UCC alliance signals Glanbia emphasis on new products
John Moloney, chief executive, Glanbia plc, announced the alliance at the Teagasc National Dairy Conference in Killarney.
He said successful new products are needed for sustainable market advantage and adding real value.
“I think it is fair to say that Irish companies traditionally were not very good at innovation.”
“Our industry generally has had a production led management style, largely driven by the CAP, and there is continuous pressure to pass back market returns to producers, rather than invest in long-term innovation and development projects.”
Mr Moloney said the Irish dairy sector has had a low relative investment in research and development compared to international competitors in New Zealand, Holland or Denmark.
“Expressed as a percentage of turnover, we invest less than one third compared to the Dutch or the Kiwis,” he said.
Significantly increased investment in research and development is needed, to identify the next Baileys Irish Cream, said Mr Moloney.
“It is the essential horse before the cart, if we are to decrease our dependence on commodities”.
He said it was because the lead time from concept to shelf can be one or two years, and some times longer, and the failure rate was high that resources, and co-ordination of universities and Teagasc with the commercial activities of food companies were essential elements.
“For instance, Glanbia has signed a strategic research agreement with UCC, which will see the two organisations co-operate closely in targeting research areas and commercialising outputs,” he said.
Mr Moloney said he believes the status quo cannot remain, because the Irish dairy sector is not competitive against New Zealand, or other low cost producers, on the farm or in the factories.
“Imagine where we will stand, if there are lower trade barriers and reduced support from the EU”.
The Glanbia boss said that given what is known about EU budget decisions and Agenda 2000, it is inevitable that EU supports will be reduced, and the Doha agreement will further liberalise the global marketplace.
“If we decide our future is in commodities, we will need wholesale rationalisation and consolidation at farm and processing level, to achieve high efficiency. This will not mean higher milk prices, but may help to stabilise the situation”.
“In this model, inflexible quotas may well be an impediment in the longer term, as volume will be required for economies of scale and to compensate for margin erosion”.
“If our focus is in building value added, real clarity of long-term strategy is essential.”
“New market knowledge and skills will be prerequisite and significant investment in new processing assets will be required”.
“Competitiveness at all levels of the supply chain will be essential to compete against existing operators.
“We will also require substantial shifts in our supply patterns to improve our annual production profile. Can we do this? I believe we can. The Irish dairy industry has continuously re-invented itself over the past three decades and has achieved notable success overseas. We adjusted to the changing circumstances of the marketplace and will do so again.”
“Our issue now, however, is to be strategic and prepare for the changes that we know are coming rather than respond to them when they happen,” he said.
Mr Moloney said Glanbia has a clear strategy to focus on dairy products with a functional foods and nutritional emphasis in both ingredient and consumer form, to address growing consumer demand. We have also focused heavily on our strengths as a cheese producer.Our other business units are delivering the cash required to implement this growth strategy.”
