Joint Committee on Jobs, Enterprise and Innovation debate -
Tuesday, 25 Sep 2012

Beverage Exports: Discussion with Drinks Industry Group of Ireland

Chairman

We move on to our discussion on the report entitled Beverage Exports 2000-2011 with the Drinks Industry Group of Ireland. I welcome Mr. Kieran Tobin, chairman of the Drinks Industry Group of Ireland, Mr. Peter O'Brien, Diageo corporate relations director for Ireland and western Europe, and Mr. Anthony Foley, senior economist at Dublin City University business school.

Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence you are to give this committee. If you are directed by the committee to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise nor make charges against any person(s) or entity by name or in such a way as to make him, her or it identifiable. I invite Mr. Tobin to make his presentation.

Mr. Kieran Tobin

I thank the Chairman and the members of the joint committee for the opportunity to address the committee on the topic of the drinks industry report. I am the chairman of the Drinks Industry Group of Ireland, Mr. Peter O'Brien is the corporate relations director for Diageo and Mr. Anthony Foley is the author of the report.

Membership of the Drinks Industry Group of Ireland spans manufacturers such as Diageo, C&C, Irish Distillers Pernod Ricard, and Heineken; distributors and importers; and the retail sectors of the industry, both the on-trade, such as pubs, restaurants, hotels, and nightclubs, and the independent off-licence sector. Mr. Donall O'Keeffe, our secretary and the chief executive of the Licensed Vintners Association, is in the Visitors Gallery.

Together, our members support over 62,000 jobs dispersed through every town and village in the country. These jobs range from the barman in the local pub to the factory worker on a bottling line to the tourist centre guide to the marketing manager for many of our major international brands. We also make a major contribution to the overall economy.

This is made not only through employment but also through the €3 billion turnover and €1 billion in exports generated by the drinks sector. Almost €2 billion in taxation revenue from VAT and excise is provided to the Exchequer through the sale of our products in Ireland.

Like many sectors of the economy, ours is facing significant challenges. For example, our most recent mid-year drinks market figures show that sales volumes in the key on-trade sector have declined by 34% since 2007. As a result, employment levels in our pubs have plummeted, with 7,000 full-time job equivalents lost in recent years. Contrary to popular belief, the overall market for alcohol and per capita consumption have declined over the past decade. Average adult consumption levels of alcohol have reduced by almost 20% in the ten years to mid-2012.

While prospects for the domestic drinks market in the short term are gloomy, Irish drinks exports have proven to be a consistent success story over recent times. To quantify the extent of this success and to identify the markets where our products are thriving and the policy decisions that are required to build on this, DIGI commissioned the beverage exports report from Mr. Anthony Foley, who has previously authored a number of studies for us. In essence, the report shows that Ireland significantly over-performs in terms of beverage exports. Our brands of whiskey, beer, cider and cream liqueur are known and respected the world over, are available in more than 100 markets and are among some of Ireland's most celebrated and internationally recognised brands. I include brands such as Guinness, Jameson, Baileys, Tullamore Dew and Magners.

The Irish share of world alcohol exports is 2.4%, compared with 0.8% for overall merchandise exports. With regard to our international position, Ireland is ranked 11th in order of size of alcohol exports, compared with 33rd for overall merchandise exports. For a small country such as Ireland to be in the top 12 global drinks exporters is something of which we should be very proud. The value of our exports increased each year from 2000 to 2003, when it reached €1 billion for the first time. This peaked in 2007, when in excess of €1.3 billion worth of products were exported. While there has been some decline in recent years due to the international recession, growth has resumed and the future remains very positive, given the wider success of Irish food and drink products in key global markets.

The report shows that the United Kingdom and North America continue to be the main markets for Irish beverages, but it also demonstrates the very significant potential for additional sales to China, India and other major emerging markets. For that reason, the drinks industry continues to work very closely with the Department of Foreign Affairs and Trade and the Department of Jobs, Enterprise and Innovation in particular to identify new markets for our products and ease certain tariffs and restrictions that are in place and which are barriers to growth. For example, the industry is involved in an ongoing dialogue with the Department of Jobs, Enterprise and Innovation and the Irish permanent representation to the European Union in Brussels regarding the treatment of alcohol under negotiations for the EU-India free trade agreement. Currently, high tariffs are in place for imported spirits to India, a major emerging market. There will be significant potential for Irish whiskey and cream liqueurs in India when these prohibitive tariffs are reduced. I appeal to committee members to support all such efforts in this regard.

There is a very strong economic payback at home for our success abroad. Increased manufacturing and sales of our global brands sustain local jobs. The agricultural sector benefits significantly from purchases of raw materials, such as barley, milk and cream. Local suppliers of glass, packaging, design and marketing services are major beneficiaries. The impact of beverage exports on the domestic economy far outweighs that of other products manufactured in Ireland for international markets due to the high level of locally sourced inputs. The figure for the beverage industry is 60%, compared with 15% or 18% in pharmaceuticals.

