Standing in one of his mushroom tunnels, Frank Donnelly is reflecting on the challenges his business faces today.
Top of the list is price – already working to low margins and facing competition from cheaper imports, many in the Northern Irish mushroom industry used a government-run renewable heating incentive (RHI) to invest in biomass boilers. As well as encouraging the sector to consider renewable energy, subsidy payments also helped offset higher input and labour costs and offer customers a competitive price, explains Donnelly.
But a national exposé and scandal revealed the unaudited scheme was being abused by non-genuine applicants who claimed payments without need of a boiler. Northern Ireland’s Department for the Economy eventually slashed subsidy tariffs, but not before millions of funding was paid out, leaving those who had genuine investments without the means to pay back major loans.
For Donnelly, who had already invested in one biomass boiler and only claimed the RHI for an additional, smaller one, the reduction in subsidies meant his books no longer balanced, and he was recently forced to let a team supervisor go, picking up the hours himself to work a seven-day week.
“We priced the effect of the RHI in, and then they took away half of the subsidies,” he explains. “It wasn’t abused by the mushroom sector. It moved us in the right direction into renewables and also offset the price by enabling more efficiencies and allowing the industry to compete with cheaper imports.”
Elaine Shaw of producer organisation Northway Mushrooms adds: “The benefits of the RHI did not stay with producers. Now the price is set, based on this additional income. Compost prices have gone up, labour has gone up.”
The RHI scheme was managed by the department for the economy, headed up by the now First Minister Arlene Foster, and the subsequent scandal is seen as the public catalyst for a major political stalemate currently playing out in Northern Ireland, where the leading parties have been unable to agree on key issues and consequently haven’t held a parliament at Stormont for 10 months.
At a time of Brexit uncertainty, this lack of political leadership is proving disastrous for businesses across the region, including fresh produce, as budgets remain unapproved and major public infrastructure projects are put on hold.
“We have nobody shouting our corner,” explains head of sales at Willowbrook Foods, Gwen Murray. “The two biggest challenges are we need government up and running so we have a clear direction. A lot of it is driven by Westminster at the moment. We feel far away from there. On the positive side, Northern Ireland is coming up in Europe discussions,” she adds.
With local political frustration a hot topic, Brexit is far from the only challenge facing the sector. But while produce companies are keen to convey a ‘business as usual’ spirit, it’s not quite enough to hide concerns over the impact if a so-called hard Brexit closed what is essentially an unmarked border between Northern and the Republic of Ireland.
Daily deliveries to the Irish market as well as exports via Dublin port to the UK and beyond are threatened with delays and added costs if the border was subject to customs checks, never mind the logistical chaos for those who commute daily, or even own land that straddles the border.
“We’re being asked by customers what is our strategy for Brexit, but we have no direction from government,” says Murray. “We’ve had to create a strategy for if there was a hard border and new tariffs. We would look at having some sort of distribution centre in the Republic. If it’s a soft Brexit, it will be business as usual.”
With such turmoil at a political level, it would be unsurprising if produce businesses were holding off on investments until they have more certainty. But if anything it is spurring them on, as concerns of availability in labour in particular are prompting an accelerated investment in automation.
Willowbrook is building a new mashed potato facility that will be highly automated, according to production director Andrea Harrison, while leading mushroom supplier Hughes Mushrooms was poised to build a new “status quo” facility in England, before Brexit prompted a new focus on reducing labour and increasing efficiency at the new site.
Hughes is keen to stress the new facility, a multi-million investment in growing and packing mushrooms in Yorkshire, does not detract from supply or investment at the company’s headquarters and production site in Dungannon, which supports 30 local growers. At the latter site, the company has begun a major investment in a new standalone high-care facility, which will accommodate growing demand for added-value and ready meals, as well as allowing greater flexibility in recipe development.
“The Howden investment was an inclusive and strategic movement to help this business grow. It’s about adding new customers and additional volume,” explains commercial director Pearse Donnelly.
Emmet Hughes, business development director, says: “The world-class facility we’re creating in East Yorkshire is unrivalled in Europe in terms of its efficiency and environmentally-friendly credentials. We believe the scale and ambition of our investment in our sites is unprecedented in the UK mushroom industry.”
