Small Irish traders join export rush
LIMERICK, Ireland |
LIMERICK, Ireland (Reuters) - When two former fishermen and a friend quit their jobs to start a whiskey business in Ireland's moribund economy, they knew straight away their future lay in selling their wares overseas.
The whiskey makers targeted Europe and America just six months after their first blend was in Irish supermarkets and as Asia's consumption of the spirit booms, the trio expect 90 percent of everything they produce to be sold abroad.
West Cork Distillery is just one example of how Irish companies are looking overseas, rallied by a government which is vying to reposition the country's long-term business model on more labor intensive industries to help spur a recovery that it desperately needs to bring its debts down.
"I think everyone in Ireland is looking to export at the moment, it's only the show in town," said John O'Connell, co-founder of the drinks company.
While local exporters are dwarfed by larger multinationals in terms of output - accounting for less than 15 percent of exports - they employ the same number as the rival juggernauts which include tech and pharma A-listers such as Google (GOOG.O) and Pfizer (PFE.N).
This means their role in job creation is vital in a country where a bloated social welfare bill accounts for a third of all government spending and unemployment remains stubbornly high at almost 15 percent.
"They (small companies) are very important. Individual employers may not create massive jobs, but when you add them up, they are quite large.... Every job is more taxes coming in and less money being paid out in social welfare," said Alan McQuaid, economist at Merrion Stockbrokers.
Exports have played a pivotal role in the modest Irish growth that has set it apart from other bailed out euro zone members.
The interest from firms trading exclusively in the home market and wanting to get into exporting has grown "exponentially" over the last few years, according to the head of the Irish Exporters Association as the domestic market has shriveled and in spite of head winds from the euro zone.
The rise comes at a crucial time as buoyant pharmaceutical exports - driven by eight of the world's top 10 pharma companies which operate in Ireland - may soon sag as the industry faces its biggest-ever wave of patent expiries.
STEEP LEARNING CURVE
Dublin-based Joanna Lovegrove, who splits her time between her two children and her frozen yoghurt business, runs one of the 29 companies selected for an 'X-Factor' style competition to help point food and drink companies at the export market.
Until launching the business in November, Lovegrove was a full-time mother which sparked the idea for the kid-friendly alternative to ice-cream.
"To go into France: I don't know which shops would sell our products so it's a whole new scary learning process," said the co-founder of Chilly Moo who begins the boot camp leg of the half million euro "Food Works" project next week.
The novice company is not lacking ambition however, looking beyond the traditional first-stop of the UK to lucrative Asian markets. "They do like our Irish dairy in Asia," she said.
Shepherding domestic companies to the export market is one of the approaches the government is taking to spur enough economic growth to make inroads into a debt pile set to peak at 120 percent of gross domestic product (GDP) next year.
Similar programs have helped over 40 start-ups in recent years with almost three quarters now exporting, and nearly a third have gone on to secure private sector investment.
The drive to push artisan food and drink products abroad has led to a revival in the agri-food industry, prompting prime minister Enda Kenny to take 20 loaves of Irish bread with him when he met Barak Obama this year.
DOMESTIC DEMAND NEEDED TOO
A short drive from Limerick, a town where the high street is dying as locals struggle with the downturn, Willie Wixted is turning former pig feed into a lucrative export of protein supplements for athletes.
The manufacturer, who employs 13 people and is targeting 50 percent growth per annum, said reducing costs further -- such as wages and rents -- must be a priority.
"I think there is a big job on a national level of adjusting our cost base. I think we got very uncompetitive during the Celtic tiger years," said Wixted, founder of ABC Nutritionals.
"It's hard to see any great revival, that's why I think we're reliant on exports," he said.
Smaller businesses do not have all the answers and not all of them are ripe for export makeover. Only a rebound in domestic demand will give Ireland the acceleration in growth it desperately needs and the government has pushed its forecast for that out to 2014.
Retail sales slumped to their lowest point in 2-1/2 years in June.
Yet with a budget deficit still set to be above 8 percent of GDP at the end of this year and targets to be met under an 85 billion euro bailout, there will be no let up in an austerity drive that will likely hurt the domestic economy even further.
"If you want to have a route to recovery, then you will need to do something about the jobless rates," said Chris Van Egeraat, lecturer at Maynooth University, adding indigenous exporters will not aid the job crisis immediately.
"The recovery requires short-term solutions ... If you're able to stimulate demand, then you really make a big bite into the employment numbers," he said.
One silver lining to Ireland's crisis is its burgeoning reputation as a country that faced up to its problems, something that has helped the whiskey men from Skibbereen when cutting deals from Germany to the United Arab Emirates.
"It's allowing you to open the door a bit. There is an emotional goodwill towards Ireland. Though it won't sell, it will help your case," said West Cork Distillery's O'Connell.
(Reporting by Lorraine Turner, editing by Mike Peacock)
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