Thursday 19 September 2019

Richard Curran: 'Glanbia-Ornua cheese spat may be first skirmish in longer battle'

Kerrygold Park, Mitchelstown Co. Cork
Kerrygold Park, Mitchelstown Co. Cork
Richard Curran

Richard Curran

The grass-fed brown stuff has truly hit the fan in a row that has blown up between Glanbia and Ornua over a new cheese product Glanbia is launching in the US. Glanbia has been growing its business in the US in the natural and healthy foods category and saw an opportunity with a new cheese product that would emphasise to all those health-conscious American consumers that it comes from cows which are genuinely grass-fed.

Hence it developed the brand 'Truly Grass Fed' cheese. Glanbia knows the healthy eating business in the US and the fact that healthier cheeses are a growing segment in the €13bn American retail cheese market. It also knows cheese.

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Glanbia's US ingredients subsidiary Glanbia Nutritionals, produces $1.5bn of US cheese a year, representing a 20pc market share of American cheese production. This new grass-fed cheese will be sold in stores and is aimed at the health-conscious buyer. Truly Grass Fed Cheese will be made in Ireland from milk supplied by Irish farmers.

So far so good. What could possibly be wrong with that? Well Ornua, which is owned by a collection of Irish co-ops and owns the famous Kerrygold brand, is not happy. It sells two cheese brands in the US - Kerrygold and Dubliner. The company argues that Glanbia is seeking not only to compete side by side with Kerrygold cheese but is undercutting it on price. What's wrong with that?

Well, according to Ornua this could undermine the value proposition for Irish farmers. What's more is, if Glanbia decided to launch a grass-fed butter product, it could undermine the Kerrygold brand in the US - something which has been very successful over many years.

There is also the slight issue of Glanbia being the largest shareholder in Ornua with two nominees on the Ornua board. It seems a board meeting last week didn't take place.

Ornua told the Irish Times that its board members were "aware of their responsibility as directors including obligations with regard to the safeguarding of confidential information".

It may be that Ornua is worried about a commercial threat from Glanbia. It knows there isn't anything it can do about it except go and compete. Glanbia is emphasising the grass-fed qualities of its new cheese product, not its 'Irishness'. Surely there is room for lots of Irish manufactured cheese products in the American market? As it is, American shelves and chill cabinets are full of competing products from all over the world.

Ornua should focus more on growing its market share. Even if Ornua is right, and there is an element of competition between the two, isn't that a good outcome for Irish cheese, Irish processing and Irish farmers?

Farmers are going to need as many new export products and markets as possible if Brexit really goes pear-shaped. Competition in Irish whiskey grew the category worldwide in the last 10 to 15 years and direct competitors know the benefits it has brought to the whiskey sector.

According to SPINS industry data Ornua has just 0.3pc of the overall US retail cheese market. So there is plenty of room for more Irish players. The more the merrier as it could help everyone grow. Glanbia could say it is unreasonable to have nobody take on Kerrygold just because it has been there for a long time and represents a collective effort from the industry in Ireland. Glanbia has said it even approached Ornua with plans to work on this new product together but was turned down.

The real challenge here will come if Glanbia decides to bring out a similar butter product, a market segment in which Kerrygold is a bigger player. Kerrygold butter has an almost revered status in Irish agri-food history. Challenging it might seem almost sacrosanct. But, wouldn't it just be business? After all, Glanbia is making the stuff in Ireland.

Glanbia could ask the question of how do other shareholders manage their commercial interests where they already compete with Ornua for example in selling ingredients into the UK. Glanbia says it is committed fully to Ornua but clearly it wants the commercial freedom to do other things too. This row reflects how the co-op movement itself and some of its biggest players have evolved and how traditional structures and ways of doing things are coming under pressure.

This may be just an early skirmish in a much longer battle that lies ahead.

Business caught between a rock and a hard Brexit

A caller into a BBC Radio Ulster show last week made a very simple case for why the Brexit referendum should be re-run. He said nobody on the Remain side or the Leave side really fully understood the implications of Brexit. "Imagine," he said, "if my wife and I decided to go the cinema. We hadn't gone for ages and we said, that's it, we are definitely going tonight'. When we got there we discovered it costs £100 each to get in. Wouldn't we be stupid to say, 'We said we were going and that's it'.?"

He is right about the implications now being seen up close but it has only prompted both hard and soft Brexiteers to speculate about what could have been, should have been and perhaps may be in the future.

That lack of knowledge among the British public must prompt some serious self-questioning within the business community both in Britain and Northern Ireland.

Major multinationals did not articulate the implications of a hard Brexit properly at the beginning. Instead they relied on business organisations and lobby groups to make their points in a vague general way for them. This never works and people switched off.

It is far more powerful to have the person running a large business warn about jobs in his/her business, than it is to have a national business organisation caution about the future for everyone.

Many British firms only began to warn about the implications for their company late on in the negotiations and two years after the referendum. In the North, some businesses didn't want to appear un-unionist, or alienate themselves from the DUP by saying Brexit will be a disaster. The Northern business community has been virtually silent on the practical implications of the backstop for their firms, and instead have left the airwaves to jingoistic politicians.

Many of us do not like the idea of business dipping its oar too firmly into politics. But when it came to Brexit, the economic arguments needed to be spelt out.

Perhaps, like the former British Prime Minister David Cameron, business leaders were too casual about the whole referendum and never believed it would pass.

Now, as a rejection of UK Prime Minister Theresa May's deal seems likely, British politicians are preparing to re-set the dial back to zero on Brexit. It is going right back to the morning of the result in June 2016. But with one big difference - it is now pretty clear there is no better Brexit deal which can be extracted from the EU. If May's deal collapses, business leaders in the UK have a responsibility to be more forthright in spelling out the consequences of the two most likely choices that arise - vote again or crash out. Unfortunately, they may be more focused on channelling their energies into ensuring hard-left Labour leader Jeremy Corbyn doesn't get elected. Many of them will see the choice as being between a no-deal Brexit or Corbyn's brand of socialism. Between a rock and a hard place.

Sunday Indo Business

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