Taking the Irish food sector to its next phase
That is not to say that taking the €300m division to the stock market is certain because the group has other options such as joint ventures.
It is interesting that in less than two years under new management the slumbering giant in North Cork is already showing signs of a reawakening.
It is noteworthy however that chief executive, Jerry Henchy, has isolated the consumer division for possible flotation.
In his view there is no place on the stock market for dairy/agri based operations that has to pay farmers a reasonable price for their milk when times are tough.
Even though he did not elaborate at length on that view, implicit in his comment is that margins will be tight, probably very tight, in the dairy sector going forward, and farmers will be under a lot of earning pressure.
Under the circumstances trying to keep farmers and the stock markets happy at the same time would simply pull the operations in conflicting directions.
It cannot be done successfully and to a greater or lesser extent the experience of Avonmore, Waterford Foods and Golden Vale, now part of Kerry Group, has demonstrated that point pretty clearly.
I think it is also the case that a lot of farmer shareholders were never happy with the kind of interference they had to endure from the “pin striped suit brigade up in Dublin“.
Their hostility showed a number of basic failures by some in the business to understand the culture of the markets the fundamental one being: You have to play by the stock market rules.
Other factors such as bad investment decisions and a failure by the last crop of senior managers to build a rapport with the farmer shareholders meant the flotation dream, and with it the promise of great things for the region, never materialised.
By good fortune or whatever Kerry Group, more or less sparked the dairy business once it bought food ingredients group Beatreme in the US back in 1988.
That move gave the Kerry venture legs. It allowed it to earn decent margins and to handsomely compensate its farmer shareholders who could be forgiven for thinking the Central Bank had been handed over to them and they could issue their own money.
Kerry was unique it what it achieved coming from the Irish dairy sector. Avonmore/Waterford now Glanbia, hasn’t been as successful and perhaps the group might look at other options into the future.
Given that rationalisation of the dairy sector is still a key issue for all involved who knows what could be achieved? It is certain that joint ventures will be needed to drive the dairy sector forward.
Already we have reached the point where more farmers operate part-time than full-time and income, despite generous top up grants from Brussels, is a major issue.
In that context a bit more creative thinking is needed as to how the dairy side might combine their undoubted consumer strengths to form a united consumer publicly quoted company.
Glanbia and Dairygold are the two obvious groups but whether the process would be too complex for Glanbia given it is already on the market might make it impossible to achieve.
One thing is certain. All of the dairy operators here have a vested interest to rationalise and fine tune the sector to the best of its ability.
In going public they displayed drive and determination, even if the end result was not as spectacular as they had hoped.
They can call on the same resilience to take the Irish food sector to its next phase.
They can do it again, indeed they need to in the interest of all their stakeholders and in the interest of the Irish food sector.
