There’s an unwritten rule in politics that if someone in public office is in the headlines for more than two days over something controversial, they’re goosed.

The row between Tirlán and Ornua over butter in the US is now entering its fifth week and shows no sign of abating, such is the sense of anger and frustration among many dairy farmers about the development.

That anger and frustration is not universal and Tirlán is not without support, as reflected in the opinions expressed in last week’s Irish Farmers Journal.

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The Tirlán PR machine has been working hard for some time to tell its side of the story, as is its prerogative.

Deals like the one with Costco don’t happen overnight, and one wonders whether it was already in the making when former Tirlán chair John Murphy was taking potshots at Ornua from the stage at Dairy Day last November? Was he laying the groundwork for what has since emerged?

The main argument being put forward by Tirlán is that by filling the order with Costco, they are displacing New Zealand butter. While this is true, in practice it makes no substantial difference.

There won’t be less butter produced in New Zealand as a result of losing the full Costco contract, and New Zealand farmers are unlikely to be any worse off as a result. In the same way, I would seriously wonder if Tirlán suppliers will be any better off by having their butter on Costco shelves.

Commodity butter

Ultimately, the butter going into these own brand labels is commodity butter purchased at or close to world market prices. Tirlán, like most other co-ops in Ireland and New Zealand sells ship-loads of butter at commodity prices. Now that it’s supplying Costco own brand butter, Tirlán has a new home for some of this commodity butter.

The problem for Ornua and its member co-ops is that Costco consumers will now be faced with a choice – buy own brand Irish butter for $15/kg or buy Kerrygold Irish butter for $21/kg.

We understand that some Kerrygold lines are already being delisted in some Costco stores.

Falling sales of Kerrygold at Costco is the only logical conclusion from Tirlán’s actions. Look at the impact own brand goods have had on Irish brands.

Own brand products now make up almost 48% of all the groceries purchased by Irish shoppers.

The share of own brand or private label has doubled over the last 20 years as retailers like Lidl and Aldi now make up over 26% of the grocery market share. Meanwhile, retailers like Dunnes and Tesco have focussed on improving the quality of their own brand range. Ironically, when it comes to fresh milk, Tirlán’s Avonmore brand has suffered more than most at the hands of own brand milk.

Anyone who thinks that Tirlán butter in Costco is not going to damage Kerrygold sales is delusional. Look at what has happened in Germany. Once the shining star of the Kerrygold stable, the German market for Kerrygold is under serious pressure due in part to cheaper Irish butter competing with it on price. This butter is manufactured by Kinisla but sold in bulk to re-packers who then deal with the retailers. Kinisla is not a member of Ornua.

It begs the question why would Tirlán do this? If the strategy is to win friends and influence people, then it needs a rethink. Or is there a darker side to this? By weakening Ornua, Tirlán effectively weakens the other co-ops that are so much more reliant on Ornua to sell their commodity products and deliver the Ornua Value Payment from Kerrygold.

Weak co-ops are happy hunting grounds for mergers and takeovers. If this is the case, it speaks volumes about the culture within the board and senior leadership team at Tirlán. Have they forgotten they are now a co-op and not a plc? Is it even in their DNA to act like a co-op?

*Adam Woods is on annual leave this week.