Wacky inventions and ideas dry up with patents slump

Published on Sunday 12 July, 2009.

The number of patents filed for clever wheezes has fallen, leading to big problems for the smart economy, writes John Reynolds

OUR ability to create a ‘smart economy’ depends on whether we can pioneer new inventions, technology and widgets. But as the recession worsens, figures released last week suggest the pace at which we’re doing this is slowing.

There were only 318 patents granted here last year — almost half the number granted in 2002, according to the Patent Office’s 2008 annual report published last week.

Furthermore, the Sunday Independent has learned that the number of new Irish inventions this year may drop by as much as 10 per cent, judging by figures for patent applications in the first half of this year — 448 against a total of 1,007 made last year.

While UCD churns out one invention every week on average, Nicola Field, founder of the now defunct Inventors Association of Ireland, says other activity outside the realms of business or academia is slowing.

Despite building a network of about 350 inventors, her group struggled to get government grant support in 2006. She then formed a smaller advisory service called the Inventors Garage, but that too is now struggling.

“I’ve now taken a year out from the business. At its peak, I’d get about two or three serious enquiries by email a day, but now I might get one a month. Perhaps people are sitting on their inventions until there’s a chance again that they might get financial backing,” she says.

Since the 18th Century, Irishmen and women have been responsible for an impressive variety of inventions: a compound that led to a cure for leprosy, the world’s first guided missile, high-speed photography, the electrocardiogram, the dynamo, the heat exchanger, the rechargeable battery, the world’s first submarine, the Ferguson three-link tractor, the rubber tyre, the hypodermic syringe, the ejector seat, the steam turbine and the caterpillar track.

With such a strong tradition of science and invention, and although we lag behind countries like Holland, Denmark and Finland in terms of the number of new inventions we patent, we actually seem to punch above our weight.

“We’re very good at valuable inventions for niche markets. Our indigenous companies have a ready market of multinationals here that they can supply,” says Richard O’Connor, manager at Cruickshank patent attorneys.

What we’re not so good at is taking new inventions through the investment cycle to IPO stage for example, where investors can exit. This can discourage early financial backers, according to Joey Mason, partner at venture capitalists Delta Partners.

Although the government topped up Bank of Ireland and AIB seed capital funds by €30m in February, early stage funding for ventures outside life sciences, pharmaceutical and healthcare sectors — where investment is strengthened by multinationals here — has become difficult to secure.

“There aren’t too many funders for ventures outside those areas. Private money, from friends, family and through stockbrokers appears to have dried up, so the pot of money available here is now a lot smaller,” Mason adds.

“Venture capitalists were always cautious, but now they’re more risk-averse than ever, although early stage funding, especially for technology ventures, has always been difficult to secure,” says Maria Johnston, operations manager at DCU’s Invent Centre, where the latest discovery is a technology of interest to solar panel manufacturers.

One innovative way of boosting software and technology start-ups in particular would be to create an internet-based exchange for seed funding that operates like a stock exchange but facilitates the raising of smaller amounts of money, internet entrepreneur Patrick Collison argues.

He and his younger brother had to go to San Francisco to get just $15,000 in start-up funding for their software venture Auctomatic.

Now millionaires, having sold their business to Live Current Media for an estimated €3.2m, they are among a number of role models that may inspire more scientists, engineers and other inventors in farms, factories, laboratories, offices and sheds around the country.

Offaly native, inventor and engineer Stephen Grant’s home heating boiler-manufacturing business has dozens of patents granted and pending. It turned over €75m last year and employs 270 people.

George Young successfully patented energy-efficient power supplies for electronics such as laptop computers. He sold his company, Commergy to Texas Instruments, last year for an undisclosed sum.

Graham O’Donnell and Ian Flitcroft of Orbiscom found similar success after patenting their electronic payment software. They sold the business in January last to credit card issuer Mastercard for an estimated €73m.

Thanks to seed capital and support from state agencies, electrical engineer Mike McCormack’s firm FMC Tech has been granted eight patents, has raised €3.5m since 2003, and plans to raise a further €5m next year.

With pilot projects currently running with the ESB and several UK power companies, the firm is focused on perfecting a system of electricity sensors and related software.

By helping them reduce power cuts and manage electricity generated from wind farms, it will be a fundamental component of smart power grids that will be built throughout Europe and the US.

