Removal of Glanbia board is a risk
Replacing the directors who represent 54% of the shareholding of Glanbia PLC would be a major shake-up for both companies.
However, the vote of no confidence last week in the co-op directors seemed to have little effect on the PLC's standing.
Investors in Glanbia PLC must not have taken the co-op members very seriously, or didn't fully understand their intentions.
Or maybe they think the company will forge on unchanged in the search for higher annual profits, regardless of which bunch of farmers represent the co-op on the PLC board.
As far as PLC investors are concerned, the co-op is a major raw material supplier to the PLC's dairy ingredients business, a sector which promises little growth to increase returns to investors.
Their attitude will be "fix it and get on with business".
But they won't be happy if fixing it means higher milk prices for farmers. On the contrary, investors are depending on lower milk prices, to compensate for the ongoing reduction in CAP prices of dairy commodities.
They expect that to feed into reduced profitability from ingredients made from milk, and will be unhappy with Glanbia, unless it can achieve lower milk input costs (in other words, pay less to farmers) and get some savings also from the recent co-operation agreements with Dairygold and Connacht Gold.
But the main worry for PLC investors over a co-op row is probably that it will take up some of the time of managing director John Moloney and his senior executives, and that the business could go astray if it has to take on new, less experienced directors from the co-op.
Investors are depending on directors and executives to continue the growth in the US ingredients (both cheese and nutritionals) division, pigmeat business, and liquid milk the sections of the PLC where scope is seen to improve profits.
As far as farmers are concerned, the co-op directors who represent them are not doing a very good job of delivering what farmers want.
But could a new board do better for them, and fit seamlessly into the PLC, without slowing its progress?
They would need to be a well picked group, because they must ultimately answer to two bosses, their farming neighbours and also the PLC investors.
The latter group are ultimately the more powerful, because if they fall out with a company, they pull out their investment and look elsewhere for a better return for their money.
That option is hardly open to the co-op members, tied as they are to the PLC and depending on investors to help fund it, and hopefully to grow it to an ever more powerful company, perhaps to the level of Kerry Group, now rich enough to cut some slack to milk suppliers in the home patch.
So maybe they will have to be happy with a new co-op board and the promise of no further milk price cuts before October.
The Glanbia situation and the Dairygold Co-op vote of no confidence illustrate the essential differences between co-ops and PLCs.
All but one of the Dairygold board stood down, and farmers there are now paid 6c per gallon more than at Glanbia.
But Dairygold is a farmers' co-op, Glanbia is a PLC, of which 54% is owned by a farmers' co-op.
Farmers have given up a lot of control at Glanbia, but they are in a big company which sells €1.83 billion per year. Dairygold is a farmers' company, but that is one of the reasons they sell only €876 million per year.
