Conor Galvin, who took up the position of CEO of Ornua in May after almost a decade at Dairygold, sat down with the Irish Farmers Journal to outline his ambitions for the co-op and give his outlook for the dairy industry.

“Now that the period of rapid growth in milk production is coming to an end, the focus more than ever has to be about finding more value,” Galvin said.

In that search for value, he pointed to the continued success of the Kerrygold brand and suggested that there are ways in which more can be done with it.

“What I would like to see in the next 12 to 18 months is that we continue to drive value out of Kerrygold, but also that we expand what Kerrygold stands for.”

Soft-cheese products

While Ornua recently launched a range of soft-cheese products under the Kerrygold name, Galvin’s ambitions for Kerrygold seem to stretch well beyond the supermarket dairy fridge.

“The idea is always to get the maximum from every litre of milk. If that means doing more with the protein side, that is certainly an area we would look at.”

However, he is not ready to rush headlong into a major expansion or significant investment, saying that “expansion must be done at a sustainable pace” and that there has to be an understanding that a long-term view is needed around investment spending.

He did say that Kerrygold Park, which saw a doubling in potential production last year with the opening of the major expansion, still has reasonable capacity.

“The phase of expansion [for the dairy industry] has slowed down. You can see where milk volumes have gone for the past few years. You’re entering a new phase where co-ops, and Ornua, are going to have to define what it is for the next phase of development, and it won’t be from milk volumes. Where we go in the next 10 years will be about finding more value in that milk pool.”

Everybody can make up their own mind on what they think is the right thing for their member pool

He said that the move forward for the industry has to be based on an alignment between processors and suppliers.

When asked if he is disappointed in recent years that Irish co-ops have been trying to make inroads into Kerrygold’s butter market with their own products, he said: “Kerrygold is a compelling product for consumers and we’ll compete with whoever is there. Everybody can make up their own mind on what they think is the right thing for their member pool.”

Looking at market developments, Galvin said that international dairy markets are “extremely volatile”.

“All you have to do is look at butter in the last 12 weeks, where it has risen to highs where nobody thought it would get back to.”

He added that “this would lead to a demand burn-off which, in turn, will lead to a drop in prices, something we are already seeing in futures [markets]”.

Ingredients

“This ebb and flow in ingredients markets would be a very difficult place for farmers to operate.

“What Ornua tries to do is to buffer some of that volatility back into the milk pool.

“We try to keep our costs low and the quality of our customers high, so whatever volatility is in the market is then, to an extent, smoothed. However, there is still a situation, as can be seen in how the PPI moves, where a certain amount of that volatility gets passed back to the farmer.”

Galvin said that the real challenge in maximising the value from a litre of milk in the last seven or eight months is that “fat has gone high and protein hasn’t gone as high at the same rate.

“This means that despite the high price for butter, if skim is low, then processors might stop making the butter/skim combination and start making cheese whey and, all of a sudden, you have no butter.”

Speaking on the potential tie-up between Arrabawn and Tipperary, Galvin said: “I think stability in our industry is important, and for milk suppliers any uncertainty can create challenges.

“I think that whatever certainty a merger [between Arrabawn and Tipperary] can deliver to those pools of suppliers should be welcomed.”

The major milk processor in the country which is not a member of Ornua is Kerry Group, as that company is not a co-op.

Potential scenario

When he was asked if a scenario arose where Kerry Co-op purchased the Kerry’s Dairy Ireland division and whether Kerry Co-op would then be able to join Ornua, Galvin said: “I think if they expressed an interest, it would certainly be looked at favourably.”