ICMSA fears margin giveaways by Ornua and Glanbia in US
Farmers’ fears that Ornua and Glanbia competing against each other in the US market will backfire on Irish milk producers were rejected at last week’s ICMSA AGM by Ornua CEO John Jordan. Glanbia’s ‘Truly Grass Fed’ cheese now competes on America’s supermarket shelves with Ornua’s Kerrygold cheeses.
“The launch of Truly Grass Fed is just another competitor for Ornua,” said Mr Jordan at the ICMSA event, where he expressed confidence that Kerrygold will continue to grow in the US.
He confirmed that Glanbia and Ornua had discussed the concept of Truly Grass Fed, more than a year ago.
“We mutually agreed not to go forward with those brands under the one house, and our view was that there wasn’t a differentiation, that there was a very strong overlap between the position Truly Grass Fed was looking at and where Kerrygold occupies today, that means there’s confusion for the consumer, so we mutually agreed not to go ahead.”
“Glanbia have a different view and that’s fine, ultimately the consumer in the US will decide.” ICMSA dairy chairman Ger Quain explained why farmers fear they will suffer from competition between these entities in the US market.
“Any time there is competition in the marketplace between two competitors, in what we consider a valuable high-end market, it can only have one effect.
“When somebody comes in, the other person has to compete against them, and they can only compete in one way, and that is on the price.” “John Jordan will still get the same salary, and who will get the rap is the man producing the milk, the man at the end of the line.”
He saw similarities with processors giving away marketing margin in the liquid milk industry over 20 years ago. “We saw this identical trend with the liquid milk industry from the 1990s on, when some of the same protagonists came into Limerick and gave away the liquid milk margin to the likes of Dunnes Stores.
“That’s why a lot of farmers in the south west got out of liquid milk, because the margin was gone from it, it was given away to the retailers for shelf space.
“The margin is tight enough, the last thing we need to do is to be competing against each other between ourselves” he said. He acknowledged that the US is a massive market, but feared competition between two competing companies from the same country will ultimately impact on farmers’ incomes. If you are over in the States waiting to buy butter, and you see a row going on between two sales groups, you are going to say ‘OK, I will set one against the other’.
“I think we are in a race to the bottom, it happened in liquid milk. I can see the same thing happening here.” In response to questions from the floor at the ICMSA AGM, Ornua CEO John Jordan explained the challenges in exporting to Asia.
“We certainly can’t compete in things like fresh dairy and yogurt, because you are not going to ship them from here. “Then you talk about infant formula, infant formula is a massive growth sector. It has some value. Ornua is not in the infant formula sector.” “As you go down the value chain, you end up with things like mozzarella or whole milk powder, a lot of which comes from New Zealand, where they have a 15% tariff advantage because of their bilateral trade agreement. “China and indeed Asia are very attractive markets, but you have to be very clear to understand how you are going to create value and be able to bring that home.
”We can do business down there, but we have to do it in the right spaces.”
He said if you go to a supermarket in Shanghai, there are masses of yogurt brands. “They have any number of significant brands, innovation in product, innovation in packaging, product we haven’t seen and it puts us to shame. “It looks like we are 15 years behind them, so the question you have to ask is in those markets where there is high value consumption, how do we compete?
ICMSA President Pat Mccormack and Deputy President Lorcan Mccabe with Sean Kelly, MEP, and European Commissioner for Agriculture and Rural Development Phil Hogan at the ICMSA AGM. Below, Ornua CEO John Jordan addressing the AGM and, bottom picture, some of the AGM delegates.