Darragh McCullough: Glanbia has right ingredients to tap into developing world markets
THE inexorable rise in the global population, and the parallel trend for people in the developing world to consume more and more proteins in the form of meat and dairy is good news for Irish farmers.
In Africa alone, population growth is expected to soar 76pc by 2050. The average African consumes less than 106kg of dairy product a year. In Europe the corresponding figure is 375kg, but greater prosperity means the imbalance is shifting.
It's also the reason why the management of the newly formed Glanbia Ingredients Ireland (GII) is so up-beat about the future for the business.
GII has emerged as the country's largest dairy processor. It's a joint venture between its two parent companies, Glanbia Plc and the farmer-owned Glanbia Co-op. GII now processes 30pc of Ireland's milk pool – a colossal 1.5 billion litres a year from over 4,300 farms.
The plan divided farmers, with many believing that the price of setting up the joint venture was too high, given they were effectively investing in a lower margin business.
However, GII chief executive Jim Bergin is convinced that the future is bright if they stay focused on the right priorities.
"When this dairy ingredients unit was part of Glanbia Plc, we were just one of nine different divisions. We were trying to compete for both capital and focus, which at times was difficult. Now we can focus 100pc on three things – our suppliers, processing plants and markets," Mr Bergin told a gathering of agri-sector leaders recently.
With an annual output of 180,000 tonnes of product generating sales of €738m and a EBITA of €44m, GII is already Ireland's third largest domestically owned exporter.
But things are going to move up a gear in the coming weeks as the first sod is turned on the company's €180m processing facility at Belview, near Waterford Harbour.
"The Food Harvest 2020 aims to increase Irish dairy output by 50pc over the next eight years. There is no other project that is going to have as big an effect on the rural economy," declared Mr Bergin.
Recruitment for over 70 permanent staff has begun. The plant is expected to be up and running within six months once construction begins.
As Mr Bergin moves from what he calls the formation phase to the execution phase of this development, he is already signalling the potential for further expansion at the new Belview site.
"We currently process about 30 million litres of milk a week at our biggest processing site, Ballyragget. The new site is going to have two 7.5t/hr milk powder drying towers with a capacity to process 19 million litres a week. But we already have permission to add in two extra towers if we want.
"We aim to become one of the leading dairy companies in the world. After all, this is one of the best places in the world to produce milk in terms of low-cost, sustainable production," he said.
"We need relevant scale in certain sectors to be real players in a global market," he said.
Instead of simple commodity-based products, Mr Bergin wants to focus on value-added products such as infant formula. Sales in this sector are "growing like a train" at up to 12pc per annum.
'Affordable nutrition' is the other slightly nebulous area that Mr Bergin claims is worth chasing. Think processed cheese that doesn't even need to be refrigerated.
But that is exactly what suits some of Glanbia's fastest growing customers in developing countries like Africa.
"These products are also showing double digit growth. We've got one distributor in Western Africa whose sales are growing at 14pc a year without even having a chill-chain," remarked Mr Bergin.
The new plant will essentially be a big powder plant, churning out various different types of fat and protein-based powders. Separate streams of whey and protein isolates tailored for everybody from sports fanatics to convalescents are more examples of how Mr Bergin envisages adding value to what would otherwise be low-value commodity dairy powders.