their capacity was placed at 15% increase in costs. Despite their being efforts to curb this threat and utilize the capacity, the Irish Competition Authority blocked this move. A government industry initiative had produced a deal to curb the wastage of the capacity before their move was blocked by the Irish Competition Authority. Competition was also noted as a threat to Kepak and the Irish beef industry. The Brazil protein company had vast effects on the Irish beef industry. As noted, the effect was not only based on facts but also from a potential point of view. This is evident in the acquisition of a large poultry processor in north Ireland by a Brazilian firm, Marfrig. Aside from competition, there was co-opetition. Bord Bia made several efforts to emphasize the need for agriculture and food to be at the core of Ireland’s economy. In addition, they highlighted the need for Ireland’s growth of global demand for food with the level of outputs of food from Ireland. It was noted that there exists a barrier, the National scale. Co-opetition was tabled as an alternative to curb this barrier and other challenges faced by the Irish food industry. Co-opetition was defined as a strategy in which various firms could compete in deferent levels and at the same time partner up or rather cooperate in others. Ideally, this strategy was green to the industry and was yet to be put to the test (Meattradenewsdaily.co.uk 2012). Kepak CEO John Horgan noted that since their ‘Celtic Tiger years were behind Kepak, adequate strategies had to be put in place. First and foremost, Horgan highlighted the need for powerful retailers. This was to be achieved by compelling a valuable preposition to strengthen the retailers especially those who held vital positions and influence in the food industry. Secondly, he needed to emphasize to farmers in the beef industry to shift focus to future perspectives. This entailed that the beef farmers had to produce beef differently. Synergy other than being competitors was among the core principle of his second strategy. Most importantly, he had to convince the farms to uphold the beef growing practice. Despite all these strategies, there were still stiff competition and Horgan had to look at all major threats and opportunities that faced Kepak (Ucd.ie 2012). After the foundation and expansion of Kepak, Keating, the founder of Kepak had steered Kepak into means of intervention. It was at a later day that he deemed intervention as an unsustainable strategy. This led to the adaptation of differentiation and customer service. Years later the founder of Kepak, Neol Keating passed. However, he left Kepak in the hands of well experienced managers and a well-respected financial director, Liam Mcgreal. Up to this point, there were still major challenges to both the Irish beef industry and Kepak . All the challenges were highlighted by BSE (bovine spongiform encephalopathy) and the devaluation of the sterling pound in the year 1992. During the rejuvenation of Ireland in the Kepak and the future of Ireland Beef industry, the only largest remaining indigenous industries were fisheries and agri-food. These industries contributed to about 65% of exports of indigenous manufacturing. Furthermore, these industries offered employment for 150000 people (Hbs.edu 2013). This was about eight percent of the total employment of Ireland. It is in the year 2009 that Ireland, using its beef supply chain in which farmers breed and sell cattle to producers, produced about 680 percentage of its beef requirements. It was up to the producers to market the beef to the international market. Despite the strategic measures to curb the economic plunge, research has shown that during the year 2012 the head count for cattle will be 200’000 less. This loss amounts to 300m euros. Retailers are convinced that during these hard times, it is unwise to push for high beef prices considering that the consumption of beef is dropping. An approximate of about 80’000 fewer cattle was recorded as of 2012. These are cattle that were recorded for the export patterns of Ireland and the census data (Ucd.ie 2012) SWOT ANALYSIS Strengths One of the strongholds of Ireland beef industry and Kepak was its supply chain of beef. Before the crumble, Ireland recorded a 680% production of its own beef requirements. The supply chain was simple in terms of cattle farmers sold their produce to processors (Ucd.ie 2012). There after the beef was processed, the processors marketed the produce on an international scale. At the time, 2009, Ireland had more than 130’000 cattle farmers. More than three quarters of these farmers were in active in beef production activity. Other than production, beef processing is also a major success contributor to Kepak and Irish beef industry. Fourth to Brazil, Australia and the US, Ireland is fourth in line in beef production. As early as 1990, Ireland had opted to major on state of the art processing facilities. These facilities met the International standards of quality and animal welfare. As a result of these moves, production changed from producing frozen beef to fresh beef. Ireland beef industry had a lavish market mostly within Europe. More than half of Irish beef production was sold in the UK in the year 2009 only. Other than the market share, Ireland also enjoys a strong customer base platform both on a local scale as well as an international one. Multiple Retailers, continental Europe and the UK are the leading channel for Irish beef. These markets were constantly on price battles and only retailers with reasonable prices stood a chance to prevail in the market. Weaknesses What has not been mentioned are the challenges faced during the plan to recovery of Kepak and Ireland beef industry? What has failed to be captured is that there are numerous issues such as