Article appeared in issue 4, 2022
Ornua comes out on top
Despite the challenges of the last year, Ornua, the Irish agri-food co-operative, has recorded a record turnover. CEO of Ornua, John Jordan talks to Erin MCCafferty
Last year was a record year across all financial metrics for Ornua, according to recent results that show turnover for the Irish agri-food co-operative is up from 6.9% on 2020, to €2.5 billion.
Group operating profit also rose by 1.3%, to just under €154 million. In addition, the co-op recorded a jump in net assets, which are up 11% to €670 million.
“It’s a really good performance from the team, given that we were facing a lot of issues and still going through Covid at the time,” says Ornua CEO, John Jordan.
The results were influenced he says by a change in people’s eating habits due to Covid. “At the start of 2021 we assumed that people would go back to their old eating habits and that there would be a rebalance of how we spent money on food,” says John. “But in fact, 2021 turned out to be a lot like the year before, in that we were still experiencing rolling lockdowns.”
The market was however different for each country selling Irish dairy products, as each opened at different times and post-Covid, no real pattern has yet emerged in eating patterns. Now, how we spend money on food is being affected by inflation.
While consumers have already experienced price rises due to inflation John says there are more to come.“Will dairy products become too expensive? Will consumers trade down to private label? Or will they buy on promotion or switch out categories? It’s something we will have to watch very carefully over the next six months or so,” he adds.
The challenge at farm level has been a rise in the price of input costs, with dramatic increases in the cost of feed, fuel, and fertiliser this year. The war in the Ukraine has also exacerbated the issue. As a result, despite year-on-year financial increases, dairy farmers here have not seen the margins they would have expected. “Dairy farmers in the main have seen on-farm profitability rise in the last number of years and the Teagasc report is forecasting a further increase in margins, but they are still relatively tight margins,” says John. “Our job at Ornua is to try to capture the value of the market and pay that back to the co-op to help it support milk prices.”
He points to Ornua’s Value Payment of €78 million, paid out to co-ops in Ireland for premium and cash bonuses in 2021. “If you look back to five years ago that was €30 million, which is quite an increase,” he says.
He’s hopeful that Irish dairy farming can weather the storm of inflation. “If you go back four years ago, we were completely focussed on Brexit. But Brexit sort of never really happened to the extent that we thought it would. In the meantime, we’ve had Covid, the Suez Canal issue, supply chain issues, and tariffs in the US. But we’ve just responded and dealt with all of those issues, and we have a great team, who are close to our customers and our consumers. If we’re hit with more surprises down the line, we just have to step up and deal with them and we have a proven track record of doing that.”
Irish farmers are already ahead of the game when it comes to sustainability and this, says John marks them out. “The great thing about Irish farming is that it’s a family farm grass-fed system,” he says. “What’s more, we are one of the most carbon efficient producers of dairy in the world.”
There are improvements to be made in relation to the environment however and Irish farmers need support in carrying them out. “It’s important that our sustainability story isn’t undermined by EPA reports on the quality of water saying Irish river quality is deteriorating year on year,” says John. “Farmers need help with these issues.
“If you look at the dairy supply chain, 93% of greenhouse gas emissions happen within the farm gate and farmers also need financial support and practical measures to change that,” he adds. “I believe the government and the EU have a responsibility to support that.”
He refers to legislation, brought in under the climate action bill, which means that even though Irish dairy farmers already have high standards, they need to be even more efficient. “Those standards are being driven by customers and consumers, but in Ireland they’re now law, and I believe Irish farmers will step up.”
All of this helps our reputation abroad as people around the world are increasingly aware that Irish dairy products are not only premium quality, but sustainably produced. “That shows through in the simplicity of the quality of product,” says John. “Irish dairy products are superior to others. For example, if you take a packet of Kerrygold butter and put it beside butter from Land O’ Lakes in the US, they are very different products and ours is superior – it’s more yellow, its softer and its creamier.”
Ornua has experienced particular growth in its branded business. For example, its acquisition last year of Whitehall Specialities Foods in the US is seen as a win. “We’re currently going through a five-year planning process that will see us out to 2027,” says John. “We certainly see growth in our existing business, and we have a pipeline of acquisitions that we would like to look at over the short to medium term. It’s all very positive.”