Irish Dairy Board: way to go
Profits at the Irish Dairy Board are expected to be near last year’s operating surplus of 36.7m.
That means that the IDB’s member co-ops can expect a cash payout of more than 11m in cash, over and above the price the Dairy Board paid for their butter, cheese, skim milk powder, and other products which the IDB sells for them, in nearly 200 countries.
This bonus is paid pro rata to the member co-ops that employ IDB’s marketing and distribution skills, and ultimately goes into the hands of these co-ops’ dairy farmers.
The Irish Dairy Board 2003 performance looks good in a year when some international dairy giants found the going tough.
Friesland Coberco Dairy Foods of the Netherlands expects annual profits to fall 35% due to the strength of the euro, restructuring costs, and a sharp fall in income from cheese.
Arla Foods has posted slightly increased profits but its new UK arm has announced a one third profits slump.
Mixed results from Nestlé and Unilever, two of the world’s biggest companies, were indicative of the problems in the wider global food sector.
And of course Parmalat of Italy has ended up insolvent.
The Irish Dairy Board overcame problems such as the strengthening euro, which left the US dollar 25% weaker. The strike at Albertsons’ supermarkets in California also affected sales.
But the Board is still going strong 42 years after its predecessor, An Bord Bainne, was founded in 1961, to help export Irish dairy products.
It is strengthening the case for centralised marketing, which would be threatened if the Irish Government’s preferred strategy ever comes about, of consolidating the Irish dairy industry into three of four super co-ops.
It is certainly showing up the futility of the duplication which occurs when the main Irish milk processors compete in the same markets as the IDB, a grossly inefficient duplication, which has competitors laughing at the sight of numerous Irish brands taking each other on in already highly competitive export markets.
Of the Irish dairy companies, only the IDB has built an internationally established brand, Kerrygold, which is only used to sell Irish dairy products.
Whereas most of our food companies cannot afford to get involved in international branding, the Dairy Board’s branded consumer business continues to expand. Total sales of Kerrygold products increased almost 4% in 2002, with Kerrygold’s share of the retail butter market increasing to an impressive 13% in Germany, for example.
In 2002, although the “yellow fats” market in the UK shrank by 2%, Kerrygold butter sales increased. And Kerrygold spreadable butter sales showed impressive growth, up more than 40% on 2001.
In the fiercely competitive US market, the Dairy Board’s branded sales grew by 19% in 2002. In 2003, Kerrygold sales in the US are believed to have grown 30%, achieving a significant 2,500 tonnes market foothold.
The Group have signed a deal with the third largest retailer in the US, Albertsons, whose 2,400 supermarkets will sell 120m of IDB products per year.
The Board expects to do another deal with a major national retailer in the US shortly.
In the UK, the IDB’s Pilgrims Choice cheddar cheese is now the number two brand.
Of Irish dairy related companies, only the IDB has built up retail, food ingredients and commodities arms on the export market, with group subsidiaries diversified into specialised cheeses, cooked meats, fish and deli products.
Against this background, it is strange that an increasing proportion of Irish dairy product is sold outside the Dairy Board channel by Irish processors.
Not only should more processors avail of the Board’s services; they should listen to Noel Cawley, IDB chief executive, one of the better informed voices advising the Irish dairy industry.
He doesn’t agree with the conventional wisdom that diversifying the range of Irish dairy products will boost increased returns for farmers.
However, he agrees that processors must diversify away from over-dependence on butter and skim, but says Ireland cannot produce fresh dairy products for Europe, because of the high cost of getting them to market.
He says there is no product without a certain amount of risk, but warns that depending on casein sales to the US is the single biggest threat, being dependent on export refunds, vulnerable to lower cheese prices and the possibility of substitution.
As the New Year brings a worrying euro exchange rate trend for our exporters, more of our milk processors should turn to the company which has been through it all over 42 years, and jump on the successful IDB marketing bandwagon.
