Food companies showing the banks the way

THE performance of some of our food companies stands out in sharp contrast to the goings on at the banks at the moment.

A quick look at share prices shows Glanbia standing at €2.13 with Greencore standing at €1.1.

That is close to their lows back in 2003,but the loss in share values pales in comparison with the major banks whose values are just a fraction of what they were back in 2003 when Bank of Ireland hit a low of €9 against €11.50 at AIB.

There’s no need to labour the point: the difference in the loss in value in the case of the banks is enormous.

It is noteworthy also that both of the two food groups (one in dairy, the other in convenience foods) were struggling to establish themselves at that point while the banks had the world at their feet.

Each of the food groups needed to find a niche and both in fact struggled for a long time to put down roots that would deliver long-term shareholder value.

While it has taken time and a lot of pain, Glanbia has established a credible presence in a range of markets from Ireland to the US — either in its own right or through joint ventures — and has at this stage the technological expertise to continue to play a part in the evolving global dairy sector.

That is a significant achievement given the pressures the group was under with its exposure to the meat sector years ago.

Southwest Cheese Company in New Mexico is a joint venture between Glanbia, Dairy Farmers of America, Select Milk Producers and other dairy cooperative members of the Greater Southwest Agency.

Officially opened in October 2006, the $190 million (€146m) plant had projected sales of $350m in its sights.

At full capacity, Southwest Cheese (SWC) will process 2.5 billion pounds of milk and 2.3 billion pounds of high value-added whey per annum into American-style cheeses and valuable proteins for the global nutritional market. The large scale, automated, state-of-the-art plant allows SWC to produce a high quality product in high volume to meet the needs of the national and international markets.

Production from the plant brings Glanbia to the position of number one US producer of American style cheddar.

That’s some achievement and is a reminder that the Irish food sector has a lot to offer when it has the right people at the helm and a clear strategy.

Greencore had to struggle too and despite some serious setbacks it has established a niche for itself in the British own brand market, supplying truckloads of sandwiches and a range of ambient and chilled foods which command the top or number two position in the highly- competitive retail sector.

With Britain struggling a bit right now, the group has set its sights on the US market and from a standing start it hopes to double turnover in each of the next five years.

In the context of the global slowdown, each group will struggle to deliver much earnings growth over the next two years.

However they will not require Government guarantees to keep them afloat and they have demonstrated an ability to get the right calibre of manager in place to ensure the continuing success of the enterprises.

As the banks struggle, the Irish food sector looks to have come of age with other top names such as Kerry and Aryzta, formerly IAWS, which made Cuisine de France an international name, also establishing and sustaining strong positions in their respective markets.

It is clear that, even in these difficult times, the Irish food sector is not about to keel over, like the banks, because in reality, it had to fight for everything it has achieved — unlike the banks over the past 120 years who sat back and enjoyed the ride.