Our exports also provide international profile for Ireland and contribute to our reputation for hospitality and conviviality. Large-scale facilities, such as the Guinness Storehouse or the Old Jameson Distillery, and the small rural pub at the country crossroads are unique parts of the visitor's experience of Ireland. At a time when we are attempting to boost tourism into Ireland and the wider hospitality sector through initiatives such as The Gathering, it is important to remember that major tourism guides frequently state that a night in an Irish pub, enjoying some of our world renowned products, remains a key positive experience for visitors.

This demonstrates the important link between export success, tourism and a vibrant hospitality sector, of which the drinks market is a major part. As I mentioned, this domestic market has suffered significantly in recent times. Latest CSO data, for example, show us that bar sales volumes to July this year were 8.2% below 2011. Such losses cannot be sustained indefinitely and we need to find ways to encourage consumer confidence to boost spending in the hospitality sector. In this regard we believe the measures proposed in the EU-IMF-ECB memo to increase excise, if implemented, would likely lead to higher prices. This would further deter customers from our pubs with a knock-on effect on local jobs, businesses and the wider economy. At the same time it would contradict laudable initiatives such as The Gathering and the reduced lower rate of VAT on food services and other tourism products. Ireland has some of the highest alcohol taxes in Europe and the Government must take this into account when framing budgetary policy.

I hope the report and statement show the importance of the drinks sector to the economy, the success of our products abroad, our important contribution to tourism and the manner in which all of these are connected. My colleagues and I are grateful for the opportunity to address the members and look forward to answering any questions they may have.

Chairman

We will move on to questions.

Deputy Dara Calleary

I welcome DIGI, which represents a very important industry. It is under-appreciated and easy to kick at times, as it were. Bearing in mind the 34% decline in the on-trade, what is the figure for the off-trade?

Mr. Tobin spoke a lot about the success of our exports, which is to be welcomed. Where is the innovation in the industry in Ireland? Where are the new Guinnesses and the new drinks?

Mr. Tobin spoke about increasing the market share in the United Kingdom and United States in particular in recent years. These are the traditional markets. Are we coming up with products that are attractive to those who drink in the non-traditional markets? In 20 or 30 years, will we have a drink the equivalent of Baileys that will come from Ireland and sustain such markets?

What supports are in place? Is DIGI receiving enough support from the agencies, including Enterprise Ireland, in terms of the innovation process and being ahead of the demand curve?

Mr. Tobin referred quite a bit to The Gathering. What ideas and innovations will DIGI bring to the table in that regard? The group represents one of the industries that may gain the most from The Gathering. One of the challenges of The Gathering is that private sector finance must be secured. Has DIGI thought about that?

This committee can highlight the Indian issue. Are there other markets or blockages? Commissioner Reding said on the radio this morning that it is a priority for her, as Vice President of the European Commission, to consider areas that have been blocking job creation. Ultimately, this is what we are all about. What are the key blockages to be addressed?

Mr. Kieran Tobin

Those are all good questions. On the question of how much has gone to the off-licence trade, overall the market has seen a slight decline, by 3.2% this year to date. Has Mr. Foley a figure for the off-trade?

Mr. Anthony Foley

Yes. Approximately two thirds of the 30% decline is due to growth in the off-licence sector. It is not quite one for one; it is a case of approximately two thirds going to the off-licence sector. The off-licence share has increased dramatically. It is now responsible for approximately 55% of volume, with 30% of value. Ten years ago, it was responsible for approximately 20% of value and 40% of volume. Therefore, there has been a significant change.

Deputy Dara Calleary

Can I pursue that? Are the benefiting off-licences in the big supermarkets?

Mr. Anthony Foley

Primarily, the growth is in the supermarkets, the big multiples.

Deputy Dara Calleary

Yes.

Mr. Kieran Tobin

Independent off-licences would be members of DIGI and we know they are losing market share in addition to the on-trade. It is the multiples that have gained.

The question on innovation was very good. Baileys has been the great innovation success of the past 30 years. One of the other great successes has been a very traditional product, Irish whiskey. The company I work with, Irish Distillers, is the primary producer in this regard. We are considering a range of products that were popular in the 19th century, such as pot still products, and bringing them to market. Sometimes there is nothing new under the sun. These are some of the products that are successful abroad as well as at home. We are developing a new range in this area.

Of the traditional products across the sector, I have no doubt that Irish whiskey has considerable potential as it stands, irrespective of innovation. The innovation comes in terms of route to market, marketing, branding and positioning.

