Farm Ireland

Thursday 22 February 2018

IDB looking East to fresh markets and are poised to hit the jackpot in Saudi

Darragh McCullough

Darragh McCullough

The Irish Dairy Board (IDB) is poised to make one of its most significant investments in recent times as it carries out due diligence on a major multi-million euro investment in the Saudi Arabian capital of Riyadh.

IDB CEO Kevin Lane (right) sees the Middle East and North African (MENA) market as one of the most promising emerging markets for Irish dairy products at the moment.

"MENA is one of the greatest short-term opportunities for the dairy sector at the moment," he told journalists visiting the Kerrygold butter plant in Germany last week.

"While European dairy consumption is fairly flat at 0-1pc annual growth, growth in MENA markets is closer to 9-11pc," he added.

While Mr Lane was reluctant to specify any details of the deal before the conclusion of the due diligence process, it appears likely that any new investment in processing facilities in the Middle East will focus on capitalising on new product technology that has been developed and commercialised in Teagasc Moorepark.

"For the last 15 months we've had Teagasc researchers working on recombination techniques that will allow us to reconstitute dry milk powders into 'fresh' cheese products," Mr Lane said last week.

Previously, the IDB boss told the Farming Independent that the company was on the verge of launching a type of cream cheese known as Labneh in the Middle East.

"If we get it right, there's a potential market worth hundreds of millions," he said at the time.

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However, Mr Lane believes that Teagasc's R&D facility in Fermoy still isn't delivering new products fast enough.

"Moorepark is delivering but not fast enough. It has traditionally been very good on the R [in research and development] but not so much on the D. It was slow to get started and it needs more money. We could double the €0.5m that we currently give them if they can justify it through their delivery of new products.

"It would all depend on the number of new products launched and the volumes involved," he said.

Mr Lane said that the latest Fonterra recall has not had a significant effect on the business.

"It has not had a transformational effect but we are in dialogue with customers and some are now admitting that they were over-dependent on one region," he said.

However, China, which was one of the main countries affected by the Fonterra recall, has not materialised as a key market yet for the IDB according to Mr Lane.

"We haven't succeeded in gaining traction in China. It just hasn't been a success, whether it's down to the people or the products or whatever," he said.

Instead, the Fonterra scare appears to have helped the IDB get a foothold in Russian markets where they launched a cheese in recent months.

"The Fonterra situation certainly drove demand for European product in Russian markets. We just happened to be in the right place at the right time in that the Fonterra issue caused a disruption in supply that led to a shortage of product in Russia just at the time we were looking to get listed in Russian supermarkets," explained Mr Lane.

With many of the new retail chains in Russia are German-owned, there is a similar listing system that costs approximately €1m per product to secure distribution throughout an entire network of shops. However, with a shortage of dairy imports, the Irish product secured a listing free of charge, according to the IDB boss.

Irish Independent