Henchy’s masterplan to revive firm’s fortunes

SOME people may argue that it is too soon to start making any bold predictions about the future for Dairygold. Last year it clocked up losses of almost €40 million and cut 825 jobs in an effort to whip the group into shape.

It sold its two red meat plants, closed several trading stores and it still has to grapple with the dairy division that will require two if not three plant closures to make processing profitable into the future. And at least 700 more jobs are on the line.

Despite the enormity of the challenge, chief executive Jerry Henchy, just 13 months in the job, believes the future is bright.

That view is underpinned by the caveat that the job cutbacks are completed as planned and that the tough decisions on the dairy side are also dealt with expediently.

Based on his first period in the job Mr Henchy has delivered on what he set out to achieve.

With the exception of a few hiccups on the industrial relation’s front he has managed to bring workers and farmer shareholders with him for the most part.

When he launched the annual results for 2003 recently he made it clear that taking the consumer division public was an option already being explored.

But mindful of his overlords he made it clear that would be done only if he got full backing of the board of Dairygold.

Going public would facilitate rapid growth, allowing the business to double in size from €300m to €600 or even higher over a five-year stretch. This is not a plan to be initiated in two or three year’s time.

Mr Henchy already has the plan in motion. Just as he hit the ground running last March he believes that the industry is consolidating both nationally and internationally and that these challenges have to be me head on.

Yesterday, he articulated his vision to the dairy sector in Britain. He said that the group will be made up of the dairy and agribusiness sector on the one hand.

These will stay co-op owned, be highly competitive and operating to the best inter- national practices, he said.

Then the second part of the business will comprise the consumer foods section operating in Ireland and Britain in what he describes as a ‘twin-island’ strategy.

The aim is to turn it into a business of scale with sales of between €500m and €750m.

This will be subjected to a number of strategies to extend the branded offerings of the group that include dairy produce to the Galtee meat range.

Dairygold will try to extend its branded offering but it will also go after new options.

“We will continue to grow our business in the UK own-label spreads and cheese markets. And we will examine strategic Irish partnerships,” he said.

He also said that the group’s Welsh cheese packing plant has a lot of untapped potential. Horlicks Prepack cheese brand will also be developed along with the Xtremcheese brand, he said.

All of that consumer jigsaw may or may not happen, he said.

Joint ventures may prove impractical. If so acquisitions will fill the space, provided they fit well with existing businesses and the group’s articulated vision.

Finally, Dairygold will examine the flotation route if funding becomes an issue that cannot be resolved through other mechanisms.

One thing is certain: Dairygold is a very different operation to what it was just 12 months ago. It still has a way to go and the consumer part of the strategy has to be delivered on.

This will take time, but it is fair to say that the outlook is far brighter than what it was and Henchy looks to have the broad backing of the farmers and the board to plough ahead.

The consumer area is increasingly low margin where competition is vicious and this will test the group’s mettle in the years ahead.