Meanwhile, as swine flu spreads around the globe, serial Mayo entrepreneur Leonard Moran’s biotech firm Ovagen has patented a way of producing the germ-free chickens and eggs which are vital to pioneering research into viruses and illnesses such as cancer.

To date the firm has raised €12m in its bid to build a hi-tech factory in Ballina, from where it aims to supply pharmaceutical giants around the world.

While Ireland’s enquiring minds continue to hatch new discoveries like these, perhaps there’s some hope yet for our smart economy.

Original article can be viewed here.

Out of Gas

Published in Irish Times Innovation magazine, Monday 6 July, 2009. By John Reynolds

GAS SUPPLY: With Europe’s gas fields near depletion, Ireland must face the risks of not having a secure gas supply

DEPLETED GAS fields are becoming increasingly important commercial assets, offering further business opportunities and creating a means of improving our fragile energy security.

Any debate over the Corrib Gas field should not lose sight of this, while also bearing in mind the stark economic risks of not having a secure gas supply, according to the Ecology Foundation, an Irish green business group.

It has highlighted the fact that, since we’re at the end of the pipe, with 90 per cent of our gas coming via interconnectors with Britain, we should bear in mind that our neighbour almost ran out of gas in February of this year. Its saving grace – and probably ours, too – was the depressed state of the economy, resulting in reduced demand from industrial users, the UK shadow energy secretary later revealed.

If we’re to prevent shortages, we should look ahead to what can be done with the Corrib field in 20 years’ time, once it is more or less empty, according to Mark Rutledge, the Ecology Foundation’s country director for Ireland. As with our previous main source of gas in Kinsale, which used to meet about half of our needs but now meets less than 10 per cent of demand, it may have the potential to become a gas reservoir.

Dublin-based, AIM-listed exploration firm Island Oil & Gas is currently looking at the potential to store gas in depleted gas seams at its Old Head and Skull fields in the Celtic Sea.

This would involve leasing the space to a joint venture partner, who would buy gas during the summer, when it’s cheap, and sell in the winter, when price and demand is at its highest.

“It’s a low-risk, medium-reward option. It’s a way of monetising our assets, it provides cashflow, which is vital at the moment, and it could be profitable over 20 or 30 years. We’re making sure it’s feasible and we’ve had initial discussions with partners and customers,” the company’s chief executive, Paul Griffiths, said.

Another alternative would be to effectively create an energy hub in northwest Mayo, Rutledge claims. “Once Corrib has declined, it’ll afford us a huge opportunity to use the empty gas fields as a carbon sequestration store. This would make north Mayo an excellent location for heavy energy industry because carbon sequestration will be a huge determining factor for the location of industry once full carbon auctioning comes into the traded sector.

“As well as providing a welcome economic boost, the same infrastructure could be used as the service centre for future offshore tidal, wave and wind farms dotted around the west coast. Belmullet could become the Aberdeen of the green energy sector in the future,” he adds.

A testing facility for wave and tidal energy with a link to the electricity grid is due to be in place by early next year, according to energy minister Eamon Ryan. Building on this infrastructure, while also bearing in mind various operational technology and software will be needed to monitor and run it, would boost skilled employment in engineering and associated roles.

Since our climate already benefits from warm Gulf Stream waters, another option may be to tap into geothermal energy through the Corrib gas wells, once they are empty.

The future energy division of Austrian oil company OMV has recently spent €2 million looking at the potential to do so there, where about 1,000 existing oil- and gas-producing wells are depleting at a rate of about 30 per year.

OMV is investigating whether suitable wells can be adapted and retro-fitted with a device called a borehole heat exchanger. This can be used to provide heat and hot water to households in the winter, also providing a means of cooling their homes in the summer months, using a heat exchanger that is more energy efficient than existing ones.

According to the Geothermal Energy Association of Ireland, this type of energy could provide as much as 15 per cent of Dublin’s hot water and heating. Given the high proportion of CO2 emissions generated by heating homes and other buildings, geothermal therefore offers the means to reduce these substantially, providing the heat and hot water can be piped to where it is needed.

Until one or all of these opportunities can be realised, there are mounting risks to Ireland’s energy security, Rutledge says. Russia’s Gazprom supplies about a third of Europe’s gas, but it is struggling to keep up with demand, he argues.

