From co-op acorns grow plc trees

SOMETIMES it's easy to overlook the legacy which the giants of the burgeoning Irish food/agribusiness sector, like Kerry Group and Avonmore Foods, owe to the humble agricultural co-operative movement of the 1950s. These multi-million-pound agribusinesses sprang from the enterprise shown by small farmers and primary producers who took the then radical step of abandoning centuries-old individualism, pooling growing and marketing resources to achieve better product prices.

Times change. Irish co-ops have evolved into enterprises as different as the wheel is from the internal combustion engine. Members became shareholders, the tin-roofed barn abandoned for the plush office block, the founding fathers' ethos of `common good' partly subordinated by the need to give institutional shareholders their pound of flesh. Nevertheless, the men in suits have produced fatter cheques for farmers and enhanced the wealth generation potential of Irish agriculture.

Kerry Group - anxious to sever its co-op roots - and Avonmore produced annual results this week charting the profitable growth of their respective operations. A common feature is the growing influence of the US market for both groups.

At Kerry benefits from the £250 million acquisition of US food ingredients grouping DCA made the major contribution to overall profitability last year. With turnover surging 36 per cent to £1.2 billion pre-tax profits rose 8.7 per cent to £43.2 million. Growth of its food ingredients business has transformed the trading profile, accounting for 55 per cent of turnover and 70 per cent of operating profits.

Chief executive Denis Brosnan believes the group has the capacity to absorb another DCA-type acquisition. But first the plc needs to free itself from the confines of Kerry Co-op which has a controlling 51 per cent interest. Liberation will improve the attractiveness of Kerry for the institutions, drawing in new finance to fund expansion.