Radical surgery will hurt workers
Because, by the time he is finished, his vision of Dairygold will be employing at least 1,500 people fewer than it does today.
In a worst case scenario, 2,000 of the 3,000 jobs may have to go, in the final shake out.
Those are the realistic job losses the new chief executive Jerry Henchy is understood to have put before Tánaiste, Mary Harney, two weeks ago, when he briefed her and senior officials at the Department of Enterprise, Trade and Employment.
Suggestions that Henchy is just trying to paint the blackest picture possible, in order to jolt workers and farmers to face reality, sound a bit disingenuous.
From the start, Henchy has made it clear that radical surgery is required, and if he needed support for this argument, the plunging profit line last year was pretty stark.
Profits before tax fell 80%, to just €4m. Dairygold would have made a loss, were it not for the €6m it secured for a part sale of its valuable stake in IAWS, one of the more successful food groups in Ireland, led by another Corkman, Philip Lynch.
It's a further irony that IAWS evolved out of a co-op structure like Dairygold's. But it was as a publicly quoted company it became one of the top global performers in the quoted food sector over the past 10 years.
It moved from being a commodity-based operation to a highly focused consumer combine, producing high quality breads and finger foods for the consumer and catering sectors.
Strategic acquisitions in Ireland and the US and a key joint venture in Canada have left IAWS well placed to grow with the rapidly evolving consumer end of the food sector.
Jerry Henchy realises that Dairygold too needs to get in on the action in that lucrative area and, under his reforms, a new consumer division is to be set up with that aspiration.
Already, the emerging cost-cutting strategy suggests that Part One of the plan is well and truly under way, and the axe is being wielded.
Last week, a move on the group's transport division was announced. At least 170 jobs are on the line, as Henchy moves to implement the rationalisations on his agenda since he hit the ground running four months ago.
Transport in the dairy, feed and fertiliser division is to be privatised. Many of the workers affected will get support from the group to help them form their own distribution companies, to serve Dairygold's future needs.
Significant cost savings will follow. That was a path Kerry Group chose some time back, a format well tried and tested internationally.
If the group comes up with sufficient incentives to get workers to accept this plan, then the new broom at Dairygold may get off to a very good start.
But huge concerns exist among trade unions that the Dairygold Co-op they know is about to be decimated, so the management policy for handling this deeply sensitive process may determine the entire outcome of the process that Henchy has set in motion.
As rationalisation begins, several key questions have to be resolved before the group is anywhere near ready to meet its challenges.
For example, can it model its progress on one of our other leading co-ops or dairies?
Successful though IAWS plc has been, Dairygold is probably lucky that it never went public in the 1980s, when it was the fashionable thing to do at the time.
It was the only one of the big dairy groupings not to go public. Golden Vale was the last, preceded by Kerry, Waterford and Avonmore. Golden Vale is now part of Kerry, Waterford and Avonmore merged into Glanbia.
Glanbia has struggled to come to terms with the huge pressures of the market place, and it is currently going through its own phase of soul searching, as 30% of its milk suppliers have started a determined move to get the plc returned to co-op ownership.
In the end, Golden Vale failed to make it, and Kerry is the only one of the dairy groups with an established global track record.
It had to break the mould, however, by making a strategic move into food ingredients in 1988 when it bought Beatreme in the US. That defining moment in Kerry's strategic development resulted in their transformation into a world player in food ingredients, with few peers now in this highly research driven end of the consumer food market.
Kerry feeds into the needs of the top food producers of the globe, operating on high profit margins, of up to 10%.
Simultaneously, it evolved a highly focussed consumer food division including white meats and pies, mainly serving the UK and Ireland.
As a former Kerry senior executive, the main thing Jerry Henchy has going for him is the realisation that strategy and healthy profit margins are vital to success.
But Dairygold Co-op today finds itself in a very different situation from Kerry back in 1988. Markets have become much tougher, the consumer has become king, and global competition in basic dairy commodities is becoming increasingly challenging.
Without doubt, all sides in Dairygold see that the clock cannot be stopped indefinitely. At the AGM the shareholders were left in no doubt that radical change was needed.
Henchy pulled no punches in spelling out stark realities. So, "radical change" is the new buzz world down in North Cork and in Dairygold's surrounding catchment area.
When the process of change is over, on the milk side, two of the processing sites will be gone. Currently, four sites are engaged in making seven products. Much of this over-capacity is a throw back to the merger of Ballyclough and Mitchelstown in 1990.
The group has deliberately not detailed the number of jobs at risk in various sites, but the industry view is that 1,500 will have to go, if Dairygold is to have a future.
Henchy is no shrinking violet and he is not shy about his own abilities, and his grasp of the global dairy sector is pretty detailed.
To his credit also, he has been straight from the very start about what is required.
Few if any disagree with his analysis.
"Today, the architecture is milk, meat and trading. We want to move to milk processing, consumer foods, UK division, agri and suburban superstores. That's the broad approach".
He also sees a much tighter cost base as vital. Fundamentally, the analysis he delivered to farmers at the AGM, and which he has repeated at every opportunity since then, is that the group has to "get real".
The beef plant is going to go. Pig meat processing will probably stay, but the pig farms are being sold on already.
Down the line, question marks have been raised about CMP Dairy, where Henchy's dairy farmer father from Ballincollig, Co Cork, was a former chairman.
But the time for sentiment over such matters is past, judging by Henchy junior's stance to date. And do not expect too much hand wringing about the impact on local communities, that was very much part of the ethos under former boss Denis Lucey.
At present, it is difficult to estimate the cost savings possible. Both the dairy and meat divisions are under the cosh, and if those two areas are resolved, the cost base of the group will be much more sustainable going forward.
