POT OF GOLD
How do you achieve a 60% bump in your selling price? One option is to reduce the product size and sell it for more on a pro-rata basis. That’s what Kerrygold is doing with its new 100 gram Butter Stick, which retails for €1.49. The bigger, more familiar 454g pack of Kerrygold butter is priced at €4.29, or €9.45 per kilo compared with €14.90 per kilo for the Stick.
In fairness to Ornua, the Kerrygold brand owner, making, packing and distributing four and a half Butter Sticks has a higher cost than the same for one larger pack of the butter. And if the shopper only needs a small amount of butter for whatever cooking reason, then that convenience has a premium.
The Kerrygold brand celebrated its 60th birthday in 2022, and this year marks the 50th anniversary of the Irish Dairy Board (Ornua’s former name) transitioning to a co-operative structure. The business is an alliance of eight dairy co-operatives who source their milk from 14,000 dairy farmers. The idea is to have one organisation marketing and selling milk-related products around the world rather than multiple smaller players, and it has worked out really well.
In 2022, Ornua paid €2,280m for its milk supplies, an average of around €160,000 per supplier. That was huge increase on the €1,470m paid to suppliers the previous year, reflecting abnormal high pricing in the global markets for dairy products. In the current year, the milk price has tumbled back.
Ornua produces 270,000 tonnes of butter a year, but its cheese output is even higher, at 290,000 tonnes. Much
Kerrygold has expanded capacity to one million butter packs a day
of that cheese isn’t made in Ireland and few Irish shoppers have even heard of Pilgrims Choice, the number two branded cheddar in the UK.
At the flagship facility in Mitchelstown, Co. Cork, butter production capacity has been ramped up, with the stated €40m investment cost attracting undisclosed taxpayer funding from Enterprise Ireland, despite Ornua reporting a net profit of €29m for 2022. The butter factory now has two butter churns and ten packing lines for a range of over 50 different product formats sold in over 60 markets globally.
Kerrygold Park’s increased cream processing capacity means the plant can make up to 80,000 tonnes of butter per year, the equivalent of over one million packs per day. Ornua has added 30 new jobs at the facility, raising the Kerrygold Park workforce to 180.