Merger warnings lost in euphoria
As a result, Dairygold Co-op was established. It had a brand new logo and became the largest farmer owned food business in the country, with more than 6,000 milk suppliers at the time, and 2,500 employees. Ballyclough, founded in 1908, and Mitchelstown, incorporated in 1919, were food-processing giants in their own rights.
They paid the highest prices to their farmers for milk and other suppliers, enjoyed strong balance sheets and formed the economic bases of their respective communities.
But in 1990, the Single European Market and increased competition in the global market place were in the air, and many experts were recommending that co-ops needed to increase their scale.
In Ballyclough and Mitchelstown, a merger also offered combined strength and organisation, and the potential to pay a higher milk price than either Ballyclough or Mitchelstown could aspire to, as individual societies.
Financial advisers at the time predicted significant potential savings from rationalisation but putting that into action were left to the new Dairygold board. Shareholders were assured that Dairygold would have the largest milk pool in the country, of 200 million gallons a year.
It would be able to pay higher prices to suppliers of farm produce than either of the existing societies could do on its own, and it would make farm inputs available at more competitive prices.
The arguments in favour of the merger were strong, and warning voices were lost in the euphoria of what was deemed the most important development since Sir Horace Plunkett founded the co-op dairy concept a century before.
One of those who opposed the merger was Liam O'Flynn, Glanworth, who warned that mergers bring more people together for less choice, give more control to fewer people, and results in lack of competition and reduced farm incomes. He pointed out that Mitchelstown and Ballyclough were both successful co-ops with reasonably happy suppliers and asked what was wrong with them staying as they were.
"They might not be everybody's dream as to what the right system should be. However, two dreams are better than one big nightmare," he said in 1990. The mood for a merger was, however, overwhelming. Ballyclough shareholders voted 89.6% in favour of the proposal, while Mitchelstown members gave it 87.6% support.
Dairygold formally came into existence on October 1, 1990. Denis Lucey was appointed chief executive and Denis Cronin was elected chairman of the ten person board. The co-op, with a general committee of 209 persons, soon began to have an impact on the lives of farm families and employees, mostly in Munster, and in the dairy industry nationally.
It began rationalising, which resulted in job losses, but the process was slow and sometimes torturous in communities where the co-op tradition was deeply rooted.
Today, Dairygold still manufactures seven different milk products in four different sites.
Dairygold has enjoyed healthy balance sheets, made acquisitions and continued to pay good prices for milk and grain supplies. Dairy and meat processing, liquid milk production, animal feed manufacture, grain trading and shop retailing became the key elements of its expanding business portfolio, which developed strong consumer brands in Ireland, and an emerging presence in the larger British market.
Supply of farm inputs and a comprehensive range of farm services, including animal breeding and livestock marketing, were other activities. In eight of the last ten years, it has been the milk price league leader among the country's three largest processors.
But returns from the changing dairy product markets began to fall in the past few years, while processing costs and marketplace competition increased, EU supports fell and the euro exchange rates against the dollar and sterling shifted adversely.
The Irish dairy industry was urged to rationalise further, move away from producing intervention type food products and develop brands for fast-moving consumers in a rapidly changing society.
Dairygold farmers, concerned about their own rising costs and falling milk prices, became uneasy at the turn of events and gradually became furious, as the trends worsened.
The co-op, which employs more than 3,000 and has an annual turnover in excess of €950 million, made €4.8 million profit last year. But this was down 80% from €25.2 million the previous year. New chief executive Jerry Henchy ordered the preparation of a five-year strategic plan for the group and warned that hard decisions would have to be taken and implemented to put Dairygold on a strong footing.
Shareholders also took action, by tabling a motion of no confidence in the board, and accusing their co-op of not honouring commitments on milk price, store closures and rule changes.
One group of unhappy shareholders summed up their feelings in a letter to the media. "For far too long, the ordinary farmers who are the backbone and owners of the Society have remained silent and patient, while Dairygold has performed poorly. Ironically, everybody else associated with Dairygold seems to have done all right."
Calling on farmers-shareholders to deliver a wake-up call to Dairygold, they said selling the family silver (shares in IAWS, piggeries, farms, etc) was unsustainable as a means of balancing the books. They quoted former IFA president Joe Rea, "Taking Anadin isn't much good, when surgery is required."
They stated that farmers' decision making has been eroded at Brussels level, by joining the euro and by the CAP reviews which brought quotas, premia, and now decoupling and modulation.
"We should, however, still retain and exert the right to influence our own co-operative's decision-making," they stated.
The annual general meeting passed their motion of no confidence in the board, from which nine of the ten members resigned. It also approved a proposal for updating the rules and regulations under which the co-op operates.
But it rejected a call for a review of store closures.
Newly appointed Chief Executive Jerry Henchy, who was given a strong mandate by the meeting to build 'a new Dairygold', said he would not shrink from taking the hard decisions that are commercially necessary.