As we languish at the end of the European pipeline, strategist Christophe-Alexandre Paillard at France’s Ministry of Defence has claimed Gazprom’s three biggest gas fields are 50 per cent, 65 per cent and 80 per cent depleted, respectively.

Our single existing gas storage facility at southwest Kinsale could meet about a third of our daily needs, and Ireland’s position on the periphery of the European network means it is more vulnerable than any other EU country. Britain faces “very serious risks” in terms of energy security, according to consultants CapGemini, suggesting our position is even worse.

“The Irish Government has made a commitment to renewables energy and it is hoped that renewables will become the main source of power for Ireland.

“However, while we transfer to renewables our reliance on imported fossil fuels cannot be continued,” says Rutledge. “Corrib gas is the bridge to the low-carbon economy and the bridge to energy security.”

View original article here


New drill in exploration sector as firms go in search of less risky opportunities

Published on Sunday June 21 2009

A lack of appropraite financing and major discounting has left the Irish oil exploration sector gasping for air, writes John Reynolds

ALTHOUGH Serica Energy struck oil last week in what was the first oil discovery off the west coast in 30 years (they were drilling for gas near the “bedevilled” Corrib field in the Rockall basin), it will need to be a “slam-dunk discovery” if oil and gas exploration here is to have a more positive future.

Until then, gas exploration firms such as Island Oil & Gas and Providence subsidiary Eirgas, which this week secured an option to buy 40 per cent of the Kinsale Head assets in the Celtic Sea from Petronas, are settling for less risky opportunities and more dependable cashflow in gas storage and trading.

Oil at about $70-a-barrel (compared with its high last year of $147), a squeeze on finances and staggeringly high deepwater drilling costs mean some industry players view Ireland as a high-risk, high- reward location.

Their appetite for gambling on offshore exploration has been dampened and the planning complications at the Corrib gas field could be deterring potential new entrants to the sector, according to Andrew Harwood, an analyst with the industry’s most respected research firm, Wood Mackenzie.

This is perhaps borne out by the fact that Providence Resources was the only other applicant for a licence to explore in the Rockall Basin. “If you had to choose between somewhere that hasn’t previously had such hitches and somewhere that has, like Ireland, then you mightn’t choose Ireland,” he adds.

Smaller exploration budgets are also having an impact. Harwood says: “In northwestern Europe, we’re beginning to see cuts in capital investment, particularly in fields that are already onstream. Companies had aimed to extend the life of existing wells, but now they’re tending not to do so. As that outlook filters through to exploration budgets, they’ll favour areas where they have more certainty than there appears to be in Ireland.”

Budgets have been compounded by the gap that has opened up between the projected costs of developing a field — especially offshore, where operating a rig can cost €500,000 a day — and the potential payoff, which isn’t as great now that the oil price has fallen from its previous high.

“There hasn’t been a slam-dunk discovery of oil or gas for some time, and the one that has been discovered — the Corrib gas field — has been bedevilled,” says Job Langbroek, analyst with Davy stockbrokers.

“It’s widely perceived that the industry made a lot of money a few years ago. But the oil price is down by about two-thirds from its peak, whereas costs might have only fallen by about 25 per cent, so there’s a mismatch there,” he adds.

Any investor or potential new entrant might therefore think twice before they sink a few holes — and perhaps tens of millions of euros — anywhere near our shores, particularly when they could be getting a more lucrative piece of the action by buying shares in our own seasoned players such as Tullow Oil or Dragon Oil, who by comparison have been very successful in finding oil in Africa and Asia.

In the meantime, smaller companies are investigating other ways of monetising their assets. Having previously planned to develop and deplete the Old Head and Skull fields in the Celtic Sea, Dublin-based Island Oil & Gas is currently looking into the possibility of leasing the space to a partner or client who would buy gas cheaply when demand is low, store it there and then sell it during the colder months when demand is high. Providence sees similar opportunities at Kinsale Head nearby.

“The project would provide a steady cash flow, which is very important in the current climate, for perhaps 20 or 30 years. Now that oil prices have dropped from last year’s high, we’re all adjusting to the new regime and measuring everything against that,” says Island’s managing director Paul Griffiths.

