Irish food companies take the cake in US

IN less than a fortnight, two Irish food companies, at different ends of the food chain, have announced major developments in the United States, which is a major driver of trends in the global food market.

Glanbia, the Kilkenny based Irish dairy processor, opened its $200 million (€159.3m) dairy processing plant in Clovis, New Mexico, on October 6, while this week IAWS tied up a $561m (€397m) takeover of Otis Spunkmeyer, a leading company in the US sweet baked products sector.

These developments signal significant moves forward for both camps, with each having sizeable slices of their respective markets.

Glanbia is now the largest producer of American (cheddar) cheese in the US while the IAWS deal has increased the company’s presence there with the addition of 62,000 outlets in the food services and retail sectors.

While the name Otis Spunkmeyer may be a bit unfortunate, the key point here is the broadening of its market presence across retail and food services, which gives the group a more rounded involvement in the life style foods sector in the US.

La Brea artisan bread, bought in 2002, has access to retailers nationwide in the US, with the number one bread in that growing market, while the latest deal puts it inside the doors of the food services sector, two areas of the market that account for up to 50% of the US food sector in America.

The group has trebled its US sales with this deal while creating a level of synergies that were previously out of reach.

Implications for profits are promising with the share price rising 5% on the back of the announcement.

Population figures are estimated to increase by 100m in the next 40 years.

Increasingly the US is turning to convenience foods and foods eaten on the move. Statistically, 50 cents of every $1 is spent on food consumed outside the home, which tells its own story.

IAWS is hitched to a growth curve that’s set to generate increased earnings for the next decade at least.

Glanbia also has the strong demographics at its back as it launched Southwest Cheese (SWC).

It has plants in Idaho and Gooding and the Clovis deal is a joint venture with four dairy coops, accounting for about one-third of the US milk market.

Glanbia is set to benefit from the growth in global wealth.

It’s a statistical fact that as countries improve their standard of living, the consumption of dairy products rises accordingly.

It is significant too that Glanbia and its four US cooperatives are intent on tapping into the evolving Asian markets where China and others are starting to develop real wealth.

The Kilkenny based business, linked to health and well being as well as improved sports performance, is the offshoot of what’s happening as a result of the manufacture of cheese.

Whey, high in protein, is a spin off from cheese production and Glanbia is spending up to 8m annually to ensure this high margin business delivers over time.

This evolving area of nutritional foods offers massive potential that, if properly exploited, could prove a huge winner for Glanbia over time.

It’s quite a turnaround in the Irish food sector to have news flow from Glanbia and IAWS dominating the headlines.

For a long time they lived in the shadow of the might of the Kerry Group.

At this stage Kerry looks as if it has lost its way and if it doesn’t do something soon, the share price, which is close to where it was at the start of the year, could suffer.

Such a thought was unthinkable a few years ago.