Innovation a key ingredient for success

ANALYSIS:Kerry Group has carved a niche in the lucrative food ingredients and nutritional space

KERRY GROUP surpassed analysts’ expectations yesterday with a set of full-year results that were at the upper end of guidance.

With revenues of over €5 billion and 23,000 employees worldwide, Kerry Group has successfully transformed itself from a dairy co-operative to become one of the most successful food and ingredients companies in the world. While it is still a significant player as a producer of consumer food products, ingredients and flavours are the real driver of growth for the company, representing 70 per cent of revenues. So what’s Kerry’s secret? Innovation and internationalisation.

Kerry is a thriving example of innovation at work. Over the last decade it quietly carved a niche in the lucrative food ingredients and nutritional space, with the result that the company is now capitalising on the growing demand for nutritionally-enhanced foods.

Occupying a space somewhere between food science and technology, Kerry has innovated and designed new products with the result that many of the foods we eat – from ice creams, to cereals, to packaged foods – contain Kerry ingredients.

Parallel to this, it has followed an expansionary strategy. During the 1990s, the Tralee-headquartered company began to look outwards, opening facilities in emerging economies such as Mexico, South America and Malaysia.

Today, the new focus for Kerry is markets such as India and Africa as it continues an active acquisitions strategy, though chief executive Stan McCarthy suggested yesterday that the pipeline of acquisitions might not be as strong this year as last.

Like many companies in the food sector, Kerry has benefited from buoyant prices, though the company also achieved more than 3 per cent volume growth last year. Kerry also has to contend with higher input costs – an increase of 8 per cent last year – though the company succeeded in increasing margins in its ingredients’ business, no mean feat in the current climate, though margins in its consumer foods’ division were under pressure

Despite its strong international credentials – McCarthy was in London yesterday morning for the announcement of the results – Kerry Group firmly confirmed its commitment to Ireland yesterday. Unlike Greencore, CRH and Elan, it has no plans to move its primary listing from the Irish stock exchange. As corporate Ireland continues to try and renew itself after a tough few years, companies like Kerry Group are exactly what it needs.