Opportunities exist during every downturn, however, and another small exploration company believes it may have found one off the coast of Dublin.

Michael O’Leary — no, not that one — managing director of VP Power, will know later this year whether he has been proved right.

A team of geologists and geophysicists recently spent six weeks conducting a seismic exploration of the Kish basin, where he believes that underground coal gasification (UCG) technology can be deployed to pump gas from a huge billion-tonne coal seam.

Raglan Capital is believed to be raising money for the firm, and O’Leary claims the board’s combined experience means it is well-versed in the highs and lows of the exploration sector.

“The way I see it, the oil price is at around $70 at the moment, up from its low of $38 a barrel. So in that respect it’s risen. It’s forecast to rise further by Christmas, which I would see as helpful.”

He’s also adamant that there is something of an upside to what seems to be a wider downturn in the sector. “We’re finding that the market for equipment such as drilling rigs has collapsed. They’re readily available and the cost of hiring one is considerably lower than it was.”

O’Leary anticipates capital expenditure of about €3m, and his project, the later stages of which may involve Bord Gais, will only be commercially feasible as long as the oil price stays above $35 per barrel.

Although the technology that VP’s project would involve is relatively ancient — Dublin’s old Ringsend gasworks used to heat up coal to produce ‘town gas’ when it was in operation — many countries with large coal deposits, such as China, South Africa and India have recently invested billions in UCG plants, recognising that the technology is cleaner than mining a coal seam and then burning the coal.

Whether that elusive slam-dunk will materialise though, using old or more modern methods, remains to be seen.

Exam was paper exercise for business leaders

Published on Sunday 14 June, 2009. 

Can we teach business acumen to Leaving Cert students, asks John Reynolds

POTENTIAL multi-millionaires, chief executives, and tycoons of the future were among the 12,000 or so students who took the Leaving Cert business exam. But would today’s business leaders be able to pass it?

Alan O’Hara, MD, Nokia Ireland

THANKFULLY, yes, I think I would pass the exam. I was pleasantly surprised to see the case study — featuring a solar panel installation business that is being hit by both the slowdown in the construction sector and the credit crunch, resulting in tight cash flow and the need to implement a staff pay cut — was very relevant to what many Irish companies are experiencing.

However, I’d have preferred the exam to focus on the key challenges that face all entrepreneurs such as identifying the correct channel, pricing, marketing, financing, production, quality and care.

Ulick McEvaddy, Co-founder, Omega Air

I would’ve passed it with honours. A lot of it was dealing with technical issues of entrepreneurship. Nowadays, business people need to be able to deal with bureaucrats more than ever because they rule your life at the moment and we’re handing more and more power to them.

There was a question on marketing hoodie sweatshirts to teenagers that seemed difficult enough, asking students to explain market segmentation. The case study on Liam and his solar panel business was tough but relevant.

The exam paper doesn’t strike me as being relevant to true practical entrepreneurship though. Very few entrepreneurs can write down their business plan.

David McRedmond, CEO, TV3

THERE was a lot of administrative stuff in the paper on aspects of dealing with Government that might make people tear their hair out, but I think I’d just scrape through with a pass.

A lot of questions were unduly focused on administration and dealing with officialdom though. Business isn’t all about IBEC or the trade unions. It was semi-state territory rather than Silicon Valley.

Apart from anything else, it doesn’t excite you so it’s dulling the subject. As scary and tough as the recession is, at least it’s exciting.

The case study question was very good though. The business case was quite real — it asked tough questions and it was very timely. It’s difficult to teach business on a course. It’s better learned on the job, from people you look up to and other business people around you.

There’s more excitement to be had around marketing, for example. Business is about a good idea — are people interested in it? And can you make money from it?

Gerry McCaughey, Co-founder, Century Homes

I’M pretty positive that I would pass the paper but it did give me pause to think about a few of the questions. Actually when I was in school, in Monaghan CBS, the equivalent subject was not taught but another student and myself actually passed the exam after reading the textbook

The paper seems a little shy in the area of entrepreneurship, which is a pity, as I believe that it is extremely important to encourage students to look at opportunities to establish their own businesses. The Ireland of the future is going to require a strong entrepreneurial spirit.

I would have liked to have seen more emphasis on entrepreneurship and marketing as I believe that it is critical for the country to continue to foster and develop a spirit of “let’s have a go at this”.