The product has the heritage and the tradition and we know how to make it. The innovation lies in its branding and promotion. Globally, approximately 90 million cases of scotch - we measure in 12-bottle cases - are sold. North American whisky sells 50 million cases. Irish whiskey sells just over 6 million cases. We could eat several people's lunches before they even realised, that is, we could double or treble our sales and still only account for a fraction of what the others are achieving. We have a long way to go to return to where we used to be, but we will undoubtedly get there.

In terms of innovation, it is important that we play in the domestic market; that is, companies should develop and try out new products domestically to determine whether the latter will fly. My colleague from Diageo might add something in this regard, as Guinness has been one of the more innovative companies. Sometimes it has done that well and sometimes it has not, but it is active in this area.

Mr. Peter O'Brien

Let us consider two brands, Guinness and Baileys, which one might believe have been around forever. The latter's four flavours - chocolate, caramel, hazelnut and biscotti in addition to its original flavour - were developed in Ireland and represent more than 20% of total Baileys global exports. Guinness Mid-Strength, one of the great innovations in terms of having a lower alcohol by volume, ABV, level, is growing in Ireland and overseas. Another product is Guinness Black Lager. Guinness has been Guinness for 250 years, but our black lager has considerable export sales in the US. These are just three examples of innovation by a strong domestic company at St. James's Gate.

Mr. Kieran Tobin

Deputy Calleary asked about Enterprise Ireland, Bord Bia, etc. Like the food sector, we have become a bit more fashionable since the demise of the Celtic tiger, in that people have gone back to their traditions. The Government has set out the Harvest 2020 vision of food and drink exports amounting to €12 billion. Drinks account for just over €1 billion of that figure, but there is no reason they could not increase to €2 billion in the medium to long-term. In our experience, the State agencies have been supportive, although they are probably more important for small companies.

Mr. Peter O'Brien

I would refer to a new element in the form of the Department of Foreign Affairs and Trade and our embassies. They have received a strong brief to support trade, which links with the issues of trade agreements, access to markets, etc., and are increasingly playing a role on behalf of all companies. We should compliment the Department in this respect.

Mr. Kieran Tobin

Meetings have been held between my company, Diageo and the people running The Gathering. Both of our organisations have a significant presence in the tourism sector, for example, in the form of visitor centres. Guinness receives more than 1 million visitors per year. The two distilleries of my group receive more than 350,000 per year. Negotiations are under way, although I am unsure as to the detail. Perhaps Mr. O'Brien might be closer to the matter.

Mr. Peter O'Brien

No, I do not know the precise details, but we are playing a strong role. We are good at marketing and will take on the role of marketing Ireland for The Gathering. Many of those involved have asked us to participate. Money is involved, but so are skills and expertise, which our company, Irish Distillers and others are bringing to bear.

Mr. Kieran Tobin

The India issue is being worked on strongly at EU level and a free trade agreement is being sought. Russia's accession to the World Trade Organisation, WTO, recently bore fruit. While Russia did not have tariff barriers, it had many non-tariff barriers to trade. Our products, including Jameson Irish Whiskey, and other products had been doing well in Russia, but with the country's accession to the WTO, all of the non-tariff barriers will disappear and the market will become considerably more open.

Our permanent representative in Brussels does a good job in this area and would be well allied with countries such as France and the UK, which are also large exporters. They form a strong coalition, which is to be commended.

Deputy Peadar Tóibín

Fáilte roimh anseo inniu. I have a question about the industry's structure. It was rumoured a number of years ago that several dominant organisations within the industry may have led to a lack of growth. Increased diversity, particularly in respect of spirits, has led to an increased emphasis on exports. What are the witnesses' opinions in this regard? The Cooley Distillery created a competitor, on the back of which it attracted a foreign investor. Some people believe that this stimulated brand competition.

I might not be correct, but most of the market's large players are foreign-owned. Does this have an effect on their view? Are the products in question additions to their core products or are they focused on driving them?

The micro-brewery industry is an emerging sector, but remains comparably very small. I studied the issue and learned that the micro-brewery industry as a whole had received an investment of €70,000 in 1996, which was equivalent to the promotion of Trinity's sports day by Smirnoff Ice, a tiny product of a large company. Diversity among the micro-breweries seems to be creating product innovation in that industry.

Regarding the structure of industry sales, on-licensed trade seems more valuable to the State than off-licensed trade. If a fisherman catches a fish, it is worth X amount. If a tourist catches a fish, it is worth more. Perhaps the Government should consider ways of promoting on-licensed consumption as opposed to the more dangerous off-licensed consumption.

MEAS is an organisation for the proper consumption of alcohol supported by the drinks industry. We were trying to set up a pilot project in Navan, County Meath, in which all alcohol bottles and cans would carry the stamps of where and when they were sold so that the adults who gave them to young people could be traced. Such activities would promote the proper consumption of alcohol and lead the Government to adopt a more relaxed attitude towards excise, etc.

