Ornua eyes €2bn in Kerrygold sales as group reports record turnover for 2020

Ornua, the State’s largest dairy exporter, aims to increase Kerrygold sales to €2 billion by 2025, mainly by securing a greater market share in the US, where it is now the number two butter brand.

Kerrygold became the first Irish food brand to exceed €1 billion in annual sales in 2018, and its owner believes it can double that within four years.

Ornua reported record sales and profits for 2020, brushing aside the challenges of Covid, Brexit and US tariffs. The group benefited from a pick-up in grocery triggered by lockdowns in Europe and the US, which boosted sales of its premium butter and cheese brands.

"Ornua had a unique performance in a unique year," chief executive John Jordan said. The group's balanced portfolio and geographical spread across 110 markets helped shield it from the instability, he said.

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Covid changed people’s consumption patterns, resulting in more home eating and more home cooking, Mr Jordan said. “As a result, retail demand surged while foodservice fell off a cliff.”

Ornua said turnover rose by 1 per cent to €2.34 billion in the 12 months to the end of December, while operating profit jumped by 69 per cent to €83 million.

The strong performance came despite the disruption of Covid, the threat of Brexit and the imposition of punitive US tariffs, which are estimated to have cost it €50 million.

Portfolio

Ornua exports dairy products on behalf of a 33-strong group of co-ops, processors and food firms in Ireland.

Global sales of its flagship Kerrygold brand grew by 13 per cent to €1.3 billion in 2020, with more than 10 million packets of butter and cheese sold a week, or 520 million in total.

In the US, Kerrygold butter – pitched as a high-end dairy product – is now the number two butter brand with a 10 per cent market share.

Prior to Covid, EU food products, including Kerrygold, were hit with punitive US tariffs, forcing Ornua to raise its price. This triggered a slowdown in growth.

“We were worried – longer term – that we might lose market share. What happened then, is Covid hit and demand went through the roof,” Mr Jordan said.

The tariffs have now been suspended and Ornua plans to reduce its retail butter price in response – from $4.50-$5 per 227 grammes (the standard US unit) to below $4. This is expected to help it grow market share.

“We’re now hoping to hit a target of €2 billion in [Kerrygold] sales by 2025,” Mr Jordan said.

The Kerrygold brand is primarily butter but it includes a growing portfolio of cheeses. In the UK its Pilgrims Choice cheese brand outperformed the cheddar category with 29 per cent growth year-on-year, securing its position as the number two cheddar brand in the UK market.

Ornua’s ingredients division also delivered positive year-on-year growth “despite being particularly exposed to the impact of large-scale and prolonged restaurant closures globally”.

Resilient

It said dairy markets proved resilient throughout the pandemic, aided by retail sales and strong demand for milk powders from China, southeast Asia and Africa.

Ornua said it delivered a 54 per cent year-on-year increase in the brand premium and bonuses paid to co-op members with a record €68.7 million.

On Brexit, Mr Jordan said increased paperwork had made trading with the UK more difficult. The UK takes 25 per cent of Ornua’s output, equating to around €600 million in sales, and it employs more than 1,000 people at four facilities there.

“The deal gives us full access to the UK with no tariffs, but we do have increased administration and bureaucracy,” he said.