This week, Eoin Lowry examines the move by Glanbia Ireland to launch a cheese range in the US under its Truly Grass Fed brand. While Glanbia has been operating the brand at a business-to-business level for a number of years, the decision to put it on shelf in the US is significant. It is the first time an Irish dairy processor has gone up against the Kerrygold cheese brand in the US market – and presumably, in time, butter will be next.
Until now, Ornua has focused on developing Kerrygold brand in the US – in both the butter and cheese categories. It is a strategy that has delivered with Ornua having achieved the difficult balance of securing increased market share while continuing to command a premium price.
As we reported recently, Kerrygold is now the second largest butter brand in the US and the largest imported butter brand. And yet it continues to command a retail price twice that of domestic butter brands.
It didn’t happen by accident – nor was it achieved overnight. It has taken over two decades, during which Irish farmers have invested hundreds of millions of euro in establishing a brand around the grass-fed credentials of Irish dairying.
With a 25% stake in the Kerrygold brand, Glanbia is naturally keen to play down the significance of its move, stressing that the offering under the Truly Grass Fed brand is limited to cheese, volumes are envisaged to be small and that it does not intend to compete on price with Kerrygold.
There is a very real risk that this competition will lead to a destruction in the value of the US market for Irish dairy exports
Given the effort and investment required to establish a new brand, it is difficult to see how a long-term commercialisation strategy would only include cheese. We understand that price promotion activity is already evident in some of the retail outlets into which the Truly Grass Fed brand has been launched in recent weeks.
So, is the Kerrygold brand now under attack from within its own boardroom? Ultimately, Glanbia is now competing in the US market with Kerrygold cheese and potentially over time with Kerrygold butter. It is not credible to say both are operating in separate markets. Kerrygold is marketed under the banner “milk from grass-fed cows”. Although the Glanbia brand makes additional claims on genetically modified and animal welfare, its core offering is being a grass-fed dairy product – as the brand name states: Truly Grass Fed.
Glanbia states that it will not compete with Kerrygold on price but it is difficult to see how this will be achieved in reality. Whether intentional or otherwise, there is a very real risk that this competition will, over time, lead to a destruction in the value of the US market for Irish dairy exports – for which farmers will ultimately pay the price.
Questions have to be asked of Ornua and Glanbia as to how we have arrived at this juncture. We understand discussions had been ongoing for a number of years. Did the potential not exist to flex the Kerrygold brand to accommodate the customer looking for a GM-free product in the US?
Looking solely through a Glanbia lens, doing a solo run is understandable in the context of trying to add value for its members and shareholders to a growing milk pool. But while accepting the need for co-ops to act in the best interests of their members, it is not tenable for them to sit at the Ornua board table as a shareholder and a direct competitor.
In the early 1980s, we saw Kerry withdraw from what was then Bord Bainne (Ornua) so it could compete without compromise.
Ultimately, the move by Glanbia raises a fundamental question around the long-term future of the Ornua model and whether Glanbia sees its future within this model.
At a basic level, the options are either to look to clarify the role and operation of Ornua by taking the steps necessary to make it fit for today’s marketplace or to let it fade away with its position in key markets eroded by competition.
While the existing model is far from perfect, farmers need to be aware of the alternative. There are numerous examples of how internal competition can lead to the destruction of value in the marketplace – we only have to look at our domestic butter market and how competition among co-ops has left Ireland with one of the lowest retail prices in the world. In many ways, the market failure in own-brand liquid milk has been created by the same fragmented marketing approach, with farmers left carrying the can.
And let’s be clear: farmers sitting on co-op boards have to take responsibility here for not looking outside their individual boardrooms.
At international level, the premium price that was once returned by the infant formula market has been eroded – again due to internal competition.
Looking outside of the dairy sector, many of the challenges in our beef industry have been created due to competition among Irish beef processes in the market.
Dairy farmers, who are in the fortunate position to have retained ownership of their processing industry, cannot afford to adopt a passive approach to this issue. Tough decisions have to be made as to what direction farmers want their industry to go – the Glanbia move has merely provided the catalyst for this discussion.
Farmers at this point deserve an independent, in-depth study on what structure will best protect their interests into the future.
Farm organisations and those representing farmers across the range of co-op boards now need to show real leadership on what direction they want their industry to take.
