Cantillon: Glanbia turns pigswill into big business

In the past Glanbia had to pay someone to come and take away the dregs of its cheesemaking business. The whey protein leftovers used to end up as pigswill on farms across the State until some bright spark reconstituted them as performance nutrition.

Now they go into a suite of products – Optimum Nutrition, BSN, Isopure to name a few – which claim, depending on your sex, to build muscle, reduce fat, repair tired limbs or arrest ageing.

Science aside, the sales numbers speak for themselves. Last year the division became the most profitable part of Glanbia’s business, generating nearly €136 million in earnings on the back of nearly €1 billion in sales.

As a net buyer of dairy, its performance nutrition business benefited from the downturn in dairy prices, which meant lower input costs. On the other side of the ledger, cheese revenues in the US, its biggest market, were hit by falling dairy prices. On average, cheese pricing in the US was down 25 per cent year on year.

Though Glanbia’s cheese business claims to have a “robust mechanism to manage dairy price volatility” it did not provide full protection from dairy markets due to the scale of price declines, the company said.

It’s clear from the results that its performance nutrition division shielded the rest of the business from the worst of the dairy slump.

The company bases its 8-10 per cent growth projection for this year largely on the continuing strength of its nutritionals. The other aspect to the numbers that’s worth mentioning is the impact of currency fluctuations, or the relative weakness of the euro against the dollar. Total group revenue was up 4 per cent to €3.66 billion on a reported basis but down 7.4 per cent on a constant currency basis. Nonetheless, Glanbia boss Siobhán Talbot described it as a “resilient” performance in the face of dairy market turbulence. At the beginning of this year, the euro strengthened against the dollar, potentially halting the favourable headwind for exporters, albeit renewed fears around Britain leaving the EU may yet arrest this trend.