Divisions have emerged within the farmer board of Kerry Co-op over the recent arbitration ruling on Kerry Group’s ‘leading milk price’ as well as on the future direction of the co-op.

The Irish Farmers Journal has seen a copy of an email letter sent by Kerry Co-op director Seamus Crawford from east Limerick to the rest of the co-op board, where he states he is very “concerned and disillusioned” with the way the co-op has handled the negotiations with Kerry Group following the arbitration ruling on the contentious ‘leading milk price’ issue.

“As can be seen following examination of the Arbitration Report there was only one discussion that should have taken place, which was on what way and when the plc [Kerry Group] would pay the huge amount of money owed to milk suppliers,” stated Crawford in his letter to the co-op board.

Some members of the sub-committee seem to think this was great money to get but remember this was only our own money we were getting back

“After arbitration we as a board held public meetings, one of which I attended in Limerick where Dan O’Connor informed the meeting on the details of winning arbitration. The take-home message for the board that night was that milk suppliers wanted us to go and get what was owed to them. It is very frustrating that Kerry plc try and bully their way at every opportunity,” he went on to say.

Obligation

“My reading of the situation at this stage is that the plc [Kerry Group] are trying to trick their way out of this obligation as they have been doing for the last nine years,” said Crawford.

In the letter, Crawford said the main board of Kerry Co-op was not kept informed of the leading milk price negotiations with Kerry Group and that several promises of information being provided to the main board have since been broken, even before the COVID-19 lockdown began.

Crawford added that he was disappointed with the effectiveness of Kerry Co-op’s ‘leading milk price’ sub-committee, which negotiated a 3c/l goodwill payment from Kerry Group in December last year.

“Some members of the sub-committee seem to think this was great money to get but remember this was only our own money we were getting back,” he stated. Crawford added that the “dogs on the street” knew this goodwill payment was coming as Kerry Group was seeking the co-op’s support for the potential deal with DuPont.

It’s not clear how much support Crawford has within the board of Kerry Co-op, but the Irish Farmers Journal understands there is a definite cohort of board members who wish to go back into arbitration with Kerry Group to try and get a higher milk price for the last five years.

Kerry Co-op deal

In his letter, Crawford also raises concerns about ongoing negotiations between Kerry Co-op and Kerry Group over the future relationship of both entities. Noises from the Kingdom over recent weeks have suggested Kerry Group and Kerry Co-op are looking at a potential deal where the co-op would buy a significant shareholding in Kerry Group’s primary dairy business here in Ireland. This would effectively see Kerry Co-op return to being a trading co-op.

While no official details of this deal have emerged, sources say it could be similar in nature to the Glanbia Ireland model where the business is jointly owned by the farmers and Glanbia plc.

Only a small number of people are privy to the details of these ongoing negotiations and Mr Crawford expressed a concern that the main board were not up to date with what is happening in the discussions. However, the main board of Kerry Co-op did a hold a meeting this week.

“It worries me that Kerry plc are trying to walk us into a situation like Glanbia Ireland, a joint venture with Glanbia Co-op and Glanbia plc where the revenue in the co-op has to be used to prop up milk price to the bottom of the milk league,” said Crawford.

Speaking to the Irish Farmers Journal, Kerry Co-op chief executive Thomas Hunter McGowan said negotiations between the co-op and Kerry Group were entering an ‘important phase’.

“Our primary focus is on delivering the leading milk price to Kerry farmers. We’re looking at finding a mechanism to resolve the leading milk price problem. There’s been a lot of commentary about a possible deal but it’s purely speculation. The Glanbia model wouldn’t be of interest to us because it would be in conflict with delivering the leading milk price,” said Hunter McGowan.

What is Kerry Group’s primary dairy business?

Kerry Group’s primary dairy business is a €600m to €700m turnover business that has a profit margin of 2% to 3% per year, meaning it makes profits of €12m to €20m.

Kerry processed about 1.2bn litres of milk last year and has three primary dairy plants in Ireland - Listowel, Charleville and Newmarket.

The main dairy products produced by the business are casein and cheddar. Indeed, about one-third of all the milk collected by Kerry Group is processed into rennet casein, making it one of the largest casein producers in the world.

Another third of Kerry’s milk supply is used to produce up to 40,000t of cheddar every year.

The whey left over from making cheese and casein is then further processed into demineralised whey, which Kerry Group sells to infant formula companies in Europe and Asia as well as using in it in its Charleville infant formula plant.

The final third of Kerry’s milk pool is used for skimmed milk powder (SMP) and a range of high-value specialised protein ingredients.