Dairygold’s strategy to derive maximum value from milk pool
This, according to Dairygold Co-op chief executive Jerry Henchy, is one of the reasons why Irish dairy farmers can be optimistic about their future. Mr Henchy was speaking at a recent Guild of Agricultural Journalists briefing in Cork.
The Dairygold chief also announced the Munster-based group's plans to turn its suppliers' 190 million-gallon milk pool into a mix of products less dependent on EU subsidies or market supports within five years.
Natural cheeses will take the lead position in this product mix.
Dairygold will also build on its business in products such as Regato cheese, for which the co-op has a 50% market share in Greece and other markets where it sells Regato, under the Kerrygold brand.
After 20 years of producing Regato cheese, it is still generating the highest return per gallon of all Dairygold's products, Mr Henchy said.
He went on to stress the need for the group to boost its research and development work, both with Teagasc and within Dairygold itself, he said.
The aim is to find more products like Regato, which consumers need and will buy.
Without more of these high-earning products on the consumer markets, Dairygold would end up fighting for commodity market shares against low-cost South American producers, who get their milk for less than 10c per gallon, Mr Henchy warned.
Profitable new products will also be urgently needed if the scrapping of export refunds being considered by the EU hits Dairygold's 50% (by value) of dairy solids which are sold outside the EU.
The full effect of refunds cuts could take up to 15 years to filter into the dairy products markets, but it would eventually hit the profitability of all products, not just export refunded sales, said Mr Henchy.
By then, Dairygold's strategy should have taken it to a position of responding to consumer demand and delivering the products the public want all going well.
"This will be the model for the successful dairy processor of the future," he said.
"This will represent a significant change, over time, to our current operations model, in which our first concern has been to process milk, and then to seek markets for the products.
"This model lent itself to an over-reliance on intervention products for which there were guaranteed markets.
"The more successful dairy processors have reversed this approach so that their manufacturing decisions are determined entirely by the market.
"To derive the maximum value which can be achieved from our milk pool, Dairygold will require significant change, gradually and over time, to its processing and product mix," the chief executive said.
The Dairygold strategy will involve working in partnership with selected companies across all sectors, be it branding or private label in the case of retail, or providing innovation, technical/product solutions or superior service in the case of the catering, food service and industrial sectors.
Meanwhile, the co-op is finalising a partnership agreement with Tine of Norway to produce their premium priced Jarlsberg cheese the first example of how Dairygold aims to capitalise on market opportunities forspecialty cheeses.
