Dairy co-ops seize opportunities as global population soars
Jason Hawkins, CEO at Carbery Group, left, with TJ Sullivan, Carbery chairman, Colm Leen, CFO, John Holland, COO, and Conor O’Donovan, cheddar cheese manager, with the new Carbery Dairy mozzarella in the firm’s new cheese facility in Ballineen, West Cork.
The rise in demand for good quality food ingredients - which was exacerbated by Covid-19 - has seen these divisions within many of the Irish coops expanding worldwide.
Much of the expansion is being geared towards the US and Aisan markets while others are furrowing deeper into potential markets within the EU.
And, while 2020 was a challenging year for the food and drinks sector, Bord Bia indicated last week that the Irish industry remained resilient throughout and the future does look bright.
Technology, of course, alongside robotics and artificial intelligence (AI) is also helping the global food sector to develop and expand, and with the world’s population expected to grow to 8.6bn by 2030, the demand and need for nutritious, good quality food has never been greater.
Here in Ireland, the coops continue to grow in an effort to meet the demand of its consumers and the Irish Examiner has learned that Ornua is currently involved in a massive food ingredients initiative in the US - the details of which will no doubt be revealed in the very near future.
But that’s not all that is happening in Ornua. The coop’s Ingredients North America formulates and manufactures pasteurised processed cheese products. The company’s ingredients arm has another cheese making facility in Minnesota and last year the business supplied cheese for about 50 million pizzas.
Ornua processes nearly 45% of the Irish Republic’s near eight billion-litre milk pool on behalf of a 33-strong group of co-ops, processors and food firms.
Last year its flagship butter and dairy label Kerrygold generated more than €1bn in sales, making it Ireland’s first billion euro food brand.
The Dublin-headquartered company had total sales of €2.3bn last year and employed 2,400 staff.
Meanwhile, butter is back in trend and there has been a huge increase in sales with the Kerrygold brand because of more home consumption and in particular with the increase in home baking.
The Group is structured across two divisions - Ornua Foods and Ornua Ingredients - and while Covid-19 severely impacted one side of the business, it was the ingredients aspect that held out over the last few months.
As recently as December, CEO John Jordan told an ICMSA meeting that butter was “back on trend” and the subsequent demand has led to “a huge boost” to the Kerrygold brand globally.
He was also keen to point out that while the food service side of the coop - in which the company has substantial business across continental Europe and the US - “collapsed” because of Covid-19 restrictions, the demand on ingredients eased the burden somewhat.
In 2020, Ornua bought €1bn worth of dairy products from its member coops.
Looking ahead, Mr Jordan alluded to “great hope and positivity” despite the uncertainty around customer consumption in restaurants, cafes and bars because of Covid-19 restrictions and Brexit impact.
“There is also the very significant economic impact - the UK’s GDP shrunk by 11% in 2020 - that is the worst economic fall in a year since 1666 when we had the Great Fire of London,” he added.
“That fall is replicated in other markets - Ireland’s unemployment rate is running at 21%, we have a weak dollar and we also have to contend with Brexit and tariffs, etc.
“25% of Ornua’s exports go into the UK so there are challenges there for us.”
In November Carbery Group opened its new cheese plant at its headquarters in Ballineen, West Cork.
The expansion at the site will see the production of new cheese varieties including mozzarella and grilling cheese for the food service market in Europe and Asia.
The company expects the new ranges of cheese will go to market under the brand name ‘Carbery Dairy’ which will be sold in existing and new markets as well as in the growing markets of Asia.
CEO, Jason Hawkins told the Irish Examiner that Carbery’s cheese diversification strategy had been “in the works” for a number of years and the company received a huge boost in bringing the project to fruition.
“This diversification will create new markets and value for our West Cork milk suppliers,” he added.
Best known for producing Dubliner Cheese and Carbery Cracker for the Irish domestic market as well as cheese for export under the Ornua brands, Carbery Group currently produces 55,000t of cheese annually, or 25% of all cheese made in Ireland - this will increase to 64,000t because of the latest expansion.
“2020 has been a challenging year for us all, and Carbery has been no exception,” Mr Hawkins added.
The coop was founded in 1965, and has spent over 50 years producing innovative, natural cheese solutions for international markets. Milk from grass fed cows is supplied from 1,200 local family owned farms, where the cows graze outdoors for up to 300 days a year.
Despite the challenges posed by Covid-19, the Kilkenny-based group said it experienced “improving trends," with strong cash flows that fuelled a launch of a share buy-back programme of up to €50m in 2020.
Glanbia also pointed out that it expects Glanbia Nutritionals and Joint Ventures to “continue to deliver a resilient earnings performance in addition to further sequential improvement in Glanbia Performance Nutrition” in 2021.
In December Kerry Group shares jumped by well over 3% on the back of speculation that the Tralee-based food ingredients giant was sizing up a sale of its consumer foods division.
Kerry is understood to be considering strategic options for its consumer food business in a move that could free up money for acquisitions.
The group is said to be reviewing its ownership of Kerry Foods, which sells chilled meat and dairy products including Charleville cheese, Cheestrings, Dairygold spread, and Richmond sausages.
The non-dairy consumer food assets are seen as easier to divest and could attract interest from private equity firms.
The food ingredients division of Lakeland Dairies is a global supplier of high quality dairy based ingredients that include milk powders, proteins and dairy fats.
Technology is to the fore at the Co Cavan based facility which dedicates itself to the “provision of superior ingredients with maximum functionality and optimal nutritional value for a wide variety of applications”.
The coop operates six major food ingredients manufacturing centres, supplying ingredients that are further processed into a range of products that are consumed daily in key global markets across Africa, Asia, Europe and North and South America.
Lakeland Dairies states that the “starting point” for its ingredients is the naturally produced milk that is collected daily from high quality farms situated in “a green and unspoiled landscape”.
“From this natural source of goodness, we harvest the various constituents of milk to create customised food ingredients for our clients under internationally recognised quality standards.
“Lakeland Dairies is a long standing supplier of choice for leading food companies across the world. Throughout our business, we pursue quality, flexibility and reliability in meeting customer needs. We achieve this from a platform of manufacturing excellence that is underpinned by long term sustainability in farming and environmental practices.”
