Farm Ireland

Friday 24 November 2017

Meat sector consolidation raises all sorts of questions

Larry Goodman. Photo: Steve Humphreys
Larry Goodman. Photo: Steve Humphreys
Darragh McCullough

Darragh McCullough

Beef and sheep farmers are worried about the fall-out as the Allen family retire from redmeat processing with the Larry Goodman owned ABP taking a 50pc share in Slaney Foods.

If the deal goes ahead, it will leave Mr Goodman controlling 28pc of the national cattle kill, 40pc of the national sheep kill and 50pc of the country's rendering capacity.

This is about 450,000 head of Irish cattle, along with another one million sheep. That's on top of ABP's British plants that now slaughter an estimated 370,000 head, or close to 14pc of the British and Northern Irish cattle kill.

It means that one man controls about 250,000 tonnes of annual meat sales - equal to half the entire Irish output.

The Bunclody plant would be another valuable addition to the portfolio. It is the largest beef plant in Ireland, with one of the most modern boning halls in Europe, courtesy of investments of over €25m in recent years.

Slaney had championed the development of premiums for Hereford and Angus lines that they sold into growing contracts in Lidl Ireland and abroad.

ABP was the other main outlet for these Herefords, providing some healthy competition. This is one issue, but farmers are also wondering if the other major shareholder in Slaney - Fane Valley Co-op - will be involved in the plant for much longer.

The northern co-op has already formed a merger with Cavan-based Lakeland Dairies to help it through the current dairy crisis.

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While the deal must first be assessed by the Competition and Consumer Protection Commission (CCPC), farmers won't be banking on any favours.

The IFA has repeatedly received warnings from the competition watchdog, most recently when it reminded the association during the last beef protest in 2014 of their obligations to consumers under competition law.

The CCPC will focus on whether ABP's move poses a significant threat to competition in the market. ABP's market share will be another consideration, but market dominance will not be the over-riding factor.

They will also consider the increase in ABP's market share (from 22pc to 28pc) and whether other contenders are big enough to take on the business.

But the reality is that the competition commission rarely blocks a merger as the businesses involved in cases referred to the commission usually figure out a compromise that involves selling off some of the contentious assets.

Farmers also need to be clear as to what would be a better alternative to ABP. If Kepak and Dawn were to bid for Slaney, it would involve a bigger consolidation of the lamb market. Beyond that, you are looking at venture capital or international investors, which would probably make farmers even more uneasy.

It's at times like this that beef farmers must wish they had a co-op to step in on their behalf.

Indo Farming