Ornua targets China after export growth as CEO warns on Brexit tariff 'wipeout'
Ornua, Ireland's largest exporter of dairy products, has said that it expects greater potential demand for its products in China to come from food services, rather than premium branded sales.
Announcing its results for 2017 yesterday, Ornua said that the food services part of the market in China was growing very rapidly, however the part of the market that is not growing is the premium high-priced retail products segment.
Demand for the group's products continued at pace in both Germany and the US last year, where the group reported a record year for Kerrygold in both markets, with the brand recording double-digit volume growth in each market.
During the year the group, which is made up of 33 dairy co-ops, expanded its German production facility, with total investment in the facility now standing at €60m. Meanwhile, Ornua reported a record year for its ingredients division in North America.
With Brexit on the horizon, Ornua said that the best scenario would be no change to the current situation, while the worst scenario for its members would be a hard Border and Word Trade Organisation (WTO) tariffs.
"If full EU tariffs were brought in, the penalty or levy on cheddar would be over €1,670 per tonne and no consumer in Britain or anywhere else is going to stomach or eat that extra cost, so it will be a wipeout scenario for the majority of your exports to Britain," said Ornua CEO Kevin Lane.
"We are already feeling the affects in that our sales into Britain and our profitability returns are affected by 12-15pc."
On the subject of genetically modified foods, Ornua said that in some of its key markets there are GM-free products, however they are not selling for any premium over Kerrygold today.
"It is something we are having a look at because of Ireland's position on imported feed ingredients. It is something of a challenge in declaring all of Kerrygold GM-free, but it is something that we are evaluating at this time."
On the issue of milk prices, the group said that it was budgeting 28-30c per litre including Vat for 2018. However, it warned that there was a health warning on this in the form of market volatility.
Overall the group announced record revenues of €2.1bn for 2017, an 18pc increase year-on-year.
Operating profit at the group was €35m, up almost a third on the 2016 performance, according to the group's financial results.
Meanwhile, profit before tax increased by 84pc to €29.1m.