Mr. Kieran Tobin

I will ask Mr. Foley to discuss the on-licence and off-licence topic.

Mr. Anthony Foley

Ar dtús, an féidir liom freagra a thabhairt faoi easpórtáil agus faoi mhéid an chomhlachta? The scale of a company is a major determinant of its exports' performance. Historically, we have been a good exporting nation, but that has primarily been driven by multinationals. Some 90% of our exports come from multinationals. Scale is particularly a determinant where consumer branded products are involved, in that it would be difficult for many small companies to develop export capabilities abroad.

Some members may recall our idea about building a trading house to act as a co-operative for small companies to export. It never worked well. Although admitting it almost sticks in my throat, one of the main issues encountered when trying to develop Jameson Irish Whiskey internationally had to do with the fact that its parent company is an international company, with access to shelf space, markets, etc. An Irish company without those international connections would not have been able to do it. When Grand Metropolitan took over Baileys Irish Cream, the former's international marketing capacity gave the latter space and prominence in duty free shops, etc. As a straight Gilbeys of Ireland product, it would not have achieved that level of prominence.

As to scale, the structure of the industry is dominated by large operators but, like the dairy industry, which is trying to promote amalgamations with an eye towards building capacity to do research and development and improving expenditure on marketing.

That would be a major determinant of the export performance.

With regard to the on-licence and off-licence side, there are approximately 5,000 people employed in off-licences, with approximately 55,000 people employed in bars, including hotel bars, around the country. Some 70% of the VAT receipts come from the on-licence side and 30% come from the off-licence end. With regard to tax associated with employment, the on-licence side is clearly the contributor. Receipts from excise are more of a 50-50 split, as it is the same excise whether alcohol is sold off-licence or on-licence. Approximately 55% comes from the off-licence side, with 45% from the on-licence side. The Deputy is absolutely correct in the basic comment that the on-licence side provides the main economic benefit in terms of employment, tax receipts and so on.

Mr. Kieran Tobin

I was interested in Deputy Tóibín raising the issue of micro-breweries and the burgeoning industry here, which is great. I work for a multinational company but it is interesting to see this type of industry. In the United States there is an explosion in the use of micro-distillation or craft distillation, which we may begin to see here as well. It will be based on whiskey but it will also take in white spirits like gin and vodka, which are more immediately saleable because whiskey must be aged for a minimum of three years before it can be sold. That side of the industry will come to fruition as well, which will play with the concept of Ireland as a food and drink island.

People will come to taste our products and it will be part of the tourist experience to go to the Guinness Storehouse and a small whiskey company in Dingle. I know somebody starting such a business in Dingle, which is a great tourist centre. Tullamore Dew has just announced it will build its own distillery and it has opened a visitor centre. I am sure Jim Beam, the company which bought the Cooley Distillery, will upscale and upgrade the Kilbeggan centre and push that product. There is a burgeoning expansion in the area and from our perspective in Jameson, the more competition there is, the better. We are not competing against each other. I have provided the statistics; there are 6 million cases of Irish whiskey, 90 million cases of Scotch whisky and 50 million cases of North American whisky. There are probably 200 million cases of vodka. That is what we are after. We have managed to break out of that cycle.

Deputy Peadar Tóibín

The more players we have, the more the industry will be lifted.

Mr. Kieran Tobin

Absolutely.

Deputy Peadar Tóibín

On certain Scottish islands there may be three distilleries operating. What about an excise promotion structure for micro-distillation and micro-brewing? It may not necessarily be in the direct interests of large multinationals but for the smaller producers under a certain volume of production, is there a system where lower excise is imposed?

Mr. Kieran Tobin

I believe there is in other markets but not here.

Mr. Peter O'Brien

The only differentiation with regard to beer is in beverage alcohol volume. In other words, for lower strength beers there is a reduction in excise. That does not relate to production volume. To reiterate the point and as a representative of a large beer manufacturer, our craft beer is Smithwicks, with Smithwicks pale ale the latest innovation. Craft beers are growing and they have a significant role to play in pubs. Beer consumption is declining in Ireland and it is being beaten by wine in many cases. The more we can do to promote the micro-brewery business and get people back to appreciating and drinking beer, the more positive it will be in promoting Irish business.

Deputy Peadar Tóibín

With regard to responsible drinking and tackling under-age drinking, what steps can be taken by the organisation?

