Irish farmers will carry the cost of individual dairy processors competing with Ornua’s Kerrygold brand on the US market, warned IFA deputy president Brian Rushe.
His comments follow the decision by Dairygold to launch a range of cheeses in the US market under its Pastureland brand.
Mr Rushe said increased competition in the premium end of the lucrative North American butter and cheese market was bad news for Irish dairy farmers.
He claimed Dairygold’s move could undermine the level of returns Ornua secures for Kerrygold and its cheese brand Pilgrims Choice.
Any reduction in margins would ultimately be carried by Irish milk suppliers, the IFA deputy president maintained.
'Crowding the market'
Comparing Dairygold’s move to Glanbia’s launch of the Truly Grass Fed dairy range in the US in 2018, Mr Rushe said that he failed to see the value of crowding the market and undermining the benefits that Kerrygold delivers for Irish farmers.
“We have a brand in Kerrygold that is unmatched in the States, no one can compete with it in terms of value or provenance,” Mr Rushe said.
“But now, first with Glanbia and then with Dairygold, we have two Irish products competing with Kerrygold. And the only way that they can compete for market share is either through price or differentiation,” he explained.
Because it is more or less the same product, they have to compete on price
"And because they can’t compete on differentiation, because it is more or less the same product, they have to compete on price,” Mr Rushe maintained.
“That will ultimately cause downward pressure on price at retail level. Farmers will end up paying for this, as sure as night follows day. It is farmers competing with farmers,” he added.
“Have we not learned the lessons of liquid milk,” Mr Rushe asked.
He said inter-processor competition in that liquid milk trade had effectively “eroded the brand” to the point where margins over manufacturing milk has been “completely wiped out”.
While Dairygold claimed that its Pastureland range will “complement existing Irish dairy products in the US market”, this view was not shared by Mr Rushe.
“If this was a PLC, you could say that this decision was one of the vagaries of marketing. But this is not a PLC, this is a co-op,” he pointed out.
The IFA representative said that in 2018, Kerrygold was unique in the US market, but there are now three Irish dairy labels competing against one another.
“When you’re a consumer and you have three products claiming to be the same thing, what is going to grab you - it’s going to be the price.”
Mr Rushe said farmers had invested in developing the Kerrygold brand and that it had largely delivered for them over generations.
He said that rather than competing with Kerrygold, farmers wanted the brand to be supported and protected.
The Pastureland range of cheeses will be distributed by Norseland, a subsidiary of the Norwegian dairy co-operative TINE SA.
Dairygold plans to manufacture Jarlsberg cheese on TINE’s behalf at its Mogeely facility in Cork.
The US market remains a crucial outlet for Irish dairy exports. Last year, the market took close to 60,000t of product, with total sales valued at €360m.