Kepak announced last week that it was reviewing operations at its Hacketstown plant. Fears are that this may result in the closure of the plant, leaving sheep farmers with fewer buyers.

Kepak says that the plant has been operating on a two- and three-day week recently because lamb throughput has halved since 2003. The Hacketstown plant employs 50 staff and processes carcase lamb only. The group processes 800,000 lambs and employs 1,700 people across seven sites.

Management at the company says that along with under-utilised capacity, a lack of boning and processing facilities is restricting adding value to produce and gaining access to a changed market where value-added products have overtaken carcase trading.

Kepak stated that while it is fully committed to retaining its position as a key lamb processor in the Irish market, this is part of an ongoing rationalisation process.

It is estimated that the Irish sheep industry is currently worth around €275m. With our domestic requirement making up less than a third of this volume, Ireland is one of the largest exporters of sheepmeat to continental Europe. Last year, export volumes increased by 3% while value grew by 4%.

Against this background, and with 80% of production exported, you may ask why Kepak is considering closing this plant.

A particular feature of the industry is the significant role of the French and British markets. There has been a marked shift of dependence on the French market, where exports fell from 75% in 1999 to 44% today. At the same time, Irish lamb has become more competitive in the British market, driven by the relative strength of the euro against sterling.

New markets

New international export markets like Hong Kong continue to open up. In Europe, markets like Sweden, Germany and Belgium, although small in volume, offer premium returns from branded packs.

Back home, sheep farming has changed dramtically in 20 years. The sector expanded in the 1980s, when ewe numbers had grown to 4.75m by 1992 from a mere 1.5m in 1980.

The national flock in the mid-’90s consisted of over 45,000 sheep farmers. This expansion coincided with the introduction of a common EU regime for sheepmeat. Since then, numbers have declined at a gradual but consistent level to around 2.5m ewes and 30,000 full-time sheep farmers today.

During the period 2005-2012, there was a 21% decline in ewe numbers in surrounding counties of the Hacketstown plant. The total decline for Ireland during the same period was 11%.

Even though throughput at meat factories grew last year by 7% to 2.61m head, it has declined by 32% over the past 15 years. The availability of a steady supply of Northern Ireland sheep has allowed processors to compensate somewhat for falling numbers and diluted processing costs by increasing their throughput. This is the case in the larger plants, with just over 454,000 sheep (18% of total throughput) imported for direct slaughter in 2013.

Food Harvest 2020 outlines the need to move from dependence on lamb carcases to more processed cuts for the sector to remain competitive. In order to hit the 20% growth target and with sheep numbers and producer output in decline, the processors must increase product and packaging innovation to add value to sheepmeat exports.

With further decline predicted in EU sheep numbers over the next 10 years, the opportunity for Ireland now is to capitalise on the excellent reputation of the Irish lamb brand across Europe.

Although significant investment has occured to date in both capital and product innovation, to make a significant impact on the global stage, processors need to be create a world-class supply chain centred around three areas: adaptable factories with the ability to flex between sheep and beef to drive economies of scale; agile production to react quickly to changing markets; and alignment to discerning European customers meeting their needs through value-added premium brands.

Main players in sheep processing

Irish Country Meats, Camolin, Co Wexford

  • Largest processor of Irish sheepmeat with plants in Camolin and Navan.
  • Throughput in two plants estimated in excess one million lambs.
  • Specialist sheepmeat processing division of Slaney Meats.
  • Working with local farmers and sheep producer groups throughout the country.
  • Recent investment to grow value added and premium product range, namely Irish Country and Slaney Valley. Has also developed a comprehensive range of retail pack products or convenient/ready to cook sheepmeat products.
  • Expanded its presence outside of Ireland in 2011 with the purchase of Belgium’s leading lamb processor, A Lonhienne.

    • Dawn Country Meats, Ballyhaunis, Co Mayo

  • Capacity of 2,000 sheep per day.
  • Sheep and beef.
  • Investment in efficiency and value add in 2008.
  • Supply catchment: The west, midlands and northwest.
  • The company has a major focus on breaking down the lamb carcase to add value and supply major blue-chip customers across Europe. One of its main customers is Tesco.

    • Kildare Chilling Company, Co Kildare

  • Capacity to kill 500,000 sheep per annum.
  • Traditionally catered for large numbers of sheep reared on the Curragh and in the surrounding areas.
  • Trades in both carcase and value-added product mix. Like other plants, there is a greater focus in recent years in boning lamb and supplying premium products.
  • Marketing premium product range in Kildara Farm and Kildare Heritage Town.
  • Supplying Irish, EU and international markets.

    • Kepak Athleague, Co Roscommon

  • Process an estimated 25% of total sheep throughput, or in excess of 550,000 sheep.
  • Plant doubles up as a sheep and beef processing plant.
  • In the 1980s and ‘90s was primarily slaughtering and exporting sheepmeat in carcase form due to volume of lamb processed (average 20,000 sheep per week). Has diversified production and a large proportion of their business is now in value-added/retail packaging and targeting premium markets.
  • Its major Irish contract is the Supervalu/Musgrave contract.

    • Other notable processors

  • Moyvalley Meats, Broadford, Co Kildare.
  • Ballon Meats, Ballon, Co Carlow
  • Martin Jennings Wholesale, Ballinrobe, Co Mayo