Stan McCarthy – the in­ter­view

The man bridg­ing the gulf be­tween sup­pli­ers and cus­tomers of a global giant.

Irish Independent - Business Week - - FRONT PAGE -

Stan McCarthy will be named 2016’s All-Ire­land mar­ket­ing cham­pion by the Mar­ket­ing In­sti­tute of Ire­land

WHEN most of us think of Kerry Group the first thing that comes to mind is prob­a­bly milk. That’s cer­tainly true of the farm­ers, many rooted in the rich dairy coun­try close to Kerry’s Tralee head­quar­ters, who dom­i­nate the share reg­is­ter of the €14bn food giant through the orig­i­nal Kerry co-op.

Whether it’s true of chief ex­ec­u­tive Stan McCarthy is an­other ques­tion al­to­gether.

When the 59-year-old Kerry boss sur­veys the global busi­ness, milk, and the green fields of the King­dom, are among of a whole clat­ter of busi­nesses and is­sues he needs to jug­gle.

The task of manag­ing that dy­namic spilled into the open this week, af­ter the

Ir­ish In­de­pen­dent re­vealed the depth of ten­sions be­tween man­age­ment of Kerry group, led by McCarthy, and some of its old­est share­hold­ers. Kerry Co-op owns 13.7pc of the plc, worth €1.9bn, and farm­ers are es­ti­mated to hold a fur­ther 30pc of shares, hav­ing ben­e­fited from a se­ries of spin-outs mak­ing them a pow­er­ful body to be reck­oned with.

McCarthy joined Kerry in 1976 as a trainee ac­coun­tant. He’s a Kerry lifer. Forty years later the re­served Ker­ry­man leads a vastly trans­formed or­gan­i­sa­tion where an­nual rev­enue topped €6bn last year.

He’s speak­ing to me from Chicago, where the com­pany has had a pres­ence since the early 1980s.

In his ninth year as chief ex­ec­u­tive, McCarthy sees his role, and his chal­lenge, as po­si­tion­ing Kerry to take ad­van­tage of rapidly chang­ing con­sump­tion habits.

Many farmer-share­hold­ers back home, reel­ing from this year’s col­lapse in milk prices since the lift­ing of Euro­pean quo­tas, might feel there are more press­ing is­sues to con­tend with – like lift­ing farm gate prices.

It’s a ten­sion that was prob­a­bly al­ways in­her­ent in the hy­brid cor­po­rate struc­ture not just at Kerry but Glan­bia and other big agri-food play­ers that emerged out of the co­op­er­a­tive move­ment. The lib­er­al­i­sa­tion of the dairy sec­tor, and the glob­al­i­sa­tion of groups like Kerry, may well make it harder, not eas­ier, to man­age that ten­sion into the fu­ture.

For one thing, the pop­u­lar view may as­so­ci­ate Kerry with milk and but­ter, but most of the group’s rev­enue comes from its ‘Taste & Nu­tri­tion’ busi­ness.

It throws up much of the div­i­dend in­come that share­hold­ers, in­clud­ing farm­ers, have come to ex­pect from Kerry. That busi­ness is built around cut­ting-edge science and tech­nol­ogy, used to pro­vide foodtech ser­vices to other busi­nesses bent on mak­ing end prod­ucts health­ier and tastier, and more “func­tional” in the in­dus­try jar­gon.

Raw ma­te­ri­als mat­ter, but it’s clear from the con­ver­sa­tion that much of McCarthy’s fo­cus is on con­sumers, whose chang­ing habits and re­quire­ments are be­ing stud­ied to shape Kerry’s fu­ture.

“The mil­len­nial gen­er­a­tion think very dif­fer­ently to when I was grow­ing up. When I was grow­ing up, you didn’t pay at­ten­tion to the food that you con­sumed the way peo­ple pay at­ten­tion to it to­day,” McCarthy said. “Life­style is im­pact­ing that as well. Peo­ple have less time, they make de­ci­sions quickly.

“Peo­ple de­cide what they want to eat and what they con­sume at four o’clock in the evening and they want it read­ily avail­able, they want it to meet the stan­dards that they ex­pect. So you have all th­ese fac­tors im­pact­ing change in con­sump­tion.

“That has to be re­flected in how we en­gage with our cus­tomers, that we en­sure we’re help­ing them de­liver prod­ucts that meet that con­sumer ex­pec­ta­tion.”

Re­spond­ing to that can be mas­sively ex­pen­sive, and man­age­ment in­ten­sive.

Kerry is an “ac­quis­i­tive busi­ness”, McCarthy said. Last year it spent almost €900m on buy­ing other com­pa­nies.

“We’re ex­tremely busy in­te­grat­ing those ac­qui­si­tions. There are a num­ber of phases, one is to in­te­grate them and se­condly is to take what we’ve ac­quired and mar­ket it through our global in­fra­struc­ture, like the de­vel­op­ing mar­kets. That’s cer­tainly part of the plan for 2016 and 2017.

“That be­ing said, we will not stop ac­quir­ing in 2016 and 2017. We have a very busy in­ter­nal M&A team... [the amount of money Kerry spends this year] could be from €100m to €500m.” De­vel­op­ing mar­kets, in­clud­ing Cen­tral and South Amer­ica and Malaysia, ac­count for about 25pc of Kerry’s taste and nu­tri­tion busi­ness and McCarthy wants to make that 30pc by 2020.