Patrick Coveney, CEO, Greencore

I would pass it but there are several sections that I’d find difficult.

The paper is too vocational though, and too technical. It does not pay nearly enough attention to the underlying building blocks of a successful business career. In essence, I would like to see more of a focus on problem solving, creativity, and leadership than is evident in this exam paper.

It’s more important for young people (and indeed for us all) to learn the fundamentals of how businesses work, and on how to lead than to master more technical points on insurance, legislation, tax, and data protection.

Shane Nolan, Head of wealth management, Merrion Capital

ALTHOUGH I’m probably a bit rusty on giving very precise answers to some of the definition-based questions, I’d like to think that I’d still be able to pass it.

There’s a big emphasis on matters of administration or business management, with less than I would have expected on entrepreneurship and risk taking — factors which are much more important to the building of a vibrant economy going forward.

The applied business question, which covered a renewable energy business going through a difficult trading environment, was a very topical subject.

Overall, I get the impression that the curriculum gives students a good grounding in management, administration, and basic legal issues as well as in marketing and cash flow management — which are all important for survival and success in business. However, I’d like to see some more emphasis on risk taking in general and, perhaps, increased focus on business start-ups.

An observation on The Ryan Report

ONE of the outcomes of the Ryan report here in Ireland was that the media reported on the frankly obscene wealth of many of the religious orders here and around the world.

I see no reason why any of them should be allowed to hold onto their wealth, which runs into billions of euros in the light of the child abuse scandals here and in the US.

Hoarding such vast fortunes – and the horrific effects they have wreaked on their victims – demonstrates that they care nothing for their fellow men or women.

So hit them where it hurts. Strip them of their wealth – the public coffers badly need it.

Put the money into health and education, mental health care and therapeutic facilities for the victims they have left in their wake.


Secret of a perfect pint is in the science

Published on Sunday 10 May, 2009.

From fizzy pints to the secret formula, John Reynolds looks behing the scenes at the Guinness laboratory

SEVERAL huge cylindrical brewery tanks loom overhead as a sweet malty aroma wafts through the air outside Diageo’s St James’s Gate brewery.

The yeast used in Guinness is grown only here at St James’s Gate, and is so valuable that a reserve stock is kept locked away in a safe somewhere. If anything happened to the main supply, then this could be used to replenish it in just a few hours so that drinkers wouldn’t go thirsty.

Guinness celebrates its 250th birthday this year, and the Sunday Independent is here to meet some of the scientists that work at Diageo’s recently established Global Beer Technical Centre.

There’s also a chance that I’ll stumble across that top-secret strain of yeast. It’s been used since the 19th Century and legend has it that it’s descended from the strain that was used by Arthur Guinness himself.

The yeast — wherever it is — isn’t the only treasure here. Diageo made profits of £2.3bn on £8bn of sales last year, and a hefty chunk of its Irish wage bill has made some car dealers very happy. Several million euro worth of Mercedes and Audis, VWs, BMWs and a few expensive 4x4s, plus the odd Toyota supermini are in the car park.

On the way to my first meeting, I descend some steps to walk through a tunnel, one of several that wind their way underneath this huge site. The safe could be in any one of them.

Working from a nearby block of offices and laboratories, Frank Lynch, technology and development director, and his team have two pilot plants, tasting rooms and a vast knowledge bank at their disposal. The science and innovation behind the perfect pint has taken place here since 1901, and is now fundamental to success in Diageo’s overseas markets, where Guinness sales grew by six per cent last year. Particularly important is Africa, where a third of all Guinness is sold and where sales are up by 13 per cent.

“Brewing is knowledge intensive and we create the know-how to continuously monitor our drinks’ quality and their production processes,” says Lynch.

“Our costs are critical to our profitability and our ability to sustain growth. We look for inefficiencies. We hunt down and eliminate waste.”

Having worked here since 1980, he oversees a team of about 20 people, about 12 of whom are currently in Africa, with the remainder based in Dublin, where another 37 people work in related roles. All of his colleagues have taken brewing and packaging exams, adding to their strong core competencies of microbiology, engineering or food science MSc. and PhD graduates.

