Co-operation or competition

Stephen Cadogan

Bad news started with Dungannon Meats losing an order to supply 40% of the packaged beef requirements of J Sainsbury supermarkets in the UK.

As a result, there could be losses among Dungannon’s 1,000 plus jobs at plants in the UK and Ireland (their Irish plants are Newgrange Meats, Navan, and Exel plants at Kilbeggan).

Barford Meats in Carrickmacross has gone, with the loss of 80 jobs.

And food giant Nestlé’s announcement that it will close its Mallow chocolate crumb production plant, with the loss of 57 jobs, means lost sales of 80 million litres of milk from Dairygold Co-op and 20,000 tonnes of sugar from Irish Sugar.

Someone probably less surprised than most by these announcements is Competition Authority chairman Dr John Fingleton. Earlier this month he warned that there is good evidence that the Irish food processing sector may not have been exposed to strong competition, leaving it in a poor competitive position internationally.

He cites the finding of this year’s national enterprise strategy group, that the Irish food sector failed to grow during the Celtic Tiger years, and failed to diversify exports beyond the UK.

While Ireland excels in food manufacturing, it is seen as poor at innovation and customer focus, two areas which Dr Fingleton says are strongly driven by competition.

He says the Competition Authority has been to the forefront in taking on food processing, and it has litigation outstanding against the entire beef industry.

He predicts that farmers would see more demand for their products, if hotter competition in food processing forced companies towards greater innovation, and more value added.

The worst scenario for Irish farmers is loss of competitiveness in the food processing sector, warned Dr Fingleton.

But farmers don’t really know where to look, with greater co-operation generally seen as the way forward, not greater competition.

For example, Connacht Gold Co-op Chief Executive Aaron Forde says the way forward is a world class marketing body shared by all Irish dairy and other food products, and “arrangements” between processors.

But that kind of approach could land milk processors in the same trouble as the beef industry, with the Competition Authority.

Aaron Forde says new product development must be combined with maximum efficiency in processing and marketing of traditional dairy products. But his ‘Asset Sharing Model’ for processing milk in world class Irish plants (presumably jointly owned) would have to pass the scrutiny of a watchful Competition Authority.

So would his ‘Federation Ownership Model’ for the Irish Dairy Board, placing all milk processing assets in the ownership of a new Board responsible for all processing and marketing.

He says all of the ingredients exist for his preferred structure - the infrastructure, raw materials and expertise - and all that is required is a change of mindset, specifically for each co-op and dairy to give up a little sovereignty but gain through participation in a strong entity, more capable of delivering a world competitive dairy business.

It’s his personal view that one or other is needed, if most of the Irish dairy industry was not to be left behind.

Perhaps the latter is what the Competition Authority wants - hot competition, and survival of the fittest while the weaklings are left behind.

Whatever Dr John Fingleton says, there is no doubt that farmers would prefer strength through co-operation, than a competitive free-for-all.

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