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About 10 years ago, management at Dale Farm decided to invest in cheese processing rather than a new milk dryer, and that decision to target added value retail over commodity markets has clearly paid off for the farmer-owned co-op.
Over the period since then, around £60m has been spent on cheese processing capacity, leaving the Dunmanbridge site in Cookstown now capable of producing around 60,000t of cheddar annually.
Approximately two-thirds of the Dale Farm milk pool is now made into cheese, mainly destined for the retail and foodservice market in Britain.
Speaking to visiting agricultural journalists last week, Dale Farm CEO Nick Whelan said that the business wants to achieve consistent profitable growth, while at the same time reducing debt, and paying a leading milk price to suppliers.
“Our biggest fear is that we have no milk – we must keep our farmers in business,” he said. But to ensure the business can reduce debt, and have the funds to re-invest, it must be profitable.
In 2017-2018, Dale Farm reported a record pre-tax profit of £10.1m on a turnover of £482m. The latest accounts to end of March 2019 (to be reported in early summer 2019) show profits up again, while profit projections for the next two years also look strong, said Whelan.
However, he is not complacent about the future.
“We want to create a world-class business, but we are a long way off that as yet. It is what we are focused on.”
To improve performance, he has strategies in place for each unit within the business, is also keen to capture live data during processing to allow real-time decisions, and is focused on bottom-line growth (adding value to the milk already there rather than just processing more milk).
In addition, much of his effort is going into people management, ensuring that staff have the right skills and competencies.
Whelan has employed consultants to help apply lean principles to the business. This concept was originally created by Toyota to eliminate waste and inefficiency in its manufacturing operations. Taking the same approach to Dale Farm has allowed £6m of costs to be taken out in the last three years.
“The culture of lean has been ingrained in the co-op. It is improving the business as well as taking costs out,” said Whelan.
At present, Dale Farm processes over 850m litres of milk, employs 1,250 people and operates across seven processing sites in NI (including two United Feeds sites) and three in Britain.
Most of the business units are now operating close to capacity year-round, which is helping drive efficiencies. But there are probably more efficiencies to be had by rationalising the number of locations. “It is something we will have to look at,” acknowledged Whelan.
Brands
Looking to the future, he is also keen to develop more own brands. At present, less than one-quarter of output from the business is sold under a brand (such as Spelga or Dromona).
“We need to improve on this to secure our future. It is a big challenge to create new brands outside of NI, and it is not an immediate payback. But we have hugely ambitious targets set for the next three years,” said Whelan.
Aside from cheese, the other main outputs from Dale Farm are yoghurt, butter and liquid milk. It has remained a small player in milk powder, with around 6,000t produced annually.
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