Glenisk deal is a wake up call for the sector

WHO would have thought that dairy group Danone, worth €13 billion, would buy a stake in the Offaly-based Glenisk?

For years, most of the acquisitions were in the other direction as Irish dairy groups took on mainly the British market.

Waterford and Avonmore (who merged to become Glanbia), Kerry Group, Dairygold and Golden Vale, (subsequently bought by Kerry), all spread their corporate wings.

Kerry and Golden Vale ventured furthest with Golden Vale buying a cheese business in Holland, while Kerry took on the global ingredients market with huge success, from 1988.

With the exception of Kerry the past few years have been more focussed on rationalisation, especially in the dairy sector, as it grappled with a rapidly changing market amidst EU reforms and global consolidation.

Against that backdrop, Danone’s move on Glenisk, worth a modest €7m, will come as a bit of a jolt, because it suggests the Irish dairy sector had its collective eyes off the ball.

Despite the David and Goliath ring to the deal the Cleary family will still retain its 63% controlling stake in the business noted for its organic yoghurts and goats milk operations.

Glenisk has little serious competition in that market from other Irish suppliers.

And this is the point. Glenisk will get several million in capital investment form Danone, which obviously sees potential in an Irish base that could, in time, target the British and European markets in time.

The fact that an Irish company failed to spot this opening is indicative of an industry that has lost direction; but how did they miss Glenisk?

It seems that Glanbia and Dairygold were more concerned with issues surrounding their huge milk pools, which the Glenisk operation could not solve, than with spotting a potentially great business opportunity.

This is because the Irish dairy sector is still driven by the dictates of its farmer shareholders, at the expense of capitalizing on a rapidly changing global market and all manner of opportunities for products that meet the needs of an increasingly discerning consumer.

While opportunities like Glenisk go a-begging, the familiar war cry ‘What can the EU and dairy sector do for farmers’, rings in our ears.

But we have to start asking what the dairy and the Irish food sector in general can do for Ireland.

A change of focus is needed, and, in that regard, it was interesting that the Minister for Industry, Trade and Employment, Micheál Martin, under persistent questioning, last week would not rule out the appointment of a new minister for food.

People in the food sector believe that such a Ministry is required, and, with proper leadership from the top, that the industry could achieve its potential.

Appointing a full minister to look after food would finally take the focus off farmers, and put it where it belongs: on the food sector as a whole, rather than overwhelmingly on the suppliers of its raw ingredients.

The same stress, meanwhile, should be put on research and development in the food sector, as is currently put into other areas of industry.

This is not an easy task, and making Mary Coughlan Minister for Food rather than Minster for Agriculture is not going to lead to overnight changes. It would, however, be a strong statement of intent.

Talking to leaders in the sector, it is clear that, not only do they have deep concerns about the direction of the industry, but they are also struggling to deal with the fallout from CAP reform.

Some are also conscious of the fact that farmers financed many of the developments the industry has benefited from over the last few decades.

The industry must look after everyone’s concerns, but it must avoid getting mired in farmers’ issues.

Danone’s move on Glenisk should be a wake up call to those who care about Irish food.