the price situation. These questions that arise are of concern of how long the deficit in both the world market and the EU will prevail for (Hbs.edu 2013)Considering that the plan is implemented, what political and or economic factors can negatively impact the supply and demand for cattle products? Recent survey on the Irish consumer price indicated an increase in beef prices. The increase based on price index data was clocked at 6%. This price index was in contrast to those recoded for poultry and pig meat industries. The poultry and the pig meat recorded a decrease of 6% for poultry and 0.5% for the pork. Again the issue of sensitivity on the meat products is no addressed. There is the need to address the prevailing price levels conflicts. It is unclear if beef is considered a more preferable meal and is being preferred over pork or poultry meat. Needless to say, with the world being the targeted market, it is paramount to point to the high pricing and the impacts these prices will reflect on the international trading blocks and the free market. On the plus side, the pricing of the red meat, mostly beef is cheaper in EU thus making it inevitable for international prices to undermine the EU prices. Furthermore, the prices differences seem constant, and there is nothing to suggest otherwise (Ucd.ie 2012). Opportunities Ireland has unique beef offering that is in demand all over. This is a great opportunity that Kepak and the Irish beef industries should look to capitalize on. Irish beef offers grass-fed-beef. This type of beef is said to be of high quality in taste. In addition to grass-fed beef, Irish beef complies with the animal welfare assurance and full traceability (David Damien & Mary 2011). Secondly, Irish beef industry ought to capitalize on their operation capacity. Over the years overcapacity had been noted as a prevailing set back to the beef industry. Despite the government outlining some strategy to offer the capacity to other investors the move was blocked by the Irish competition Authority. Regardless of this opportunity being wasted, some Brazil based protein companies came to the rescue. Some major Brazilian protein company acquired a large poultry processer. Marfrig was the name of the company and the acquisition was in the year 2008. As a result of this move, the South American companies have brought with them global foot print to held widen the Irish beef industry market (Hbs.edu 2013). Finally, yet importantly, Bord Bia introduced the concept of Co-opetition. This was after Bord Bia noted the essence of matching up the quality of beef from Ireland to the growth of global demand for food. Bottom line, the co-opetition concept was a strategy to make food processing companies compete amongst each other, however, the very companies cooperate in some areas (Hbs.edu 2013). Threats Mercosur is among the greatest threat to the Irish beef industry as of the moment. Mercosur is an agreement between Bolivia(new member), Brazil, Argentina, Uruguay and Venezuela. After the petition to be in the Mercosur, Ireland is anticipating rejection of EU/ Mercosur. It is without doubt should Ireland be rejected from the Mercosur the Irish beef production sector will suffer a major blow (David Damien & Mary 2011). Furthermore, Mercosur are said to have cheaper beef prices that would further undermine the Irish beef sector. On the contrary, beef produced in Ireland is mostly exported. Therefore, with an estimated 80% of beef product being exported, Ireland feel less threatened by the cheaper imports from Mercosur expected to flood the markets. On a plus side, Ireland boost on the fact that they produce grass based beef and have the lowest carbon footprint compared to their counterparts in South America. Ireland perceives themself as luck as in case of any offer regarding beef quota from Mercosur will have political reasons behind it. As a result of the anticipated trade deal between Mercosur and the EU, significant loss will be on the Irish beef sector. The loss is expected to be worth 350 million euros. In addition to that, the deal, if struck, will destroy the tillage industry (David Damien & Mary 2011). Conclusion It is without doubt that Ireland is on track to recovery from its economic plunge. However, as noted in the analysis, there are vital areas that need strengthening. Bord Bia and Kepak have had major roles to play in the rejuvenation of the Irish beef industry (Hbs.edu 2013). Among the noted areas of weakness alongside the untapped potentials as the overcapacity, foreign South American Investors and Co-opetition, Ireland need to capitalize on them to stay on course on their plan to recovery. In addition, the expected exclusion of Ireland from Mercosur will come as a blow to their Beef industry (David Damien & Mary 2011). Their will be plenty of competition from the cheaper option of beef products from Mercosur. However, the impact of the cheap beef from Mercosur will be minimal. Ireland export close to 80% of their beef products and the remaining 20% will be of a small loss. Conclusively, Ireland should capitalize on their quality beef production, the grass-fed-beef and their carbon footprint to stay on edge of any potential competition. References David, H, Damien, P & Mary S 2011, Kepak and the Future of the Irish Beef Industry. Journal for Harvard Business School. Hbs.edu 2013 David E. Bell - Faculty - Harvard Business School. Retrieved from: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=6422 Meattradenewsdaily.co.uk 2012, Ireland - Kepak on the beef and lamb industry. Retrieved from: http://www.meattradenewsdaily.co.uk/news/100112/ireland___kepak_on_the_beef_and_lamb_industry.aspx Ucd.ie 2012, UCD Dublin | Research | Business. Available at: http://www.ucd.ie/research/people/business/professordamienmcloughlin/ Read More