SIAL Paris: sustainability must extend
to farmers
Bord Bia chair Dan MacSweeney, CEO Tara McCarthy and Minister of State Andrew Doyle arriving at SIAL Paris on Monday 22 October. \ Chris Bellew, Fennell Photography
There are 35 Irish companies showcasing Irish produce this week at SIAL Paris 2018, the world’s largest business-to-business food fair. The numbers exhibiting are huge – 7,200 companies from 110 countries. Irish beef processors had a strong presence, which is important in a year where the 2018 beef kill to date has increased by over 50,000 head and beef production continues to rise.
The Origin Green brand was the frontrunner for numerous selling points for Irish beef, including grass-fed, strong environmental credentials, high standards of animal welfare and food safety. Sustainability was another commonly used term.
Let’s hope that when processor representatives return to Ireland, they will put the same effort into discussing the sustainability of farmers.
At current prices, staying in winter finishing is challenging as farmers are expected to carry all the risk. Good to see beef prices beginning to rise; more good news from Paris is needed.
Autumn work: making the most of it after a year of extreme weather
Niall Carroll sprays a crop of winter barley in Ballower, Co Carlow, for his daughter Louise Carroll, who has leased the land while she studies machinery and tillage in Waterford. \ Philip Doyle
What an excellent October farmers are having as mainly dry weather provides respite for cereal and livestock farmers – a real positive weather event in a year of extremes.
Suckler and dairy farmers are able to complete very clean grazing which should set the farm up well for spring 2019. Cereal farmers are able to complete field work again in perfect weather.
Some farmers are attempting to conserve brassicas in bales or pits and unless completed properly, it can turn out a mess.
Try to pit brassicas with grass silage and straw, or wrap very well with reduced bale handling if possible.
Machinery: diesel prices adding to farm expenditure
In our Machinery section, Peter Thomas Keaveney outlines how diesel prices are affecting farm costs. Since April this year, we have seen prices 5 to 10c/litre ahead of 2017. Depending on hours clocked up and tractor capacity, this will increase diesel costs by between €550 to €1,100 compared to last year for your typical 100hp tractor.
Chainsaws: turning to timber as field work lessens
As the days shorten and field work lessens, more and more farmers are turning to chainsaws and managing timber.
This week in the Machinery pages, we review the latest equipment available. Thomas Hubert details how he got on completing a chainsaw course, which would be a good refresher for many.
Read more
Ireland takes on the world at Paris food fair
Rising diesel prices: what is it costing the farmer?
Farm safety: what I learned on a two-day chainsaw safety course
This week, Eoin Lowry examines the move by Glanbia Ireland to launch a cheese range in the US under its Truly Grass Fed brand. While Glanbia has been operating the brand at a business-to-business level for a number of years, the decision to put it on shelf in the US is significant. It is the first time an Irish dairy processor has gone up against the Kerrygold cheese brand in the US market – and presumably, in time, butter will be next.
Until now, Ornua has focused on developing Kerrygold brand in the US – in both the butter and cheese categories. It is a strategy that has delivered with Ornua having achieved the difficult balance of securing increased market share while continuing to command a premium price.
As we reported recently, Kerrygold is now the second largest butter brand in the US and the largest imported butter brand. And yet it continues to command a retail price twice that of domestic butter brands.
It didn’t happen by accident – nor was it achieved overnight. It has taken over two decades, during which Irish farmers have invested hundreds of millions of euro in establishing a brand around the grass-fed credentials of Irish dairying.
With a 25% stake in the Kerrygold brand, Glanbia is naturally keen to play down the significance of its move, stressing that the offering under the Truly Grass Fed brand is limited to cheese, volumes are envisaged to be small and that it does not intend to compete on price with Kerrygold.
There is a very real risk that this competition will lead to a destruction in the value of the US market for Irish dairy exports
Given the effort and investment required to establish a new brand, it is difficult to see how a long-term commercialisation strategy would only include cheese. We understand that price promotion activity is already evident in some of the retail outlets into which the Truly Grass Fed brand has been launched in recent weeks.
So, is the Kerrygold brand now under attack from within its own boardroom? Ultimately, Glanbia is now competing in the US market with Kerrygold cheese and potentially over time with Kerrygold butter. It is not credible to say both are operating in separate markets. Kerrygold is marketed under the banner “milk from grass-fed cows”. Although the Glanbia brand makes additional claims on genetically modified and animal welfare, its core offering is being a grass-fed dairy product – as the brand name states: Truly Grass Fed.
Glanbia states that it will not compete with Kerrygold on price but it is difficult to see how this will be achieved in reality. Whether intentional or otherwise, there is a very real risk that this competition will, over time, lead to a destruction in the value of the US market for Irish dairy exports – for which farmers will ultimately pay the price.