“We link up different fields of knowledge by moving people between operations and the R&D. On average, only one in 100 innovations will succeed, so we need technical and commercial due diligence to mitigate the risks involved in developing new drinks,” he adds.

Diageo’s nearby pilot brewing facility houses €2m worth of shiny cylindrical tanks and a maze of metal walkways, pipelines and valves, switchpanels and computers. In one corner some steam hisses out of a valve, as process development manager Joe Bergin shows me around. Perhaps the safe is hidden in here somewhere.

The pilot brewery’s 300-bottle capacity means that a new product can be created in a day and despatched to a small trial group of consumers for feedback, while a 6,000-bottle brewery on the floor below facilitates larger trials.

“Having this beside our traditional brewery allows us to compare new techniques with old traditions so that we can come up with future innovations,” technical director Christian Van der Heide says. His brewing career spans more than 20 years and has included overseas stints in Germany, Canada and Belgium. He is also president of the European Brewing Convention, a brewing science group.

Finding the optimum flavour is an exact science and testing drinks from the company’s partner breweries around the globe requires both human tasters and electronic ones.

Surrounded by shelves full of bottles of Guinness and other Diageo drinks in the company’s laboratory, chemist David Jackson uses all kinds of wizardry such as mass spectrometers and tasting machines to take 100,000 analytical measurements every year.

In the nearby tasting booths, 10 qualified tasters regularly taste, detect and describe the drinks’ good and bad flavours and aromas, comparing them to an ideal profile. “Being a Guinness taster sounds like the ideal job, but it can be exhaustingly hard work. They spend three intense hours concentrating and analysing 30 different attributes of beers and then scoring them between zero and 100,” he says.

Science is also behind the famous Guinness widget. Packaging manager Joe Whyte, working with his colleague Frank Lynch, took five years to develop it. Starting life in the early Nineties, it initially came in the form of a small plastic syringe. This was used to suck up some liquid and then inject it back into the glass to create the head.

After experimenting with thousands of ping-pong balls, their next widget was an expensive and cumbersome plastic chamber that sat at the bottom of a can. Success came eventually with the floating widget, however: a plastic ball with a tiny hole in it. It fills with gas and liquid, which creates a head when it is poured from the can.

More recently, they invented the rocket widget for bottled draught Guinness, which is especially popular in the US and Japan.

With wings to stop it coming out of the neck of the bottle, Diageo’s British widget manufacturer uses specialist machinery to make it there.

Once a new drink or new widget hits the market, brewmaster Fergal Murray, the face of Guinness, travels around the globe, speaking to audiences that range from the company’s 20,000 employees to brewing aficionados and the media.

He recently trained 40 US Congressmen to pour a pint of Guinness, has rung the Stock Exchange closing bell on Wall Street and has launched new drinks in Nigeria, Ghana, Finland, Brazil, Singapore and Korea.

One of the first people to get a PC at St James’s Gate, where he started as a research chemist,Fergal Murray’s 25-year career has involved stints in the US and Africa.

“In growing markets such as Asia, people will pay a premium for a product that tastes and looks great. They’re interested in its history in Ireland, in what makes Guinness special and what makes it tick,” Murray says.

Speaking of which, surely he’s the very man who knows where the secret yeast is kept, In the same way as when you’re waiting for a pint of the black stuff to settle, so my patience is eventually rewarded.

A replica of the legendary safe is on view to the public in the Storehouse, he reveals. “But the original safe is in a strong room, where it cannot be accessed for security reasons, next door to one of the director’s offices,” he concludes.

Update and work in progress

I haven’t updated this site for some time, partly due to a slow start of the year, and partly due to a couple of technical issues I had with this and with WordPress.

I’m still writing the Eco:nomics page in Irish Times Innovation business magazine, and I should have an interview published in the May edition which is out shortly.

In the meantime I’ll try and post some comment pieces under the Observation tag/category on here.

Work in progress at the moment includes a number of news features for the business pages of the Sunday Independent, and I’m also very much open to ideas along the lines of quirky economic indicators and ‘freakonomics’ type stories which illustrate economic trends, such as this one. (also posted below.)


Young ones smoking rollies again

By John Reynolds
Sunday April 19 2009

IT now costs as much as €8.45 to puff — or cough — your way through a packet of cigarettes, so it’s no wonder more and more smokers, and students especially, are rolling their own.

