Cantillon: what is the secret to Glanbia’s success?

Glanbia has reported strong results for 2013, boasting powerful growth in revenue and profit. This is despite struggling Dairy Ireland and Ingredients Technologies divisions.

The company’s strategy seems to be continued investment and expansion to offset any difficulties, and this strategy seems to be working. Take, for example, its Dairy Ireland division, where Ebita fell 29 per cent, as a result of record high milk costs and the resistance of retailers to translating those into price increases.

While overall volumes declined, the company still managed to achieve low single-digit revenue increases in the division. And should milk prices scale new heights in 2014, the company is prepared.

It recently announced a further phase of rationalisation to improve its competitiveness in the domestic market. This includes a reduction in the overall cost base through the redesign of its supply network and restructuring of head-office functions.

It also announced plans to build a new €15 million UHT (ultra-heat-treated) facility to produce long-life liquid milk and cream suitable for export to markets such as China, Europe and the Middle East. This is expected to be operational in the second quarter of 2014.

In the US, market prices for most of Ingredient Technologies’ dairy-related products declined in 2013.

Once again, Glanbia is fighting back with investment. It forked out €22 million last year expanding capacity at its state-of- the-art specialty grain processing facility in South Dakota.

All in all, the company had a total capital expenditure of €112 million last year, helping it rake in revenues of €3.3 billion despite challenges in certain markets.