Dairygold restructuring plan ‘ready by March’
Jerry Henchy, chief executive of the 1 billion a year turnover co-op, revealed the timescale at the Teagasc national dairy conference, attended by 700 people in Cork yesterday.
He said Dairygold will look internally to see how best to upgrade some of its assets to move from four processing sites to two or perhaps one. It will benchmark the capital cost of all investments against acting in a federated co-operative processing manner with fellow processors.
And it will move without pride or prejudice in the direction of shared processing facilities if it best serves its purpose.
Mr Henchy said Dairygold, which processes 190 million gallons of milk annually from 3,500 suppliers and employs 3,200 people, must right-size its current structure.
“We are currently actively engaged in this in a responsible manner across our entire milk processing division, as it is clear to all stakeholders that we are currently uncompetitive.
“To ensure our survival, we must quickly rationalise and ensure within the current structures that productivity increases outstrip overhead and labour costs going forward.
“If we fail to right-size the cost base in our current structure in the short term, we will have failed to buy the time we need to re-organise the structure for the future,” he said Mr Henchy would not be drawn on the number of jobs to be axed by the co-op but he confirmed it had taken out about 100 positions since the start of this year.
Meanwhile there are fears Dairygold will shed up to 1500 jobs over the next three years as it restructures. However, Dairygold recently indicated that the net job losses would be less than 1,000, when outsourcing and the sale and privatisation of some business units are taken into account.
Calling for a sharper overall dairy industry survival strategy, Mr Henchy said processors must not only take out substantial costs from the current structure, it must also improve route to market and build capability. He said a key criteria is access to quota for committed dairy farmers who wish to stay in milk production and a system that can fairly accommodate those who wish to exit.
Dairygold, with an average quota size of about 55,000 gallons, is not badly placed by Irish standards. But Ireland’s position in European terms is very weak, ranking ninth in the EU average quota league.
Mr Henchy said with the support of the Department of Agriculture, a fair and effective quota trading system can be designed by the autumn of 2004 to free up the quota logjam.
