Glanbia Cheese, the company investing €130m in a new mozzarella cheese factory in Portlaoise, is a joint venture between Glanbia PLC and Leprino Foods.

Glanbia Cheese was formed in 2000 and has its HQ in Cheshire in the UK.

It is the largest mozzarella manufacturer in Europe, prodiucing around 90,000t per year from its two production facilities – Llangefni in Wales and Magheralin, Northern Ireland.

This third factory will have the capacity to produce 45,000t of cheese per year– 50% more than current combined capacity.

According to the company, the current facilities are at maximum capacity and with growing demand for additional product, more capacity is required.

This is one of the main reasons cited for the expansion, according to CEO Paul Vernon, who has headed the business for the last 20 years.

While farmers will be very familiar with Glanbia PLC, Leprino Foods is less well known. Based in Colorado, it is a global cheese and dairy ingredients company. It was founded 65 years ago and has grown to become the world’s largest mozzarella producer. It remains a family-run business, with an annual turnover in excess of $2bn and exports to almost 50 countries.

Leprino is a leader in food technology and has over 50 production patents. It is the exclusive supplier of mozzarella to many of the top pizza chains in the US and around the world.

Milk

Glanbia Cheese currently buys around 350m litres of milk every year. It sources around half of this directly from farmers, with two-thirds coming from supply agreements with Dale Farm and LacPatrick co-ops. It also sources milk directly from farmers in Wales.

The new Portlaoise factory will source dairy raw ingredients (mainly in the form of cheese curd) from Glanbia Ireland – the joint venture between Glanbia plc and Glanbia Co-op.

The majority of this will come from Glanbia’s Ballyragget factory, 15 miles away on the Kilkenny/Laois border. When at full capacity, the factory will use the equivalent of 400m litres of milk per annum to make 45,000t of mozzarella, which will be used mainly as an ingredient in pizza toppings for pizza chains across Europe.

Accounts

Glanbia Cheese, which employs 360 people, made an operating profit of £10.5m on a turnover of £190.6m (5.5% margin) in 2016. After-tax profits were £8.1m. Around 60% of its business is to the UK, with 40% to the rest of the EU.

Given the high percentage of business in the eurozone, it is exposed to euro-sterling exchange rate fluctuations. This new factory gives the business a euro-based hedge along with an EU footprint, which is important given the implications of Brexit.

Comment

The location for this factory was hotly contested, not only in Ireland but within the EU, with Belgium the strongest competitor.

Glanbia Cheese is a UK-based business that needed to expand its manufacturing footprint due to increased demand from its customer base. It would make sense to have located within the EU given its exposure to this market, especially in the context of Brexit.

Investing in Belgium would have brought it closer to its customers, but would probably not have used Irish milk. The investment will be funded by Glanbia Cheese, supported by its parents Glanbia plc and Leprino Foods.

Enterprise Ireland will also invest as (unlike other sectors) it manages foreign direct investment in the food sector.

This business has a portfolio of innovative and patent protected cheese products and long-term relationships with established customers. While profits will be made by Glanbia Cheese, it provides a route to market for Glanbia Ireland without having to invest €130m itself in added value markets. This allows Glanbia Ireland to focus on investing in milk-processing capacity while a sister company can invest in developing markets.

As one of the largest producers of cheddar cheese in the country, it also provides Glanbia Ireland with a Brexit strategy and an additional outlet for its expanding milk pool.