Henchy may take consumer division public

Brian O’Mahony, Chief Business Correspondent

Over the next few years, the group plans to at least double turnover in this division from E250 million to E500 million as part of its evolving strategic plan. Floating on the stock market was one route to be considered, said chief executive Jerry Henchy.

“Such a move would have to have the full backing of the group,” he said, adding that it could only happen “if the owners of the business want it.”

Dairygold has some fine brands including Calvita, its Dairygold spread, and its Galtee meat range.

However, the convenience food sector is growing rapidly as consumers demand ready to eat meals and a variety of food to consume on the go, he said. That change is reflected in supermarket shelves across Ireland and Britain and the success of other Irish food companies in carving out significant niches in that fast evolving market.

In the major British supermarkets the top five players account for 70% of total retail sales.

Getting a toehold in that market will be crucial, he said.

To do so requires scale to satisfy the demands of big players like Tesco and others in Britain.

If Dairygold is to double the consumer divisions sales to at least 500m in five years, then substantial acquisitions will be required.

That will require more money than Dairygold can muster on its own and going on the market could facilitate that strategy, he said.

In the years ahead, Mr Henchy says the consumer division will seriously under perform unless it embraces what he describes as a “two-island strategy”. Going public is not the only option and “joint ventures” with third parties is another angle to be considered, he said.

However, the basic aim is to at least double the business in size over five years.

Mr Henchy says the “two-island” approach is essential because Ireland on its own would not yield the level of sales required to get the division where he wants it to be down the line.

He acknowledged his targets are ambitious, but it is an area where margins are better.

With massive changes coming in the Common Agricultural Policy and a move to free markets, the dairy division and the agribusiness sectors are incompatible, because of the pressure in having to serve farmers on the one hand and satisfy stock markets on the other. Putting clear water between the two would be basic to any future move in that direction, Mr Henchy said.