Investment is noticeable at firms across the region, and it was also one of the reasons Nathan Crozier decided to join prepared veg and mushroom supplier UMI Foods, where he is now sales and marketing administrator. “The company has invested £1.5 million over the past two years in storage expansion and facilities,” he says. “One of the reasons I wanted to come to the business is the amount of investment made by the directors. They’re happy to invest in the business and the people. As a young person that’s what you want to hear.”
The company recently rebranded to UMI Foods, away from its original Unimush name, to reflect an increasingly broad product portfolio. The ratio of wholehead to prep is currently 60:40, although the aim is to grow the prepared side of the business, says Crozier.
Co-founder and industry veteran Plunkett Curry is pragmatic about Brexit and what the future may hold. “We have growers both north and south of the border so our trucks cross the border quite a bit. There’s no point being fearful, there may be opportunities in it as well,” he says.
While labour costs are going up and margins are tight, Curry says UMI Foods will continue to use manual labour on its prepared products to preserve the company’s quality credentials, although much of the packing side is now automated. “You have to become more efficient, for example we put solar panels in to reduce our energy bills. That helps to offset costs elsewhere,” he adds.
Convenience has formed the core of the Mash Direct business since 2003 when owners Tracy and Martin Hamilton tackled “scary” returns in veg supply by investing in new processing equipment and launching a global brand. With a youthful marketing team powering Mash’s use of social media and video, recent activities include advertising at a recent Six Nations rugby match between Scotland and Ireland, transforming a bus stop into a farm in the centre of Belfast to bring the country to the city, and sharing drone footage of the farm on social media.
Growth areas for the brand include the boom in gluten-free marketing for the company’s products that fall into this area, says Tracy Hamilton, as well as a growing exports business in the Middle East and the US. The Hamiltons are well-known and active business leaders, sitting on various sector boards and having hosted several high-profile visits from politicians and royalty to their site in Comber, County Down. “Our biggest worry is the border, we need the movement and we don’t want any restrictions,” she says.
It’s an outward-focused approach and a clear sign that in the current political climate, to succeed, Northern Irish businesses must take the future in their own hands.
Fertilising the future
Northern Irish producer organisation Northway Mushrooms has invested £25 million into a state-of-the-art compost yard that will supply 40 per cent of the group’s needs and marks its first step towards vertical integration.
The facility, described as the first of its kind in the UK, will produce high-quality compost with all processes under cover, preventing any associated odours from affecting the local community. The new facility will include five bunkers and 21 tunnels on a 17-acre site, producing 800 tonnes of phase three compost.
“This compost yard is safeguarding the future of our growers and their previous investments,” says Northway Mushrooms’ Elaine Shaw.
Currently, Northway’s growers must buy compost from Irish producers, as well as supplementing with imported compost from Belgium where necessary.
According to grower Frank Donnelly, whoever produces the compost is “in the driving seat”, while Shaw adds: “The big driver is quality as the compost will travel fewer miles a week. We’re looking at a moisture content of around 63 per cent. At the moment there is such demand for compost, it is sold and bought at any level of moisture.” Works have begun and the site is due to be operational by September 2018.
Using funding drawn down from the EU’s PO scheme, Northway has also been helping growers invest in anything from tunnel infrastructure to IT monitoring systems that help create worker efficiency. The company is also dipping its toe into diversification, as a way of expanding without threatening the business of local packers and customers. Last year Northway began packing strawberries direct to local retailer Dunnes, which allowed the company to make an initial point of contact in a different sector.
Heritage ambition
Former botanist at Raymond Blanc’s Le Manoir kitchen garden, David Love Cameron, is heading up a project to restore Northern Ireland’s only Victorian walled garden. Located just outside of Belfast, Cameron supplies around five leading chefs from the city with a range of niche and heritage produce varieties. “This is our second season now and we are learning what sells well. We’re looking at high-value produce such as baby veg, heritage carrots, fennel, beets and baby leaf mixes,” says Cameron. “It was obvious there was a real niche for this – there are some growers who only supply chefs, but nothing on this scale.”
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