Farming

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Co-ops' founding father would relish seeing his vision realised

If the great Horace Plunkett were to arise and appear back in Ireland this Easter, what would he think of the co-operative movement he initiated almost 120 years ago? What shape is that movement in today to meet the current challenges?

Remember this was a man who, at a meeting in Cavan, when there was a row over where branch creameries should be built, said that he envisaged the day when one single creamery would handle all of Ireland's milk.

Surely though he would be impressed with the Kerrys, Glanbias and Aryztas of this world. But then again, they are no longer co-ops, but are plcs which grew out of co-ops.

Kerry plc, with its €5bn turnover and €500m profit, has blazed an amazing trail which others have falteringly tried to follow. If they had hiccups along the way, they were quickly overcome, maybe even buried under the overall success.

On the plc journey Kerry has become a global operator and has delivered amazing cash windfalls to the farmers of the southwest, windfalls that even Plunkett would hardly have envisaged.

Other co-ops and co-op/plcs, struck by the deeds of Kerry, also went on the acquisition trail, both in Ireland and abroad. But many bought unwisely and dissipated a lot of farmers' money.

After a calamitous start while operating as Avonmore and Waterford co-ops and plcs, Glanbia plc too is now making strong global progress with more than €2.7bn of a turnover and profit of €167m.

Aryzta plc grew out of the Irish Agricultural Wholesale Society, which actually goes back to Plunkett's time. Having spun off most of its Irish trading operation in Origin plc, Aryzta is now primarily an international player in bread making, but I guess Plunkett would be happy with this evolution.

Of course, the majority of co-ops, even dairy co-ops, have not gone down the plc route. People may talk of Eircom and Greencore as the first privatisations of State assets but the co-ops actually pioneered this process 40 years ago when they took over the Dairy Disposal Company assets from the State.

Since then, there has been continual pressure for co-op mergers and rationalisation but I suspect that were he to view the dairy co-ops of today, Plunkett would have a soft spot for the fab four co-ops in West Cork.

Not alone are Bandon, Drinagh, Lisavaird and Barryroe consistently profitable but they also consistently pay the highest milk prices to their suppliers. Their global growth has been achieved through their purchase of the progressive and well managed €250m turnover Carbery Milk Products.

Overall, Plunkett's vision of co-ops being the purchasers and processors of the milk from Irish farmers has been realised. But this was guaranteed when another of Plunkett's creations, the Department of Agriculture in 1923, gave co-ops monopoly rights on milk purchase in Ireland.

The biggest challenge to this came 25 years ago from Larry Goodman when his Food Industries began swallowing up co-ops such as Westmeath, Baileborough and Leckpatrick in Northern Ireland. These were exciting times in Irish milk circles, but the Goodman challenge melted when his businesses went into examinership.

But what about the farm commodities other than milk? Mr Plunkett would have to be sorely disappointed about the fate of co-ops involved in meat processing. Clover Meats was up and going in Plunkett's own time.

In the 1960s, a massive nationwide fundraising effort delivered €4m to Cork Marts to establish the IMP beef group. In terms of land purchasing capacity, that €4m would equate to more than €300m today.

Between them, Clover and IMP in the early 1970s controlled over 50pc of the national cattle kill. Other co-ops including Kerry, Avonmore, Golden Vale Marts and NCF also dabbled in beef processing. Now all have gone.

Co-ops also once played a major role in Irish pig farming and processing through weaner groups and also through the Mitchelstowns and Roscreas. They too have been moved on.

Why were co-ops not fit to compete in beef and pigmeat, where unlike dairying, there was not a captive supply? Was their reaction time too slow? Were they too naïve?

The co-op involvement in livestock marts came after Plunkett's time but, like the dairy processing, it has survived. The property boom impacted big time on the marts. Many private marts cashed in on their property asset and left the playing field. Many co-op marts also cashed in on their town-centre sites. This enabled them to build new premises on green-field sites and still have the cash to recharge balance sheets. A careless few tried to ride the property tiger themselves.

I'd guess that Sir Horace would laud the co-op mart rationalisation in Cork, Roscrea and especially in Connacht Gold (another co-op for which he might have had a soft spot).

Certainly the co-op has been a huge part of Irish rural life for the past century. On the negative side, we had the small co-op manager who controlled his farmer committee through offering them soft loans or jobs to family members.

Also on the negative side, employees in bigger co-ops behaved like civil servants and assumed there was a job there for life. Dairygold suffered from this latter malaise and has had to go through painful readjustment.

But what of the co-ops' own governing body ICOS, the successor to the IAOS which Plunkett himself founded?

In 2012 he would see that many of ICOS's co-op and co-op/plc children now dwarf the parent and that in reality the ICOS influence has waned. The ICOS status can only weaken further without leadership clarity. Plunkett would not be impressed.

Yet Plunkett would identify the ongoing need for co-op leadership. How will the co-ops deal with the expected surge in milk supply? How should co-ops deal with a changing customer base? What real influence have co-ops over plcs?

I leave this discussion to next week.

Indo Farming