Wednesday 12 December 2018

'There is a lot of rancour in Britain - they're not bringing the nation with them'

Interview: Gabriel D'Arcy, CEO LacPatrick

Gabriel D'Arcy, chief exec of Lacpatrick. Photo/Paul McErlane
Gabriel D'Arcy, chief exec of Lacpatrick. Photo/Paul McErlane

Colm Kelpie

When we first meet, Gabriel D'Arcy is standing tall over a boardroom table, jacket off, munching on a sandwich.

Strewn around him is evidence of a busy morning of meetings; used coffee and tea cups, half-eaten plates of biscuits, and a large presentation showing facts and figures about the operations of dairy giant LacPatrick.

We're in its Artigarvan plant in Co Tyrone, where a £30m (€24m) investment last year has helped massively boost the company's Brexit defences, providing it with the capacity to process milk in both Northern Ireland and the Republic, an important factor in the event of tariffs or customs delays post-Brexit.

On the day we meet, the boardroom played host to a delegation from the House of Lords EU Select Committee, which visited the operation after taking evidence in Dublin, Belfast and Derry as part of its inquiry into Brexit and its impact on Ireland.

LacPatrick, employing 300 and with a turnover of more than €300m, is a prime example of the interwoven nature of the agri-food industry on the island.

Headed up by D'Arcy, it makes butter, liquid milk, cheese and powders. It currently handles and processes more than 600 million litres of milk from more than 1,000 farmers, with more than 500 million litres coming from suppliers in the North, and the remainder in the Republic, from in and around Monaghan.

It has three operations - in Tyrone, Coleraine, and in Monaghan, where it is headquartered.

It buys and sells in euros and pounds.

Its trucks thunder along the winding country roads that pepper the region, making up to 10,000 border crossings per year.

The LP brand is the market-leading powder supplier to west Africa and its products are sold on every continent.

The company says it is commonplace for milk to go from a farm in the Republic to a processing facility in Northern Ireland, and then to be exported to west Africa.

D'Arcy, the former managing director of Bord na Móna and a 20-year veteran of Kerry Group, has been vocal about the challenges posed by Brexit, both for the island and his own business and sector.

It seems some in the British political establishment have finally taken notice.

"My impression was that they [House of Lords delegation] were abhorred that they were the first members of the British parliament that have actually come and visited here [LacPatrick]," D'Arcy says.

LacPatrick's newly upgraded Artigarvan facility houses an evaporation and spray-drying technology capable of making advanced dairy ingredients for the company's expanding markets in Europe, the Middle East, Africa and Asia.

It will allow the company to produce up to 12 tonnes of dried dairy ingredients an hour, up from five tonnes previously, and process 2.5 million litres of milk a day on the site, up from one million previously.

And, crucially, it means LacPatrick now has the capacity to process milk in the same jurisdiction in which it collects it.

D'Arcy says the move was "very fortuitous".

The decision was taken in 2015, after the merger between Monaghan Co-Op, which had bought Leckpatrick Dairies Artigarvan in 2002, and Ballyrashane Co-Op, which resulted in the formation of LacPatrick.

"It [Brexit] was on the horizon, but I don't think it hardly got a mention and we went through quite a bit of due diligence," D'Arcy says.

"What is the single biggest risk facing LacPatrick or any dairy enterprise facing Brexit? In the event of a worst-case scenario, have you got the ability to pick the milk from your suppliers, bring it somewhere, process it and make it into a product? That is the single biggest risk. Can you do that in the same jurisdiction? The risk is that it will be a hard Brexit and you won't be able to freely cross the Border, or you will but you'll be paying tariffs.

"Once that risk was mitigated, the next risk is, do we have access to the markets?"

Everything out of the Artigarvan site is exported outside of the EU. LacPatrick sells into a number of international markets, including the Middle East, US, and is a brand leader in west Africa.

As far as D'Arcy is concerned, the defence provided by the Artigarvan upgrade will help mitigate the Brexit impact, but it's maintaining that market access that is giving him continued cause for concern.

