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Wednesday 7 December 2016

O'Neill: It wasn't all plain sailing in IDB early days

Ex Glanbia chief looks back at 40 years of change

Published 17/05/2011 | 05:00

There are few men in the Irish dairy industry with closer links to the IDB over a period of four decades than former Glanbia chief Pat O'Neill. He talked to Darragh McCullough about the changes he has witnessed during that time.

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"I remember arriving for my interview with then CEO Tony O'Reilly in 1964. He said, 'I've got a meeting with the Secretary of the Department of Agriculture in 10 minutes. What have you to offer Bord Báinne?'"

These were exciting times for the newly established IDB. Charged initially with marketing almost all the butter that Ireland had for export, the State monopoly was attracting the brightest and best. Although he was applying for the relatively lowly position of an administrative officer, Mr O'Neill was to quickly progress up through the organisation and eventually became its director of administration and secretary before leaving to take on the role of managing Avonmore in 1973.

"We were dealing almost solely in butter in the early days. While output was increasing, expansion was still dampened by the fact of a limit on the amount that we could get into the UK. Outside of Britain, the prices were very poor, if they were to be got at all. While we might have got three or four shillings a pound in England, it was considered a success if we got a shilling a pound in places like Morocco.

"So the launching of Kerrygold was a real turning point for not just the IDB but the industry in general. I remember Tony O'Reilly being asked how we managed to crack open the English market where other exporting nations had already established themselves. "We took out the soft underbelly of New Zealand," he said.

Following Mr O'Reilly's departure in 1966, Joe McGough took the reins. Seven years later -1973- was another key year in the history of the IDB in the opinion of Mr O'Neill.

"Up to then, there was no floor to the market and we really had very little access to Continental markets. Membership of the EC changed all that. As TJ Maher told farmer rallies at the time, it was an unlimited market with a guaranteed price."

Illegal

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But it was not all good news for the IDB. While production increased almost 50pc in the decade up to the quota cap being introduced in 1984, EC membership also made the state monopoly that the IDB represented illegal.

"Along with Paul Hussey and Albert Murphy, I spent the second half of 1972 meeting with co-op boards again and again to try to convince them to convert Bord Báinne from a State body to a co-op that formed the basis for the IDB today. It was always going to be difficult to get co-ops who had spent their entire existence in competition with each other at home to become comfortable bed-fellows in export markets. The clincher for most was the promise that they would be paid within seven days of delivery of product."

Even though all the major co-ops joined up, Mr O'Neill feels that this was the start of the erosion of the marketing power of the IDB.

"A key turning point was 1984. Capping output is never a good model for prosperity in any business. A business that cannot grow loses the ability to attract strong management. When there was a further 10pc cut in quotas in 1987, processors found themselves forced to focus more on developing niche markets that maximised the value of their output. This was something that the IDB just was not designed to be able to do. In addition, co-ops saw the purchase of processing facilities outside of Ireland and even Europe as the only way to keep expanding. But they needed to become PLCs to raise the capital to achieve this. As a result, we saw a lot of the main co-ops switch to PLC structures in the 1980s.

"In hindsight this might have been an opportunity to reinvent the IDB as a new entity, similar to the Fonterra model in New Zealand."

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