Mr. Kieran Tobin

The MEAS organisation has the consumer-facing brand called DrinkAware. That was put in place by the drinks industry approximately eight or ten years ago, and it has been building since. It is the only significant initiative in terms of funding and presence, and it has achieved certain things. Clearly it has not achieved all it set out to do but we would be very happy to work with the Government on this. We would love to have a conversation with the Government about what we do, and how we have put in €20 million or the equivalent into MEAS and DrinkAware. We would like to see how to co-operate to address the issues facing our industry and society in general regarding misuse and abuse of alcohol. We are certainly open to those kinds of discussions.

Senator Feargal Quinn

That is interesting. What are the threats? Around Europe there appears to be a sense that too much alcohol is being consumed. Will the witnesses provide figures for alcohol consumption per head of population in Ireland? Many of us find almost unstoppable the calls for more restrictions, higher taxes, bans on sports sponsorship, etc. Have we really got a much bigger problem than other countries? We keep hearing that this is the case but every now and then we hear that we drink less alcohol than people in other countries. On that basis, how will the companies look to handle those threats in future?

Mr. Kieran Tobin

I will give some top-line figures before passing to Mr. Foley, who can flesh them out. Our per capita consumption has decreased by approximately 20% since 2001, which was the peak of our per capita consumption of alcohol. At that stage, per adult consumption was 14.4 litres, and that is now down to approximately 11.7 litres. That is a decline of approximately 20%. If a reduction in per capita consumption would solve our problems, we would be on that road. The industry would argue that per adult consumption is not the issue but rather the misuse of our products. That is against the total market or per adult consumption.

Mr. Anthony Foley

Mr. Tobin has provided the main statistics. The measurement is litres of pure alcohol per adult, as opposed to per capita. Funnily enough, that puts us at about the same level as the French, and we see those as sensible, moderate and organised drinkers. The number is in the top third of European Union members, and by international standards it is relatively high, although not nearly as high - relatively speaking - as it was a decade ago.

The Senator is absolutely right in that internationally there is concern about the abuse of alcohol. Deputy Tóibín referred to one of our problems in Ireland, namely, that enforcement is pathetic. Listening to Joe Duffy's radio show over the past few days we would have heard about drunk students on Grafton Street, and as far as I could see, not one of them was arrested. They were lying around the place and urinating on the streets. There are many laws but we just do not implement them. We establish as many laws as we like but if we do not implement them, it will not do much good.

A venture capitalist with a bunch of money would probably prefer to put it into information technology rather than alcohol, given the societal and political pressures. I do not speak for the industry but I do not believe anybody would say that an industry can survive where its product is being abused and creating more negatives than positives. The long-term interest of the industry is clearly better served by a sympathetic public policy environment, and that will only come about when there is moderate and organised consumption of alcohol.

One of our big problems in Ireland is the way we consume alcohol and abuse through binge drinking. It is not a nicely moderate drink with a meal but rather people going out to get drunk. We must fundamentally change that culture. That is difficult to achieve. Although we have spoken about prices and taxes, we should remember where the temperance movement began, with Fr. Mathew when we were poverty-stricken. Why is there a limit on the number of licences? In the 1900s there were so many pubs and shebeens proliferating the authorities felt the need to put a stop to the process. That did not come about because of wealth or income. There is a deeply imbued cultural element in the Irish with regard to alcohol, and it will require a much more sophisticated and thoughtful approach to deal with the issue than most of the policy suggestions we have heard.

The sponsorship of products by alcohol companies has been mentioned. Does anybody really think a group of drunken 18-year-old students going to a local convent are influenced by a competition being called the Heineken Cup as opposed to a rugby cup? If they are from my part of the city - the north side - they do not even know what rugby is.

We have a major problem with the abuse of alcohol in particular ways and we need to be much more energetic and sophisticated in how we deal with it. One criticism I would have of this Government and of previous ones is that at times they would criticise MEAS and so on but the amount of resources put in by Government for health promotion, alcohol education and proper leadership in terms of sending leading sportsmen into schools to persuade people against alcohol has been negligible. I agree we have a major problem. It does not help the industry in terms of growth and development but it is something we will have to deal with.

Deputy Dara Calleary

In terms of the consumption figures, has the profile of the consumer changed? Are more younger people drinking now than previously? Mr. O'Brien mentioned that we have moved from beer to wine and spirits. Has that changed as well?

Mr. Anthony Foley

The first thing, which we never talk about given gender politics, is that if one goes back 40 years, by and large, women did not go into pubs. They might have had a glass of sherry whereas now they are equal partners in the drinking culture. That, in itself, has driven up average measures of consumption per head. People are consuming at a younger age and are probably consuming larger volumes at a younger age. Many of us might have tried alcohol when we were 13 or 14 years of age but we would not have had the money to do so regularly.

There is another feature which is fundamentally different. I am displaying my age but my father liked his pint but he would never drink in the house, except at Christmas. Why would one drink in the house when one could go to the pub? It is now more usual to consume alcohol at home, particularly wine. Wine now accounts for one quarter of all alcohol consumed and approximately 80% of that is consumed at home as opposed to in hotels, restaurants, pubs and so on.

