Fostering a fleet of agrifood ‘battleships’

Two interesting conferences took place over the past fortnight that put a spotlight on the challenges and opportunities facing the Irish agrifood industry.

Southern Milling held an event for over 300 dairy farmers in Fermoy that heard from experts on optimising returns on farm in a post-milk quota era.

KPMG and the Farmers Journal had a separate event to mark publication of a study in to mega trends in food consumption, globally.

These gatherings help business leaders and farm producers to weigh up the decisions needed to advance the agrifood industry. They also helped to disentangle some policy issues around producing food and the development of fit-for-purpose companies and co-ops.

I strongly argue that two distinct subjects have to be addressed when debating food:

• The production of food on this island ;
• The nurturing and development of globally competitive corporations that are led from Ireland.

These are two distinct subjects that need careful analysis and debate.

The matter of producing food on the island of Ireland has to address the following:

• Farm structures that remain fragmented and technically inefficient in a liberalised dairy industry where pricing will be more volatile;
• A milk processing industry, despite bouts of rationalisation, that continues to be too fragmented with overheads and cost structures being replicated across the country. In addition, because of the fragmentation, decisions on optimal capital expenditure are not being taken, exemplified by a spate of factory extensions and new builds over the past two years;
• Confusion about how farmers should be guided on whether or not to have a focused grass fed seasonal production system in dairying.

Regarding the development of fit-for purpose agrifood companies or co-operatives, imagine the concept of a battleship.

Ireland has to foster and nurture a fleet of agrifood battleships that have the capability and power to enter global markets, compete with the toughest competitors on the planet, and fly the flag for Irish food interests.

My own conclusions on these two differing matters are clear, but controversial.

To optimise the efficiency and profitability of producing food on the island, we need to accelerate the consolidation of farms and processors into a significantly smaller number than at present. These farms and factories should pivot around a disciplined system of grass-fed milk production which optimises our natural advantages in the spring and summer while severely curbing costs over winter.

We also have to provide the leeway and headroom for companies and co-operatives to diversify and expand into new global markets and all-new product ranges, in order to grow strongly and create wealth.

We are fortunate to already have a number of these battleships in place, thanks to innovative equity capital structures and progressive decisions by farmers, management and other shareholders over the past 30 years.

Glanbia and Kerry are living examples of what Irish enterprise can achieve if given the tools to develop. Outside the dairy sector other examples include Aryzta in the bakery industry, Origin in agronomy services, Total Produce in fruit and vegetables, and Greencore in sandwiches, food-to-go and prepared meals.

A template, therefore, exists for the build and launch of battleship food companies. The State should deploy its best resources in support of growing existing and new food companies, too. High quality third level food graduates are one example, competitive tax rates for employees is another. The Irish Stock Exchange plays its part too, providing a platform from which companies can tap global asset managers for the capital needed to fund growth.

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