Ornua Co-op serves us well

The imminent departure of several top executives from Ornua in the coming months has raised spurious questions about the future direction of the co-op. The loss of John Jordan, Róisín Hennerty, Ken Maguire and Iarlaith Smith, all top executives at Ornua, creates some uncertainty at a time when margins and sales volumes are under pressure across international dairy markets.
However, the critical role of Ornua as a primary route to market for Irish dairy remains intact in large part due to those and previous executives who have built an effective marketing structure and secured long-term customer relationships. Add on the investment in promoting Kerrygold butter as a premium, world-class dairy brand, and any temporary disruption in the organisation’s leadership chain should have minimal impact on the co-op’s marketing effectiveness. 

Kerrygold is king

The jewel in the Ornua crown is the Kerrygold brand. Historically, it was used exclusively for the marketing of Irish butter. In recent years, the brand has been extended to other premium products including cheese. Kerrygold is one of the most valuable food brands Ireland has ever created. The fact that Ornua has well-established routes to market, especially in the UK, EU and across the US, backed up by well organised logistics hubs, adds significant value to the Irish dairy industry.
The eight cooperative owners of Ornua provide the products, including the cream for Kerrygold butter manufacturing, which Ornua sells internationally. If, as suggested in a recent newspaper report, there is some discussion around hiving off the Kerrygold brand under a standalone Plc structure, that idle chatter should be treated with contempt. Such a change would not be in Irish milk producers’ best interests, and neither would it be in the best interests of the Irish milk processing sector. 

Instead of any kite-flying around cashing in on the value of the world-class Kerrygold brand, we should focus on building the footprint of the much-respected brand across the globe

Maximising returns

The Plc is modelled on the profit motive, with scant regard for suppliers of raw materials over and above what is required to keep them supplying those materials. The Irish milk-production sector has benefitted from the co-operative model, refined and developed over generations since its inception by Horace Plunkett. Yes, it is not a perfect model, but then, perfection is often described as the enemy of progress. Instead of any kite-flying around cashing in on the value of the world-class Kerrygold brand, we should continue to focus on further building the footprint of the much-respected brand across the globe. The benefits of that strategy should primarily accrue to Irish milk producers. Would those milk producers be better off sharing that value with international investors, including insurance and pension funds? The answer is almost certainly in the negative. The ambition must be to maximise return from the consumer market, not the stock market. Full ownership of the Kerrygold brand through our co-ops has served us well, with the cooperative ethos of Ornua feeding through to milk price with bonus payments accruing from the marketing of Kerrygold-branded and other Irish dairy produce. Sharing the asset value of the Kerrygold brand with external investors could only diminish that value to future generations of Irish milk producers. The family silver can only be sold once.

Demand for a wealth-extraction

mechanism in co-operative type shares is understandable. Share spin-outs from Kerry and Glanbia have whetted the appetite for realising a cash return for the latent value held in co-operative shareholdings. It has not been without positive outcomes. The Glanbia restructuring process allowed the return to farmer coop members control of their milk processing assets. The Kerry experience has, so far, not been as positive in utilising Plc assets to secure the destiny of Kerry milk producers.