Appetite for growth drives Irish agrifood firms’ success

Wealth creation is a subject that stirs up emotive debate in many quarters. If you are for it, some will condemn your mad capitalistic instincts. 

Appetite for growth drives Irish agrifood firms’ success

If against it, the category marked “looney sandal-wearing muppet” beckons. For me, wealth creation is a dynamic we should encourage because one of its end products is investment, and investment triggers employment.

A perusal of wealth creation in the Irish agrifood industry over the past 25 years is a worthwhile exercise. In 1990, agrifood companies on the Irish stockmarket were valued at just over €700m. Last week, those companies, and others that were created by them, were worth€23bn. That represents a 33-fold increase in the value of a broad group of Irish-led food companies that have built tremendous businesses on global markets.

Another measure of value is what farmers in the agrifood co-op/plcs own. The co-op shareholdings in Kerry and Glanbia, for example, have a princely value of no less than €3bn as of last week. Even that does not capture how much value has been created because a variety of spin-outs over the past decade have given shares directly to farmers worth hundreds of millions of additional euro.

The root cause of this explosion in wealth can be traced back to the creation of the co-op/plc corporate structure which was uniquely invented and put in to action by Irish co-operatives. These hybrid structures allowed farmer-controlled co-operatives to tap international asset managers for capital in support of growing the companies that were introduced to the stockmarket. Equipped with such equity, the executives of these companies have developed profitable enterprises in far-flung geographies while developing new markets.

When Kerry Co-op was set up in the early 1970s, its first year produced sales of IR£1.3m and profits of IR£127,000 from milk powders produced by 40 employees. This year, Kerry Group will achieve sales of over €6bn, profits of over €600m and all of that stems from businesses that now employ over 24,500 people in Kerry.

Promoting and supporting initiatives that foster and encourage risk-taking entrepreneurs is a responsibility for all those who are opinion formers, policymakers or political leaders in the Irish Republic. Given the 33-fold rise in the stockmarket value of Irish food companies, how ambitious is it to suggest a market value of over €45bn is attainable by 2025? To get there, we need another generation of business leaders who have the energy, appetite and ambition to drive their companies forward, build larger footprints across international markets and in so doing create more wealth for those who work and invest in these companies.

In 1990, I remember looking across the Irish Sea and wondering how fledgling Irish agrifood companies on the stock exchange would take on the companies that were well-established blue-chip names such as Unigate, Northern Foods and Beresford. Today, those companies have disappeared, while Irish companies have prospered despite all the challenges posed by slow economies, 9/11, Gulf wars, record oil prices and the global financial crisis.

If the large food companies that have been created were built on a mountain of debt, you would be forgiven for thinking the progress achieved could easily reverse. Yet the aggregate balance sheet of the stockmarket-listed Irish agrifood companies has never been stronger.

Moreover, a fan club of international asset managers who have travelled the investment journey with these companies in the past 20 years are primed to add more capital if these companies come forward with legitimate growth strategies. If you examine the most recent investor relations presentations by each of these companies, you will find one common denominator — a thirst for growth and expansion.

Joe Gill is director of corporate broking with Goodbody Stockbrokers. His views are personal.

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