The House of Lords Committee, taking evidence in Belfast the day before it visited Artigarvan, asked PSNI Chief Constable George Hamilton if he was any more comfortable now about his concerns around policing and justice post Brexit than he was 18 months ago.

The answer was no.

D'Arcy is similarly emphatic.

"How could one be any more comfortable, because there are no answers.

"The great thing about Brexit, is that everything is being played out in public. There seems to be a fairly coherent European position. Monsieur Barnier seems to be a fairly strong character and has support in terms of his approach, whereas, unfortunately, within Britain there is a lot of rancour and disquiet and almost open undermining of whatever position any leader takes. They're not bringing the nation with them."

He's equally scathing about the lack of an Executive in Northern Ireland.

While the DUP and Sinn Féin have so far been unable to break their year-long impasse, Northern Ireland remains without a political voice to articulate any potential Brexit impact.

"England is not an agricultural-based country in the sense that the amount of GDP associated with agriculture is very small, relative to say, financial services," D'Arcy says. "It pales into significance. From an English perspective, financial services will be critical in all this negotiation, and I don't think food and agriculture features.

"In Northern Ireland, if you strip away the civil service, the public service, the only significant industry is agriculture and food. It is of core, key fundamental significance and importance to the Northern Irish economy, and particularly the rural economy.

"I don't know if that has been properly understood by the British parliamentarians who are developing their strategy for Brexit."

Beyond business, D'Arcy has expertise on Border security, having served in the Army during the Troubles, before retiring as a captain.

He served in Castleblaney and was on Border duty.

Can the Border be secured from a customs point of view? "No, it's daft," he says.

Technology, he adds, may be able to work for large businesses, but the problem is with the smaller firms.

"The problem arises for the small builder that is building a house in Aughnacloy, and the following week he's going to be building in Monaghan," D'Arcy says.

"He needs to get a strip of metal. You can buy that up in the North and it's going to be 30pc more expensive than in the South because of a tariff. So he's going to buy that in the Republic, go up and put it in the Northern house.

"That is smuggling and that is undermining the builder or the steel producer of that little strip of steel in Northern Ireland, who has to pay this tariff. Yes, you can control it for these [big] operators. But for the vast mass of people, it's not going to work. It will just give rise to dislocation."

Notwithstanding the Brexit worries, 2017 was a busy year for D'Arcy. As well as the opening of the new LacPatrick facility in Tyrone, D'Arcy has also overseen an overhaul of the board structure, reducing the board from 26 to 15 and setting up electoral areas across the supply base as well as a 60-person council.

The average age of the board has come down, D'Arcy says, and the chair and members are now elected for a fixed term.

It's an all-male board though, which D'Arcy says reflects the nature of the industry. He'd like that to change.

"It's fair to say there are some good female farmers coming through, and some good wives who are very exceptionally qualified in their own domain that would make fantastic board members," he says.

Although there is no gender policy as such for his own board, he's a fan of quotas for boards more generally.

"There should be a balance on the board. Females' way of thinking on a lot of things is quite different and often much more thoughtful than the male way on a lot of different issues. I'm not saying that in a sexist way, but there's a lot of studies that show the best decisions are often arrived at by a mixed team of people that contains females and males operating in mutual respect."

So, what's the future for LacPatrick?

Further expansion into new markets and products, D'Arcy says, although for now the focus is to generate returns for the investments that have been made.

"We have outstanding opportunities coming in front of us, not to mention further developing our existing markets in west Africa and the Middle East," he says.

The global economic recovery is also helping, he adds.

"The food industry is actually in an exciting phase at the moment.

"Yes, there are challenges, but the world population is increasing. There is certainly a movement back to dairy as a key nutritional element in your diet.

"Consumption is increasing. Uniquely, at this point in time, we have the American market, China and Europe all coming into a period of fairly stable, and sustained growth, all in unison.

"So there are a lot of positive indicators."

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