Sales of John Player & Sons’ Golden Virginia rolling tobacco have lit up by about 20 per cent so far this year. Tesco Ireland reports an increase of 10 per cent, while other market sources indicate rolling tobacco sales are up by about 14 per cent.

One emerging trend is that people smoke rollies during the week and then cigarettes at the weekend, according to a spokeswoman for John Player & Sons.

Tobacco firms are also increasingly targeting hard-up students with new packaging similar to that of cigarettes, in a box also containing the papers.

“They’re particularly popular with young girls, who roll up and have them in the box ready to smoke. It also means they can be bought from vending machines,” said Liam Buckley, a former cash and carry manager for wholesalers BWG who now manages NUI Galway’s campus shop.

The market for “rollies” is worth about €75m here according to retail figures, representing about four per cent of the €1.8bn overall tobacco market — about 80 per cent of which smokers cough up to the taxman.

The grey market is also doing a roaring trade however — it has dented the legal tobacco market by about 5 per cent, retailers say, denying the taxman some funds.



A Day in the Life: Aldi

Published on 14 December, 2008. By John Reynolds

 The economic downturn puts German supermarket giant Aldi in prime position to up its share of the market to 10 per cent, writes John Reynolds

‘WE actually look forward to having just a sandwich on a Friday,” Giles Hurley, group buying director for Aldi’s Irish stores, says, with a hint of irony.

A hi-tech kitchen above its distribution centre and office headquarters is the first stop in our behind-the-scenes tour to find out what it takes to muscle in on rivals Tesco and Dunnes Stores, who currently dominate Ireland’s €15bn-a-year grocery market.

Today garlic bread, coleslaw, several different cheeses, a range of crisps, ham, steak, Madeira cake, orange juice and coffee are on the menu. Hurley and his four-man buying team spend four afternoons a week tucking in to over a dozen bite-sized courses, sampling foods for taste, quality and appearance and comparing them to other stores’ products.

While our photographer samples several succulent forkfuls of steak, I discover that the supermarket does — to my untrained and unsophisticated palate at least — sell the best-tasting garlic bread, Madeira cake and orange juice.

In a recent Christmas-themed taste comparison in Britain, the store’s mince pies beat those from ultra-expensive Harrods for taste and quality. Saving about 30 per cent at Aldi on other brands doesn’t mean compromising on quality, however. Coffee comes from Bewleys, crisps from Tayto producer Largo Foods; while meats and cheeses often come from smaller specialist producers.

Being a food sampler isn’t just about being a real food enthusiast. Hurley and his team have all had organileptic training, meaning their palates have been “calibrated”.

“We took a course that taught us to understand where you taste different things on your tongue and how to describe different taste sensations. In between different foods, we use milk and lemon squash to help clear any lingering tastes.”

Hurley got his first taste of food haggling at markets in China, where he spent a year teaching English after studying history at Trinity. “I did a cookery course when I was 18 and I’ve always enjoyed working with food,” he adds.

From the kitchen we head through a busy open-plan operations room that is humming with activity. Twenty-eight people work here looking after everything from property and payroll to accounts and logistics. Getting goods on the shelves at the right time every day in each of its 62 stores involves every product coming in at one end of the huge warehouse beside the supermarket’s nerve centre and leaving from the other.

At roughly the size of five football pitches, a team of packers and pickers are zooming around on German-made yellow electric buggies that carry pallets and boxes. Disappointingly, Hurley and I don’t get a chance to race them, which is probably just as well, because crashing one would land me with a hefty bill. Each one in the small fleet nearby costs €30,000, managing director of Aldi’s Irish stores Donald Mackay says.

He, too, is well versed in the food business. After taking a Master’s degree in manufacturing engineering at the University of Strathclyde, he spent several years managing a food production plant of which Aldi was a client.

Both he and Hurley have served their time on the shop floor, stacking shelves and manning the tills. As a former shelf-stacker and all-round dogsbody at a small supermarket myself, my jaw drops to the ground when Mackay tells me that they both had to memorise the individual prices of 800 products because the store didn’t introduce 3D scanners and barcodes until 2001.

“It took a while for barcode systems to catch up because having people memorise the prices was more efficient,” he tells me. Perhaps just as well that all staff, including store and area managers are paid “quite a bit above the average retail wage”, and can earn a healthy performance-related bonus.