Questions have to be asked of Ornua and Glanbia as to how we have arrived at this juncture. We understand discussions had been ongoing for a number of years. Did the potential not exist to flex the Kerrygold brand to accommodate the customer looking for a GM-free product in the US?
Looking solely through a Glanbia lens, doing a solo run is understandable in the context of trying to add value for its members and shareholders to a growing milk pool. But while accepting the need for co-ops to act in the best interests of their members, it is not tenable for them to sit at the Ornua board table as a shareholder and a direct competitor.
In the early 1980s, we saw Kerry withdraw from what was then Bord Bainne (Ornua) so it could compete without compromise.
Ultimately, the move by Glanbia raises a fundamental question around the long-term future of the Ornua model and whether Glanbia sees its future within this model.
At a basic level, the options are either to look to clarify the role and operation of Ornua by taking the steps necessary to make it fit for today’s marketplace or to let it fade away with its position in key markets eroded by competition.
While the existing model is far from perfect, farmers need to be aware of the alternative. There are numerous examples of how internal competition can lead to the destruction of value in the marketplace – we only have to look at our domestic butter market and how competition among co-ops has left Ireland with one of the lowest retail prices in the world. In many ways, the market failure in own-brand liquid milk has been created by the same fragmented marketing approach, with farmers left carrying the can.
And let’s be clear: farmers sitting on co-op boards have to take responsibility here for not looking outside their individual boardrooms.
At international level, the premium price that was once returned by the infant formula market has been eroded – again due to internal competition.
Looking outside of the dairy sector, many of the challenges in our beef industry have been created due to competition among Irish beef processes in the market.
Dairy farmers, who are in the fortunate position to have retained ownership of their processing industry, cannot afford to adopt a passive approach to this issue. Tough decisions have to be made as to what direction farmers want their industry to go – the Glanbia move has merely provided the catalyst for this discussion.
Farmers at this point deserve an independent, in-depth study on what structure will best protect their interests into the future.
Farm organisations and those representing farmers across the range of co-op boards now need to show real leadership on what direction they want their industry to take.
SIAL Paris: sustainability must extend
to farmers
Bord Bia chair Dan MacSweeney, CEO Tara McCarthy and Minister of State Andrew Doyle arriving at SIAL Paris on Monday 22 October. \ Chris Bellew, Fennell Photography
There are 35 Irish companies showcasing Irish produce this week at SIAL Paris 2018, the world’s largest business-to-business food fair. The numbers exhibiting are huge – 7,200 companies from 110 countries. Irish beef processors had a strong presence, which is important in a year where the 2018 beef kill to date has increased by over 50,000 head and beef production continues to rise.
The Origin Green brand was the frontrunner for numerous selling points for Irish beef, including grass-fed, strong environmental credentials, high standards of animal welfare and food safety. Sustainability was another commonly used term.
Let’s hope that when processor representatives return to Ireland, they will put the same effort into discussing the sustainability of farmers.
At current prices, staying in winter finishing is challenging as farmers are expected to carry all the risk. Good to see beef prices beginning to rise; more good news from Paris is needed.
Autumn work: making the most of it after a year of extreme weather
Niall Carroll sprays a crop of winter barley in Ballower, Co Carlow, for his daughter Louise Carroll, who has leased the land while she studies machinery and tillage in Waterford. \ Philip Doyle
What an excellent October farmers are having as mainly dry weather provides respite for cereal and livestock farmers – a real positive weather event in a year of extremes.
Suckler and dairy farmers are able to complete very clean grazing which should set the farm up well for spring 2019. Cereal farmers are able to complete field work again in perfect weather.
Some farmers are attempting to conserve brassicas in bales or pits and unless completed properly, it can turn out a mess.
Try to pit brassicas with grass silage and straw, or wrap very well with reduced bale handling if possible.
Machinery: diesel prices adding to farm expenditure
In our Machinery section, Peter Thomas Keaveney outlines how diesel prices are affecting farm costs. Since April this year, we have seen prices 5 to 10c/litre ahead of 2017. Depending on hours clocked up and tractor capacity, this will increase diesel costs by between €550 to €1,100 compared to last year for your typical 100hp tractor.
Chainsaws: turning to timber as field work lessens
As the days shorten and field work lessens, more and more farmers are turning to chainsaws and managing timber.
This week in the Machinery pages, we review the latest equipment available. Thomas Hubert details how he got on completing a chainsaw course, which would be a good refresher for many.
Read more
Ireland takes on the world at Paris food fair
Rising diesel prices: what is it costing the farmer?
Farm safety: what I learned on a two-day chainsaw safety course
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