I thank the Chairman for his introduction and for giving Food and Drink Industry Ireland the opportunity to make a presentation to the joint committee on the issue of marketing of food to children.
FDII is a business sector within IBEC that represents manufacturers and suppliers of food and drink. I propose to cover three areas, an overview of the Irish industry, the changing consumer and the industry's response to the changes.
The Irish food and drink industry has a turnover value of €23 billion and accounts for 9% of total gross domestic product. If internal economy links and capital flow are taken into account the sector accounts for almost 50% of the wealth generated by manufacturing industry in the economy. The sector employs 50,000 people directly and 60,000 people in distribution and other services. It purchases almost €5 billion worth of agricultural products from Ireland's 120,000 farmers annually.
The industry is uniquely regionally spread, constituting the most important business activity in 12 out of the 26 counties in Ireland. The sector is predominantly Irish-owned and key decisions on its investment and development are made in Ireland. It supplies 90% of the €7 billion food and drink products we consume annually.
Food consumption within and outside the home constitutes almost 20% of consumer spending and is the biggest single category of consumer spending. The sector exports almost €7.5 billion worth of food and drink products to 80 countries worldwide each year. With very little import content and a positive capital inflow from abroad through profit repatriation from global Irish food companies, the food and drink sector is the single most important sector in the economy.
The sector faces major challenges across a range of issues. From farm to fork, EU and world trade policy have a profound effect on the Irish food and drink sector. Common Agricultural Policy payments to farmers and market support systems underpin basic agricultural production. CAP-related quota regimes specifically control production of dairy products and, in the past, sugar. World Trade Organisation policies on the abolition of export subsides, reductions in domestic supports and greater market access have an impact on the sector.
While presented as responses to consumer concerns or best scientific practice, EU policies on food safety, food hygiene, environment, animal welfare, food labels and claims have a major impact on basic production costs and innovation routes to market in the food and drink sector. As Ireland is a surplus producer and exports 85% of the food and drink we produce, measures geared towards managing EU surpluses or reducing self-sufficiency have a greater impact on Ireland than on countries that have large home markets.
Pay and general business costs, a significant portion of which are generated by Government or local authorities, have increased by almost 50% since 2001. Food prices at retail level in Ireland have increased by only 4.5% and EU-wide food prices have increased by only 5% over the same period. The food and drink sector exports 30% of its output to dollar denominated international markets, so the fall in the value of the dollar has also reduced returns. The sector has been unable to recover increased business, labour and compliance costs in domestic or export markets. This erosion of competitiveness is not sustainable. Through a combination of increased food safety awareness and consumer demand for traceability, compliance costs in the sector have increased substantially and again are not being recovered in the marketplace. Increasing business costs and a greater regulatory burden thus reduce the resources that should be focused on innovation.
Consumers are busier than ever before because of changing work patterns, increased female participation in the workforce, more time spent travelling and more demands on time. The needs of consumers change dramatically depending on whether they are in busy work mode or relaxed weekend mode. The 2005-06 Bord Bia annual report noted that this has led to a polarisation in consumer choice between value and premium products, health and indulgence, and convenience and experience.
In the past, food was simply consumed for sustenance and enjoyment. Nowadays, with increased prosperity, food is recognised as a key determinant of physical and emotional well-being. Most people believe that good food can enhance body and mind. Treating and pleasure is more important for consumers. In recent years, food consumed outside the home has moved from a level of 20% of total consumption to over 35%.
We have seen growth in a trend known as income complexity. Consumers limit spending in some areas of their shopping so they can spend more on others, typically luxuries. Busy lifestyles and a demand for convenience led to a change from cooking from scratch to using ready prepared ingredients and ready to eat foods. While there is an increased demand for easy meal solutions, greater occasions of snacking and convenience consumption, there is also a demand for quality and a sense of wellness.
A balanced diet and an active lifestyle are the key preventive measures of obesity. At the launch of the national task force on obesity in 2005, the Minister for Enterprise, Trade and Employment stated that obesity was a complex condition that had an impact on virtually all ages and socioeconomic groups. He also stated that while it was true that physical activity could protect against unhealthy weight gain, ongoing and regular physical activity was protective, not previous physical activity or temporary bouts of activity such as enrolment in exercise programmes.
