Ornua pledges to buy €1bn from Irish suppliers despite downturn

Kerrygold owner reports record earnings for 2019 but warns of virus-triggered slump in demand

 Ornua’s Kerrygold is now the number two butter brand in the US

Ornua’s Kerrygold is now the number two butter brand in the US

 

Ornua, the State’s largest dairy exporter, has pledged to maintain its purchase agreements with suppliers in Ireland despite a major slump in dairy demand on foot of coronavirus.

The owner of the Kerrygold brand reported record earnings for last year, with turnover up 11.5 per cent to €2.3 billion. However, it warned that the Covid-19 crisis had triggered a significant fall in global dairy demand – estimated to be in the region of 10 per cent to12 per cent – which would negatively impact the business this year.

Chief executive John Jordan said demand for its food service products had fallen sharply on foot of shutdowns of the food service and hospitality sectors in Europe and the US, while stay-at-home directives had changed eating and cooking habits in favour of less perishable foods.

“If you’re supplying into the food service your business hasn’t slowed, it’s stopped,” he said.

Nonetheless, Mr Jordan said Ornua would purchase more than €1 billion worth of dairy product from its members in Ireland in 2020 in line with existing agreements.

“This will see Ornua carry the risk and cost of stockholding on behalf of our members, going some way towards providing a level of security in these uncertain times.”

Milk pool

Ornua processes nearly 45 per cent of the Republic’s near eight billion-litre milk pool on behalf of a 33-strong group of co-ops, processors and food firms.

Last year its flagship butter and dairy label Kerrygold generated more than €1 billion in sales, making it Ireland’s first billion euro food brand.

In October, Ornua was forced to rise the price of Kerrygold butter in the US market after the president, Donald Trump, slapped 25 per cent tariffs on a range of EU food exports. The move saw the price of a half pound of Kerrygold butter in the US rise from $3 to $4, twice the price of market rivals.

Kerrygold is pitched as a high-end dairy product in the US, with marketing campaigns playing up its grass-fed, all-natural, hormone-free roots. It is now the number two butter brand there, selling roughly three million packets a week.

Mr Jordan said he was confident of maintaining Kerrygold’s €1 billion status in terms of global sales this year despite the tariff setback.

He noted that Kerrygold sales in the US had held up well despite the price increase, and had even been boosted by the recent spike in supermarket sales ahead of the Covid-19 lockdown.

Operating profit

The group’s strong performance last year saw its operating profit increase by 21.5 per cent to €49 million. It paid a total year-end bonus of €26 million to members, an increase of 37 per cent on the previous year.

“We are pleased to report a strong trading performance for 2019 despite a challenging global environment characterised by economic uncertainty due to US tariffs, Brexit and market volatility,” Mr Jordan said.

“Post year-end this trading complexity has increased significantly due to the impact of the global Covid-19 pandemic. 2019 also saw the opening of a new €30 million Ornua pizza cheese facility in Spain. ”