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Report finds drinks industry purchasing is worth over €2.8 billion to irish economy each year

A new report from the Drinks Industry Group of Ireland (DIGI) has found that the Irish industry is responsible for total purchases of over €2.8 billion each year. Industry purchases include: ingredients used in processing such as apples, barley and milk; non-industrial services such as IT and marketing; industrial services; and labour costs and wages. Measuring the value of inputs is a method of evaluating an industry’s contribution to the domestic economy.

The report, Purchases of Inputs by the Drinks Industry by Anthony Foley of Dublin City University Business School on behalf of DIGI, shows that in addition to the direct economic benefits of 64,000 jobs, over €1 billion in exports, €1.8 billion tax revenue in VAT and excise and almost €7 billion in personal expenditure (including VAT), the drinks industry is a very substantial purchaser of inputs.

Wage, salaries and personnel costs are one of the highest inputs and total €1 billion per annum, with retail, wholesale and on/off-trade sectors paying €690 million in personnel costs each year and the manufacturing sector paying a further €311 million.

Purchasing of Irish materials and services for use in drink manufacturing in Ireland is worth €800 million to the domestic economy. Of the total purchases by manufacturers - €1.558 billion which excludes goods bought for resale - a high proportion of those materials and services are domestically sourced, at 42% and 62% respectively. The latter figure includes the 50k tonnes of apples, 200k tonnes of barley, 300 million litres of milk purchased from Irish farmers by the Irish drinks industry each year. The sector is responsible for a far greater proportion of domestic purchasing than the chemical and technology sectors.

While personnel costs are the highest input purchased by the retail, wholesale and on/off sectors, at €690 million per annum; this is closely followed by the amount spent on materials and services other than food and drink at €583 million*. The amount spent on food purchasing is valued at €243 million. The total value of retail sales is €7 billion.

The drinks industry spent €147 million on capital assets and investment purchases in 2010 and estimate a further €450 million will be invested over the next few years.

The author of the report, Anthony Foley, commented: “The drinks industry, both manufacturing and retail, plays a very substantial role in the procurement of inputs as is apparent from this report. Previous DIGI reports have identified the direct economic benefits which derive from the drinks industry in terms of employment, output, exports and tax revenue and the positive impact which the sector has on tourism. An industry also contributes to the economy through its procurement from other suppliers.

“As identified in this report, mainly through the use of official CSO data and identified assumptions where data is insufficient, the drinks industry is a major purchaser of goods and services. This is true of both the manufacturing and retail sectors of the industry. The analysis shows that the manufacturing sector in the drinks industry pays €217 million in wages and salaries, buys €901 million annually in materials, buys €33 million in industrial services and €587 million in other services and will invest over €450 million over the next few years.

“Over 200k tonnes of barley is used annually in the production of whiskey and the different beers. About 45k cows are needed to produce the more than 300 million litres of milk which is used for the different Irish cream liqueurs produced on the island of Ireland. Almost 50k tonnes of apples are used in the production of cider. The retail/wholesale drinks sector sectors pay wages and salaries of €626 million and spends €583 million on services and materials other than food and drink. The on licence sector buys about €243 million in food inputs annually and invested €67 million in 2010.'

The Chairperson of DIGI and Diageo’s European Corporate Relations Director, Peter O’Brien said: “The economic contribution that the drinks industry makes to the Irish domestic economy each year as detailed in this report demonstrates the importance of the sector. What is particularly significant is the high proportion of investment in domestic service and materials - 62% in services and 42% in materials – worth €800 million, and greatly exceeds the domestic content levels of other leading sectors in the country such as the high-tech and chemical sectors. It is apparent that where the industry can, it is supporting domestic business. In addition purchases, the industry is responsible for 64,000 jobs, over €1 billion in exports, €1.8 billion tax revenue in VAT and excise and almost €7 billion in personal expenditure (including VAT).'

*When evaluating the purchasing of inputs, the money spent on food and alcohol by the retail sector is omitted