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The taste of success

Article appeared in issue 3, 2021

Ornua, one of Ireland’s leading dairy companies, has recently published its financial results for 2020, with record figures showing a 68% increase in operating profit. Here, Miriam Atkins talks to Ornua’s CEO John Jordan about changing consumer habits and the success of Kerrygold on the international stage

“It has been an incredible year… pre 2020 we were thinking about things like Brexit; we had the US tariff which introduced a 25% tariff on cheese and butter from Europe; and there was volatility in commodity prices. These were the things we were grappling with and then, two months into 2020, we were hit with Covid-19 and that changed the world.

It was very hard to predict what would happen from there so agility and responsiveness were critical. Our buying behaviours as consumers completely shifted. How we bought food typically, there was a kind of balance between buying retail and in foodservice: in markets like the US it’s probably split 50/50 between at-home and out-of-home consumption. With the lockdown, this pretty much all moved to home consumption and in the developed markets we saw a huge surge in retail demand and the collapse of foodservice. There were a lot more occasions for eating at home – people began cooking and baking more – and consumers defaulted to brands that they know and trust and Kerrygold benefitted from that.”

Indeed, the Kerrygold brand enjoyed a volume growth for the year of 13%, with over 10 million packets sold weekly. Group turnover for the company was reported at €2.3bn.

 

Looking ahead

With such an unexpected shift in buying trends in 2020, how has the company planned for 2021 and where does John see the challenges and opportunities ahead? “When we were putting budgets together in October, looking at 2021 we were all saying to plan our business on a return to normality from early January… with restaurants opening and retail demand returning to normal. But the reality is that from January to March, in many of our big markets, the lockdowns were probably more severe than any time in 2020. So it’s very hard to predict.”

Going forward, he states, the likelihood is that we will see spikes in commodity pricing throughout 2021 as lockdowns ease. “Roughly half of our business is in the B2B space and half is consumer so if things rebalance, we are in a good position with our portfolio. What we need to do is figure out how we can capture as much value as we can to pay back to our co-ops and indeed hope that they pay that back to the farmers in the price.”

Ornua paid member co-ops an additional €68.7m this year: “The purpose of Ornua is to create value for Irish farming families and we fundamentally believe that the cornerstone of our industry is a grass-based production system on Irish family farms. Our co-ops produce superb quality dairy products. There was almost €69m of additional value created through our brand and through some of our subsidiary so that’s an additional premium. Five years ago, that was €30m. What we’re trying to achieve over the next few years, with ambitious growth targets, is to continue to drive that value payment for members.”

 

An industry under fire

Any effort for future success will need to be part of a wider conversation around sustainability and climate action – how does John think the industry is responding to consumer concerns here? “Certainly, as a sector, I genuinely believe that people are stepping up and taking ownership and responsibility. Agriculture accounts for 35% of Ireland’s greenhouse gas emissions. With the climate action bill, we have legal targets as a country to meet and I believe that farmers, dairy processors, and everybody in that supply chain will step up. It’s important to recognise that Irish farmers are the most carbon efficient producers of dairy in the world, therefore we just need to be careful… if we don’t produce it in Ireland are we pushing production to somewhere else that is in fact more damaging to environment? If you take a place like the US, where you have very large herds on feedlots off grain that probably produce double the carbon output. It is in Irish farmers’ interests to have a long-term sustainable business. In Ireland, farms don’t change hands that often – they move from generation to generation – farmers want to make sure that they are handing over a viable business to the next generation. I am very confident that, as an industry, we will step up to the challenges ahead and we will see positive movement in line with climate action.”

 

The importance of a brand

A recent loss by Kerry Group to register the trademark ‘Kerrymaid’ for use in Europe was a victory for Ornua and John stresses that protecting the Kerrygold brand is central to the organisation’s success: “The Kerrygold brand is a really important asset for Ornua. This year, we celebrate 60 years as a business and, over that time, the brand has been invested in by generations of farmers and generations of our employees. It is something we consider sacrosanct. We are very positive about the potential for growth with the Kerrygold brand in our key markets in both cheese and butter and indeed in some new innovations that we have in the pipeline.”

 

This interview first appeared in the May issue of Irish Farmers Monthly