Awareness of diet and nutrition has become an increasingly important factor in consumers' food choices in recent years. This increased awareness is a natural consequence of the rise in diet related health concerns, provoked by growing incidence of lifestyle related conditions such as obesity, diabetes, high cholesterol levels and hypertension.
The root causes of such conditions are multiple, complex and often difficult to disentangle. As well as diet, physical activity levels are very important. The food industry has a vital role to play in bringing expertise and understanding of consumers' motivation and choices to the debate. Industry seeks to address the issue with the involvement of all stakeholders, including consumers and Government.
Recent studies have identified that the decline in human physical activity could be a major cause of obesity. Human daily physical activity has declined dramatically in recent years while obesity levels have soared. In Ireland, numerous surveys support the claim that physical activity is of significant importance in combating obesity. Exercise has been identified as the number one area in which people feel they should do more to improve their overall health. Lack of time and motivation are the main reasons people do not adopt a healthier lifestyle.
The food and drink industry has demonstrated its commitment to addressing changing consumer needs, such as responsible advertising to children. Food and Drink Industry Ireland supports the fundamental objective of ensuring that advertising and marketing are legal, decent, honest and truthful. This is especially pertinent in the case of children to ensure that they are not misled.
Ireland was one of the first European countries to implement a children's advertising code successfully. This code, which came into force in January 2005, has strict criteria on how products aimed at children, including food and drink products, can be advertised on broadcast media or indigenous television channels, in what circumstances children can be shown them and what type of endorsements may be allowed. According to the Broadcasting Commission of Ireland, BCI, until recently only two complaints had been received. This is broadly in line with expectations as the children's code has further regulated a sector where there were historically low levels of complaints.
The BCI undertook a technical review of section 7 of the code, which deals with diet and nutrition. The review found that modest growth in advertising in the Irish television market had occurred. It also found that in the year since the code's introduction, one breach occurred of the diet and nutrition provisions in the 270 hours of programming monitored. No complaints had been received by the BCI or the Broadcasting Complaints Commission under this section of the code since January 2005.
In addition to statutory regulation and codes from the regulatory body, we have self-regulation. This means the adoption by the advertising industry of standards drawn up by and on behalf of all advertising interests. It involves the enforcement of those standards through the commitment and co-operation of advertisers, agencies and media. In Ireland, the Advertising Standards Authority for Ireland, ASAI, is the independent self-regulatory body set up and financed by the advertising industry. It is committed in the public interest to promoting the highest standards of advertising and sales promotion. Members of the ASAI are required to abide by codes and not to publish an advertisement or conduct a promotion that contravenes code rules. The code also ensures children are not misled by advertising in any way, which is detailed in appendix 2 of the presentation document. Furthermore, the Institute of Advertising Practitioners in Ireland and the Association of Advertisers in Ireland offer a children's advertising advice service that provides expertise to industry and the public on legal, decent, honest and truthful advertising to children.
Self-regulation has definite advantages over sole regulatory intervention in speed and flexibility. There has been increasing recognition of the effectiveness of self-regulation by authoritative and independent studies, most recently the study commissioned from the Hans Bredow Institute of Media Research by the European Commission.
Obesity has many causes and we do not have evidence that advertising is a factor. Few countries or provinces, with the exception of Sweden, Norway and Quebec, have banned TV advertising to children on ethical grounds. In fact, overweight obesity rates in Sweden are above the European average while the actual impact of advertising censorship to children has proved to have no impact on obesity in some countries. Recent studies identified the decline in human physical activity as a possible major cause of obesity. Human daily physical activity has declined dramatically in recent years while obesity levels have soared.
I will now deal with the second industry response, which is education on balanced diets and lifestyles. The Nutrition and Health Foundation was launched in January 2005 as an industry-led body that provides consumers with evidence based information on nutrition and physical activity, to enable them to make informed lifestyle choices.