There have been changes, particularly in home consumption. That has been widened with the regulatory environment - drink driving, the smoking ban and so on. Much more alcohol is being consumed at home where children may see that happening more than in the pub.

The bottom line conclusion is that much more alcohol is consumed in an unregulated environment where no one measures the measure, no one counts the number of drinks one has had and there is no cash register ticking as one buys another round. That has increased the pressure to consume alcohol. There have been very significant changes over the longer term in the consumption pattern.

Senator Mary M. White

I welcome the gentlemen and thank Mr. Tobin for his chairman's report and congratulate Mr. Foley on his excellent report on beverage exports from 2000 to 2011. The value of exports by the drinks sector performed very well increasing from €854 million in 2000 to a peak of €1.324 billion in 2007, or 55% over those seven years. From the viewpoint of the direct benefit to the economy, the share of those exports which go directly into the Irish economy through wages, spending on Irish raw materials and on services is highly significant in sustaining our economy, thousands of households and many communities.

The estimate that half of the value of exports flows into our economy in this way reflects the many raw materials sourced in Ireland, such as barley, apples and milk. The Baileys example is one which illustrates this well. According to the study, three quarters of its raw ingredients and packaging come from Ireland, including 220 million litres of fresh Irish milk. I am familiar with the Baileys product as a co-founder of Lir Chocolates. We use the unique Baileys liqueur in the production of our Baileys chocolates which are, in turn, exported.

My job was to try to get Baileys to become a partner of Lir Chocolates and I spent seven years doing that because I had to deal with changes of managing directors over the years but eventually it was agreed with Mr. Ned Sullivan. It was an extraordinary catalyst for Lir Chocolates and gave it an energy and excitement because we had a partner with a worldwide company to get into export markets. Everybody around the world knows Baileys, so we are indebted to Baileys for that and for the continued success of the export of our Baileys chocolates.

As Seanad spokesperson on jobs and innovation for Fianna Fáil, my focus is on encouraging every sector of our economy which has the capacity to increase desperately needed exports and maximising the resulting domestic expenditures. For us to help the drinks industry going forward, I would strongly encourage it to set out an ambitious three to four year export plan and the projected domestic expenditures which will benefit Irish companies. The Jim Beam group purchasing Cooley Distillery and Irish Distillers expanding into the United States is tremendous and the Grant company developing Tullamore Dew is fantastic. I do not need to be convinced if companies must be owned by other companies to get into a market. Many Irish people do not really understand how difficult it is for small Irish companies which do not have the marketing spread or tentacles around the world, to get new markets.

If the industry commits to strong export growth, it strengthens the case for very active Government, political and diplomatic action to overcome unjustified tariffs and non-tariff barriers by other countries to Irish drinks exports, such as the high tariffs imposed by India to which Mr. Tobin referred. I would encourage our committee to fully support such action but stress that it would help if the industry set out its plans to contribute to exports and jobs in our economy over the years.

Mr. Tobin referred to the drop in consumption of 20% over the past ten years. Ireland still has a very high level of alcohol consumption. We all know that. There is no doubt it is embedded in our culture. I travelled all over Italy and France for one month on my summer holidays with my husband and there is no doubt that other cultures do not binge drink. They enjoy alcohol as part of their daily life and do not drink to extreme. We have a cultural problem.

Mr. Tobin referred to Ireland having some of the highest alcohol taxes in Europe but we also have extreme price discounting and special promotions of alcohol. The industry should recognise these issues. The current political debate on alcohol policy, including minimum pricing and the extent of sports sponsorship by the drinks industry, reflects the desire of the public and politicians to address these very issues.

This committee is the most important one in Leinster House. The No. 1 problem in Ireland is employment - keeping people in jobs and creating new jobs. If the industry can come up with something, we will help it. The positive side of it is that it makes a tremendous contribution to the employment of Irish people.

Mr. Kieran Tobin

I thank Senator White for those encouraging words and thoughts. It was an interesting thought to articulate what we do internally in our companies - looking at things five years and ten year out. As an industry, it would be interesting to articulate that in a more coherent way than we have been doing. As an industry we have looked at what the level of investment will be over the next four to five years, which is €500 million.

In Midleton, Irish Distillers will invest more than €200 million in expansion of the distillery and maturation capacity. Guinness will invest €150 million in new brewing capacity in St. James's Gate. Tullamore Dew is building a new distillery and Jim Beam is going to invest in Cooley so when we add all that up, we are talking about €500 million over the next five years with all the construction jobs and all that goes with that. Ultimately, there will be manufacturing jobs.