The other side of Kerry’s busi­ness is the con­sumer foods divi­sion. The com­pany owns brands in­clud­ing Denny, Dairy­gold, and Cheestrings.

Snack­ing and con­ve­nience un­der­pins McCarthy’s strat­egy there, trends again driven by mil­len­ni­als’ habits. The shift to­wards e-com­merce in re­tail is an im­por­tant part of the mix too.

“We have in­vested pretty heav­ily in the last num­ber of years around the whole dig­i­tal and e-com­merce strat­egy and we con­tinue to do that, it’s a very fast-grow­ing part of our busi­ness.

“Our foods busi­ness is very much a brand-cen­tric busi­ness and for it to con­tinue to grow it needs to be con­nected with the smart­phone com­mu­nity.

“Cer­tainly that has been quite suc­cess­ful for us over the past num­ber of years and it has started to drive sig­nif­i­cant growth af­ter what was a dif­fi­cult pe­riod in Ire­land and the UK af­ter the eco­nomic melt­down where the con­sumer pat­terns were com­pletely dis­rupted. But now they’re be­ing rein­car­nated if you will un­der a dif­fer­ent for­mat, pri­mar­ily driven by dig­i­tal and ecom­merce. The fu­ture of our foods busi­ness, it’s fo­cused on brands, and those brands have to be avail­able for con­sumers given the in­fras­truc­tural changes that are tak­ing place in re­tail. We’re also ex­pand­ing in­ter­na­tion­ally into main­land Europe as well.”

The shift on­line could well ben­e­fit farm­ers, if it helps Kerry break the dom­i­nance of big su­per­mar­kets in set­ting food prices, es­pe­cially in the UK.

“Cer­tainly the re­tail­ers in the UK, for ex­am­ple, have been con­trol­ling the e-com­merce chan­nel, but now you have other par­ties be­gin­ning to en­ter into it that are avoid­ing the tra­di­tional re­tail in­fra­struc­ture com­pletely.

“You have com­pa­nies like Ama­zon en­ter­ing into the UK mar­ket. We’re en­gaged with many dif­fer­ent com­pa­nies that are exploring chan­nels out­side of the tra­di­tional re­tail chan­nels... Ama­zon are look­ing at de­liv­er­ing fresh food within I be­lieve 40 min­utes in the South East of the UK.”

So­cial me­dia has dra­mat­i­cally changed the mar­ket­ing land­scape and Kerry has in­vested heav­ily to try and reap the ben­e­fits.

“It’s about be­ing able to con­nect and com­mu­ni­cate with our con­sumers and the whole dig­i­tal plat­form al­lows us to do that.

“So­cial me­dia is a way of messaging to the con­sumers in terms of what’s new and ex­cit­ing about our prod­ucts, and cer­tainly can be­come more ef­fec­tive in terms of be­ing able to con­nect with the ap­pro­pri­ate con­sumer when it comes to messaging, pro­mo­tions, what have you. This is chang­ing at a phe­nom­e­nal pace and it is only es­ca­lat­ing,” McCarthy said.

McCarthy’s brand aware­ness isn’t lost on in­dus­try peers.

He will be named ‘All-Ire­land mar­ket­ing cham­pion’ at this year’s in­dus­try awards run by the Mar­ket­ing In­sti­tute of Ire­land.

The awards, with In­de­pen­dent News­pa­pers as me­dia spon­sor, recog­nises ‘an ex­cep­tional con­tri­bu­tion to busi­ness per­for­mance over time, and who has also had a pos­i­tive im­pact on the broad mar­ket­ing pro­fes­sion in Ire­land’. It’s not a ques­tion of em­brac­ing nov­elty for its own sake, McCarthy’s at­ti­tude is prag­matic. “All we can say is that it will be hugely im­por­tant to our busi­ness in the fu­ture.

“The ex­tent, it just con­tin­ues to es­ca­late ev­ery year, and it’s some­thing that you can’t af­ford to not in­vest in. We con­tinue to pour large amounts of money into it. The tech­nol­ogy is chang­ing rapidly, the abil­ity to be able to take data and con­vert it into in­for­ma­tion to take mean­ing­ful de­ci­sions is im­prov­ing all the time.

“It’s a re­flec­tion of the way mil­len­ni­als are keep­ing up to date, mak­ing de­ci­sions about what they con­sume, it’s that new way of do­ing busi­ness that’s chang­ing all our lives.”

Kerry’s fo­cus on the fu­ture, and on con­sumers, dom­i­nates our con­ver­sa­tion, which takes place just days be­fore it emerged that McCarthy has stepped down from his role as ceo of Kerry Co-Op, Kerry Group’s big­gest share­holder, in part the re­sult of row over the milk price be­ing paid to farm­ers by the group many still see as “their” dairy.

The milk price is­sue is set to go to me­di­a­tion. The gulf be­tween the co-op and the plc may take longer to bridge.

‘The re­tail­ers in the UK, for ex­am­ple, have been con­trol­ling the e-com­merce chan­nel, but now you have other par­ties be­gin­ning to en­ter into it that are avoid­ing the tra­di­tional re­tail in­fra­struc­ture com­pletely,’ says Stan McCarthy

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