North Cork Creameries is a small co-op nestled in the foothills of Kanturk. While land quality is mixed in this region and annual rainfall is high, the hinterland produces a lot of milk.
Kanturk is surrounded by dairy processing facilities and to some extent its model relies on its near neighbours. North Cork Creameries keeps processing 52 weeks of the year. The bigger players close down for a period.
North Cork purchases whole milk, dairy products and operates contract manufacturing. It only has 91m litres from its own suppliers but processed the milk equivalent of over 350m litres in 2021.
About 30 minutes to the east is Dairygold in Mallow and 30 minutes to the north is Charleville, where Kerry Group has milk processing facilities. To the northwest is Newmarket, where once Newmarket Co-op was situated, until Kerry purchased the cheese-making facility and store in 2010.
The growth in North Cork Creameries has been quite exceptional. It has invested over €25m in facilities to take growth milk from a number of different processors.
Working with Dairygold, Kerry, Strathroy and Arrabawn, among others, has allowed it to grow volumes processed, but its core north Cork suppliers have also grown in the last 10 years.
In early 2019, North Cork Creameries formally signed up the milk suppliers of Newtownsandes Co-op, the small Kerry co-op about an hour to the northwest, having previously merged in suppliers from Feales Bridge and Headleys Bridge.
This brought about 35m litres of milk into the North Cork pool, as well as new suppliers and new shareholders. This is a large chunk of the doubling of North Cork supply from 46m litres in 2017 to 91m litres last year.
Purchased in supply has also grown. In 2017, North Cork was processing 157m litres in total, and last year it was 226m litres. In total, it means the Kanturk headquarters processed milk that was the equivalent of 358m litres in 2021, by far the largest volume that the business has ever processed with capacity to process over 400m litres.
On a comparative scale in an Irish context, it means the Kanturk operation is processing about 60% of the Carbery (West Cork) volume and almost 70% of what Arrabawn and Aurivo process.
Where have energy costs gone in 2022?
We are up three- and four-fold from where we were. Our LPG price contracts are finishing and while contracts for volumes of liquid petroleum gas (LPG) we use are still available, contracts for price are not.
What products are working for North Cork?
We process whey cream, a byproduct of the cheese business, and skim concentrate and both do very well for us.
Rennet casein is a great product for us on site here and is a consistent high-value product.
Where is EBIDTA and net profit trend?
Over last five years, we have returned between €2.1m and €2.5m in earnings (EBITDA 2021 was 1.5%) compared to €1.1m for the five years before that.
Trading profit was €1.25m last year (2021) and has risen for the last three years from –€3.6m in 2018. A stability fund of €4.8m has been accounted for on the balance sheet.
Is there a business risk because you buy in so much milk rather than produce it among shareholders?
No, I don’t think so. Our arrangements make us very business-like and we have no debt in the company despite investing over €25m in the last 10 years. We are small niche players that have flexibility and we need to be lean to make it work.
Is the new branded butter going well?
It is and it has won numerous awards despite the fact it is just 12 months on the market. It is our attempt to increase the value of output. Both branded and own-brand butter have gone up significantly in sale price over the last 12 months.
You have a relatively large volume of suppliers in fixed milk schemes – have you offered a scheme recently and do you see a role for them in the future?
We have a scheme running from 2020 to 2022 inclusive and 2021 to 2023 inclusive.
The board and the co-op have done a lot to help those on fixed offerings that are below market price between March and October. Schemes will have to change to reflect some of what has happened in 2022.
North Cork Creameries is a smaller player, probably the smallest of the core nine processors left in the Republic.
While small, it does not shy away from work and, in effect, tries to keep processing going 12 months of the year to make the most of what it can.
This suits the larger processors that shut down for a number of weeks during the winter. Instead of a 28t/hour dryer to improve efficiencies, it has a 2.5t/hour dryer.
This much smaller dryer also brings efficiencies as it leaves options for smaller volume work off peak.
So North Cork is essentially operating a niche role surrounded by much bigger players.
It’s hard to fault the modus operandi of making higher-value products all year round and keeping production costs to a minimum, but margins are tight and leave little room for slip-ups.