Inevitably there will be additional employment in sales and spin-off jobs. Several of today's newspapers carry a nice photograph of the 35 graduates Jameson is sponsoring to act as ambassadors for the company in 28 different markets. That is a part of job creation which is sometimes missed. It would be interesting to articulate that more clearly.

In regard to ownership, Irish whiskey has to be distilled and matured in Ireland, irrespective of who owns it. Irish cream liquors are also subject to strict rules. Pernod Ricard, which is ultimately a French multinational, owns Irish Distillers and it sells Jameson as an inherently Irish product. It also owns Havana Club but it is not going to make a Cuban rum into a French rum. It is focused on heritage and the origins of its products. Ownership is less important than strong branding. The French have appellation d'origine contrôlée for their wines and we have it for our whiskeys, cream liquors and other products.

I take on board speakers' comments about pricing and other issues. We endeavour to express our views on sponsorship and we engage with the Government where possible.

Senator Deirdre Clune

I thank Mr. Tobin for his contribution. It is good that so many Irish products dominate the top ten lists globally. Mr. Tobin outlined the importance of that success story and why new markets need to be developed. He has also suggested some ways in which we can facilitate that task.

In regard to responsible consumption of alcohol, has the issue of below-cost selling influenced the sector in any way? Has Mr. Foley studied the issue? We are considering whether we should introduce a floor price for the sale of alcohol.

Mr. Anthony Foley

A number of points can be made on the issue. Scotland has introduced a limit but virtually no alcohol is sold in Ireland at that price. In Britain there is a wide variety of cheap spirits but that is not so much the case in Ireland. If we were going to introduce a minimum price it would have to be much higher than the Scottish one to have any effect. I am not sure that a minimum price would make a huge difference. Suppose we state that a bottle of whiskey or vodka must be sold for €15. What is to stop the supermarket from then selling crisps at 1 cent per packet? They can introduce all sorts of complementary products to get over the price. As an economist, I would have to argue that the higher the price, the smaller the consumption, but the relationship is such that enormous price increases would be required to achieve a significant reduction in consumption and a significant effect on health. An increase of 2% or 5% is not going to make much of a difference. I would bet any money that if one polled a group of young teenagers who should not be drinking in the first place, they would not even know the price of the products they purchased. They would estimate the price at €4.50 or €5 but they would not be able to accurately estimate a price of, for example, €4.67. An issue certainly arises in respect of the off-licence price of alcohol.

There are growing concerns throughout Europe about youth drinking not following the patterns of parents' consumption. For example, police in Rome are worried about drinkers congregating at fountains and squares, which was unheard of five years ago. The drinking problem among Irish youth is also a wider international problem. Price matters but one would need to create substantial price differentials to induce substantial reductions in consumption.

Deputy Michael Conaghan

Mr. Foley spoke about the north side of Dublin. Brian O'Driscoll is a prominent northsider.

Mr. Anthony Foley

That is right. He went to Blackrock to develop his rugby. I never forgave him for that. He should have gone to St. Paul's.

Deputy Michael Conaghan

Are plans in place for further consolidation at St. James's Gate? I see a lot of activity behind the walls and around Steeven's Lane.

Mr. Peter O'Brien

We are consolidating all our brewing activity into St. James's Gate. We are investing €153 million in this project, which will support all our domestic production. More than 70% of the Guinness produced at St. James's Gate is exported. This is very much an export story.

Deputy Michael Conaghan

Several years ago there were plans for a new brewing complex somewhere up the coast.

Mr. Peter O'Brien

We developed a plan in 2008 to build a huge brewery in Leixlip.

Deputy Michael Conaghan

It was a very bad plan.

Mr. Peter O'Brien

That was 2008 and this is 2012. The economy has changed significantly. Spending €153 million in today's environment, with all the consequential jobs in construction, is a positive story for Guinness and for Dublin.

Chairman

I think Deputy Conaghan regarded it as a geographically bad plan inasmuch as it would affect his area.

Senator John Kelly

I welcome the delegation. How big a factor do commercial rates play in sustaining jobs in the sector? Several years ago there were 72 licensed premises in the small west of Ireland town in which I live but there are only eight today. I see pubs closing on a regular basis. Is this a big issue for publicans and has a submission been made to the Minister? A national review of commercial rates is required across every sector of the commercial retail world.

We do not yet know how the proposed property tax will be implemented but I am worried that small publicans will be required to pay commercial rates as well as property taxes on their overhead accommodation. Sometimes people neglect to pay attention to the scenarios that may arise. I saw a situation arise in respect of the second home tax, whereby small publicans living one or two miles down the road were told their overhead accommodation was liable for the tax. Has a submission been made to the Minister on these issues in light of the impact they have on the drinks industry and small publicans?

