In the 1960s, there were more than 100 dairy co-ops in Ireland. These gradually amalgamated into bigger ones; some eventually morphed into food companies. Glanbia was formed in 1997 via the merger of Avonmore Foods and Waterford Foods. Kerry Group had a similar evolution.
The next stage of the process, for Glanbia anyway, is about exiting dairy processing altogether. The Kilkenny-based group spun out a majority stake in its dairy business – responsible for brands like Avonmore, Kilmeaden and Premier – to its largest shareholder, Glanbia Co-op, in 2017. Yesterday it announced plans to sell the remaining 40 per cent stake to the co-op for a €307 million price tag.
The plc insists the arrangement is a win-win for both sides. The company says the deal gives the co-op, and therefore farmers, full ownership of the businesses closest to them – in other words the dairy and agribusiness assets that directly affect their pay cheques.
From the plc’s perspective, it allows the company focus on its higher-margin ingredients and performance nutrition businesses. These drive the bulk of Glanbia’s €3.8 billion turnover.
The growth of both divisions was driven by a rethink of what to do with protein whey, a byproduct of cheese production. Filtered, dried and converted into powder, whey is the go-to supplement for gym goers and dieters.
Not that simple
The Irish Creamery Milk Suppliers’ Association (ICMSA) sounded a note of caution about the deal and the company’s enthusiastic sell of the proposed arrangement.
“With due respect to both the plc and Glanbia Ireland, we will consider this in terms of how it affects the farmers,” said ICMSA president Pat McCormack in response to the planned sale.
“It’s not as simple as giving the farmers the room to decide their own milk price, we have seen over in the UK how a deceptively simple slogan like ‘Taking Back Control’ is actually a much more complex proposition than seemed at the time,” he said.
The shedding of its legacy business is also likely to reignite rumours that Glanbia maybe setting itself up as an acquisition target.
