The Kerry Co-op comes full circle with dairy purchase

The organisation they started has transformed over the course of half a century having literally grown out of its original co-operative form

Mon, 24 Feb, 2025 - 02:00

James J. Kennelly

The rags-to-riches story of the Kerry Co-op/Kerry Group is not well known in the US.

This is a pity, as it is an exemplary story of home-grown Irish business success.

Still, there was at least one whoop of delight here in upstate New York when I learned the co-op’s voting shareholders had approved the phased purchase of Kerry Dairy Ireland — the €1.3bn consumer dairy and ingredient business of the Kerry Group.

The story of the Kerry Co-op had come full circle. It was never a sure thing.

Given the suspension of initial negotiations in 2021; bad blood over the contested “leading milk price”; trust issues between the managements of the co-op and the public company; dissension within the co-op’s own board; a vocal group of shareholders opposed to the deal, and the co-op’s own stringent rules requiring a supermajority of voting shareholders, the vote could have gone either way.

My own informal polling of dairy industry insiders met with general cynicism and doubts that the purchase would come to fruition.

Surveying this, however, I was struck with a strong sense of déjà vu.

More than 50 years ago, when Eddie Hayes and others were pressing hard for a milk processing facility for north Kerry, they faced even more intractable impediments, including the prevailing scepticism of most experts that Kerry farmers would ever be able to initiate and sustain a successful dairy business.

Twenty-five years ago, while researching my book The Kerry Way: A History of the Kerry Group, I interviewed many of the original pioneers of North Kerry Milk Products and the Kerry Co-op.

In doing so one theme particularly caught my attention.

Beyond the obvious, and important, practical concerns about moving up the value chain and fostering efficiencies, rationalisation, and improved technology, was a strong underpinning of something less obvious, but more telling: a deep pride of place and a real commitment to ensuring that the new business would be rooted in, controlled by, and redounding to the benefit of the people of Co Kerry (and nearby Limerick).

Of course, the organisation they started has transformed over the course of 50 years.

The Listowel factory, originally a joint stock company owned by the Dairy Disposal Board, a federation of North Kerry co-ops, and (albeit grudgingly) a small American firm, Erie Casein, quickly but not easily transformed to an all-county co-operative enterprise.

Although the new co-op was given little chance of competing with the “Big 5” of Irish dairy co-operatives, it not only survived but thrived to such an extent that it literally grew out of its original co-operative form.

When the Kerry Co-op turned over its dairy business to a new public company, the Kerry Group, becoming a shareholder in the new company, it represented a radical departure from the co-operative norm. And a risky one.

There were naysayers go leor. Given that farmers, as a class, are supposed to be conservative, cautious to a fault, and highly risk averse, this represented extraordinarily forward-thinking behaviour.

There was blowback from the co-operative movement too; to co-op scholars, this was a case of “degeneration” — a co-op enterprise turning its back on co-op principles and transforming to a publicly owned company. But it was not long before other major co-ops followed suit.

As Kerry Group, with a programme of aggressive geographical and product expansion, moved into sectors well beyond its original dairy businesses, the Kerry co-op shareholding gradually eroded, as shareholders availed of share redemption schemes to unlock the value of their co-op shares.

As the dairy business moved from being a “core” to a “peripheral” business for Kerry Group, the stage was set for divestment. This was only as it should be.

For no one organisational form need endure forever. As a business develops, its organisational structure may need to change to one that is “fit for purpose”.

In Kerry, the original factory venture, the dairy co-operative, and the public company, all served their purposes well.

Massive wealth has been created through this process, and that wealth, by virtue of the recent deal, has now been mostly distributed.

The wheel has come full circle, and Kerry Dairy Ireland, with the co-op’s 70% shareholding in it, is now again ensconced in a co-operative business form.

For this, I applaud both the Kerry Co-op and the Kerry Group management.

They negotiated in good faith over a long period of time, despite stops and starts and more than a few frustrations.

They adopted a “win-win” approach, seeking a joint agreement that would allow each organisation and its shareholders to achieve their most fundamental interests.

Finally, they demonstrated the same commitment as the original pioneers to keeping the dairy business deeply rooted in Co Kerry and adjacent areas.

Fifty years on, the story continues, and both organisations are poised for the next chapter.

Surely, if Ireland, with a small, open, island economy, is to successfully navigate a turbulent global trading environment, it requires more than a low corporate tax rate — it needs the right balance of multinational investment and indigenous Irish enterprise.

This deal allows the Kerry Group to continue its global activities unencumbered by a now-peripheral business and Kerry Dairy Ireland to remain rooted in its native place and focus on its distinctive strengths and resources.

This outcome ratifies the idealism and forward-thinking demonstrated by the co-op’s founders so many years ago. It was and remains a great story.