Over the next few years, Mackay will oversee a €350m investment here, as 16 new stores and a new distribution centre ramp up the pressure on Aldi’s competitors. The long-term aim is to increase market share from its current level of 4.7 per cent, seemingly towards the 10 per cent target it has set in Britain.

More and more of us are shopping around more than we used to, though, something that prompted Tesco to slash prices on 1,500 products in a campaign aimed directly at Aldi and its other German counterpart. Whether we’ll continue to do so if we ever come out at the other side of the recession remains to be seen, but until then the competition from rivals will only intensify.

Meanwhile, more pressing challenges lie ahead for the company. “Ireland is unquestionably a more expensive place to do business than elsewhere. The cost of land, commercial rents, duty and VAT are all more expensive,” says Aldi’s UK and Ireland managing director Paul Foley, who recently raised these very concerns with Tanaiste Mary Coughlan.

He also points out where the company’s strengths lie. “Odlums aren’t paying me to put their flour at eye level, for example. If you want to stare at 14 other varieties of flour, then you’re going to pay for that,” he adds, referring to the promotional fees and “marketing support” costs that some of his rivals might demand from a supplier. All of these — along with the television adverts voiced by celebrities, some of whom employ a seductive voice to tempt us to one particular rival — add to the price that we eventually pay at the till.

Foley knows exactly what it costs to build a store, each one of which has the same layout and hardwearing floor tiles. A narrower range of products, compared to rivals, also helps to keep operating costs down.

Weekly promotions of internationally sourced goods — from chainsaws and power tools to bathroom sinks, furniture and clothing — help to bring in new customers and make additional profits.

Aldi isn’t amassing land banks here because that, too, would be an added cost, Foley says. The privately owned company doesn’t have to impress any shareholders, and permanently re-invests profits here to grow the business.

“Our unique selling point is that we’re organisational experts,” he adds, in a straight-talking, engaging and down-to-earth manner that is also typical of Hurley, Mackay and their colleagues.

He re-emphasises the store’s emphasis on quality; preferring not to be seen as a “discounter” in the same way as rival Lidl, and concludes by illustrating Aldi’s specific way of doing business.

When the oil price — and consequently diesel prices — peaked recently, seven sub-contractors who supply the trucks, trailers and drivers that transport all of Aldi’s goods faced losing money.

The company stepped in and helped them out. After sitting down with them and listening to their concerns, he agreed to pay them the additional fuel costs until diesel prices fell again. More uncompromising rivals might not have done so in the same position.

ESB pumps cash into electric sports car

Published on 30 November, 2008. By John Reynolds

The ESB is backing an electric sports car, along with the founders of Google and the president of eBay.

As the petrolheads of BBC show Top Gear revved up the first stage of their world tour at the RDS in Dublin this week, the Sunday Independent can exclusively reveal that the semi-state electricity board is one of a number of firms bankrolling the Tesla Motors car — a car which dozens of top celebrities are queuing up to buy.

It is understood that the waiting list for it includes top-earning movie stars George Clooney, Brad Pitt, Matt Damon and Leonardo DiCaprio; hi-tech heroes and Google founders Larry Page and Sergey Brin, and Dell founder Michael Dell.

Even California governor and Terminator star Arnold Schwarzenegger — formerly a fan of the gas-guzzling Humvee — is on the list.

Tesla Motors says that its all-electric Tesla Roadster — which does 0 to 60mph in 3.9 seconds, and 244 miles on one charge — will cost around €99,000 in Europe.

The ESB has backed the car through an investment of €15.5m in a €310m clean technology venture capital fund run by US firm Vantage Point Venture Partners, who manage about $4bn of assets.

Better Place, which is developing the electricity infrastructure to enable the use of large numbers of electric cars in Denmark and Israel, is also being backed by the Silicon Valley-based financiers.

This investment by the ESB was the first made with funds that will come from a €200m innovation fund that it has established.

Using profits made by its international arm, ESB International, the company has allocated €40m per year to finance these kinds of projects over the next five years, according to a company source.

Energy minister Eamon Ryan said earlier this week that he wants 250,000 electric vehicles on Irish roads by 2020, and investments such as these will give the ESB an early insight into the workings of the technology involved, the source said.