ICMSA fears mar­gin give­aways by Or­nua and Glan­bia in US

Irish Examiner - Farming - - NEWS - Eoin Mccarthy

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.

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