Mr. Anthony Foley

Publicans consider rates as a significant and onerous penalty both in terms of concept, because until now only the commercial sector paid local authority taxes, but also because they do not take account of ability to pay. A pub might have the same valuation now as it had in 2007 - there have been minuscule changes in the poundage rates in local authorities - and is in effect paying the same amount as it did when business was booming in 2007. It is a significant cost element and both rural and Dublin publicans have made submissions to local authorities to seek improvements. On a general basis, they believe the various proposals from the local government efficiency review group should have been implemented to reduce the cost of local authorities and pass on some of those cost savings in reduced rates.

One of the worries about the proposed system is that the commercial sector will remain separate from the general population sector. Even if there are electoral controls over local authorities when they are eventually given responsibility for the property tax, councillors may avoid excessive increases for fear of losing their seats but that will not apply on the commercial side because it forms a minor part of the electorate. The ideal for much of the commercial sector is an integrated and uniform local authority tax which is levied in the same way on everybody and ideally reflects ability to pay. They are certainly not happy with the present system or the efforts made by local authorities to reduce the burden.

Chairman

I thank the witnesses for appearing before the committee.

The debate has strayed into foreign trade and health issues but there are a number of issues we as a committee can take on. We will look at our programme of work next week to examine the areas on which we can focus.

On the issue of the effect on consumption of increasing the price of alcohol, which is probably more related to the health issue, my impression from working in the industry in the past is that if the price of alcohol is set too high, people will mix their drinks which is not a good result. That consideration does not seem to feature in any argument. Has any research been done on that? If young people start mixing the wrong drinks, we will have problems.

Mr. Anthony Foley

There is not a great deal of research on that. A basic problem, as the Chairman indicated, is that there is a slightly naïve view that if the price of alcohol is pushed up that will solve the problem. However, there has been cross-border shopping with people going abroad. Some 6 million people still go abroad and if the price of alcohol is very expensive here, people will bring back three bottles of whiskey instead of the one bottle they would have brought back previously. The effects of increasing the price of alcohol are complex. A recent effect of the high price of alcohol has been the switch to buying alcohol in the off-licence and home consumption of alcohol. That means people are consuming more alcohol while saving money but they are doing so at home as opposed to in the pub. The price-quantity relationship is more complex than is usually presented.

Chairman

I think Mr. Foley is right. Does Mr. Tobin wish to add anything further?

Mr. Kieran Tobin

No. I simply wish like to thank the Chairman and members of the committee for an interesting and stimulating discussion during the past hour and a quarter. We are pleased to be here and appreciate this opportunity to put our report and case forward on various issues.

Chairman

Did Deputy Collins wish to add a further comment?

Deputy Áine Collins

I thank the gentlemen for attending. Has any research been done on how the problem of high alcohol consumption among our youth can be dealt with from the perspective of the drinks industry? A huge change has occurred in the past 15 years in that young people now drink at home or drink high volumes of spirits before they go out, as opposed to going out and enjoying a few beers as was the case ten or 15 years ago. That is a big cultural change not only in Ireland but across Europe. Has the group done any research on that, particularly on the high number of alcoholic drinks such as alcopops that are sold?

Mr. Anthony Foley

Specifically, we as the DIGI have not done research on it because we concentrate on the tax and economic development side. Research would have been done in this area and people would have been asked what influenced them to drink, what age they started to drink at, were they influenced to drink because of peer group pressure and how much they drink. There would be information on that. Where we would be weak is on solutions, on what we can do to make people not do this. I was under the illusion once upon a time that if people were heavily involved in sports they would not be out drinking because they would be training but someone pointed out to me the prevalence of a drinking culture at discos in rugby clubs. Therefore, it is a much deeper problem.

Mr. Kieran Tobin

The drinks industry must be and is extremely sensitive about communicating with or asking questions of those under the age of 18. The industry does not ask them questions. That is one of the reasons we set up MEAS to explore this more fully. MEAS, which owns the DrinkAware brand, might come before the committee sometime and talk about the research it has done and the activities it undertakes. It talks to and carries out research among those under the age of 18. Some of the numbers are disquieting and some of them are encouraging. The problem is complex. If this area is of significant interest to this committee, a short session with MEAS would flesh out the detail on this area. The drinks industry does not get involved in this area.

Chairman

I thank Mr. Tobin for that offer, but this is an issue with which the health committee is dealing. It is important that we recognise that the drinks industry group is willing to put a good deal of money into this area. It is clear from today's discussion that it is to the benefit of the industry to do this.

Mr. Kieran Tobin

Absolutely. It is in our self-interest in many ways.

Chairman

I will recommend to the health committee that if it has not invited that group to appear before it that it should do so. I thank the witnesses for their contribution.

Sitting suspended at 2.45 p.m. and resumed at 2.50 p.m.