Driving force behind historic expansion

Back in 1989 Kerry Group came to the realisation that there couldn't be that much business left for it in Ireland

Back in 1989 Kerry Group came to the realisation that there couldn't be that much business left for it in Ireland. "If we stay in the food business there are only 3.5 million people here . . . we have to go on to those farther places where there are more people to be fed," its managing director said then.

And Mr Denis Brosnan has been as good as his word. Kerry has spent the last 10 years scouring the globe for acquisitions and these days it feeds millions worldwide.

In less than 25 years, Mr Brosnan has succeeded in turning a small regional creamery into a major player in the international food ingredients business with sales of more than £1 billion.

His latest move, the £394 million acquisition of the food ingredients business, Dalgety Plc, makes Kerry the undoubted No. 1 in the European speciality ingredients market and probably the leading player worldwide.

READ MORE

The acquisition, the largest in the company's history, is the culmination of an aggressive expansion policy that has moved the company away from its dairy-based origins into the high-margin and high-growth ingredients sector.

Following the Dalgety purchase, more than two thirds of Kerry's turnover will come from food ingredients while analysts estimate that less than 7 per cent of operating profits will be accounted for by the domestic milk business.

The son of a North Kerry farmer, Mr Brosnan has been the driving force behind Kerry's expansion. He went to school at St Brendan's in Killarney where he found himself in exceptional company. Three of his fellow pupils went on to become government secretaries.

From St Brendan's, Mr Brosnan went to University College Cork where he graduated with a Master's degree in food science before taking up a job as a detergent salesman.

He joined Golden Vale as a production manager, doing a stint in the London office, before returning to Kerry in 1972 as general manager of North Kerry Milk Products, a casein plant on a 22-acre site in Listowel.

Recognising the need for rationalisation in the dairy industry, Mr Brosnan lobbied bankers to lend him money, coaxed farmers to cough up cash and persuaded the co-ops to merge to form Kerry Co-op in 1974.

At the time, Kerry was only the sixth largest co-op in Ireland with a turnover of £20 million. A year later, it was already on the expansion trail, acquiring Killarney Milk Suppliers. Three years later turnover had trebled. But by the late-1970s Mr Brosnan was already recognising the limitations of the processing business and showing increased reluctance to become dependent on the vagaries of the EU's Common Agricultural Policy.

Kerry began to reduce commodity production and double up on the output of casein, a milk by-product used as a food ingredient. In the meantime, the search for value-added products and acquisitions began in earnest.

In 1986, Mr Brosnan masterminded the flotation of Kerry as it became the first co-operative to go public. However, many believe the real watershed for the company came two years later with the acquisition of Wisconsin-based Beatreme Foods.

This gave Kerry a leading position in the speciality food ingredients market in the US and a bridgehead into the global market.

Acquisitions continued apace over the next few years culminating in the £250 million acquisition of DCA Food Industries in November 1994.

Ironically, Dalgety was the underbidder for DCA which catapulted Kerry onto the world stage in the ingredients business but signalled the beginning of tough times at the British company. "In the end we were able to move faster than anybody else," Mr Brosnan said of the crucial purchase.

Analysts say Kerry is now a market leader in its chosen sectors while its customers read like a Who's Who of the global food industry and include giants like Unilever and McDonalds.

It supplies everything from flavourings for ice creams to the batters and coatings for frozen fish and vegetables to the cheese flavourings for snack foods and the fruit fillings in biscuits and pies. Take a trip around the local supermarket and the odds are that Kerry will have a hand in foodstuffs ranging from cereals and hamburgers to yoghurt.

The accelerating trend toward snacking and convenience foods should ensure that the business continues to expand.

"It's an industry which should see significant growth over the next 10 years relative to traditional food lines such as primary processing of meat," says one food industry analyst.

But such success is rarely achieved without hard graft.

The speedy integration of DCA over the last two years was no mean feat, observers of the company say. "They had to put a lot of shoulders to the wheel to get it to work," said one industry source, noting that Kerry would also drive hard to make the Dalgety purchase a success.

Driving hard is something Kerry is known for locally.

"They work people phenomenally hard and have a relatively high attrition rate. But from those who stay, they also command incredible loyalty," one observer says. "Often as not, loyalty to the company is loyalty to the farm. A Kerry worker might have a father who is a farmer and a shareholder or a brother who is a milk supplier." Mr Brosnan is highly regarded in Kerry where there is little resentment of his wealth, partly because he has made many of his fellow Kerrymen richer along with himself.

Although he now uses a chauffeur-driven Mercedes, this is seen as a necessity rather than a luxury.

Hard-working and low profile, Mr Brosnan's main hobbies are horseracing, golf, Gaelic football and soccer.

He breeds horses at his home in Croom, Co Limerick, and serves as chairman of the Irish Horseracing Authority (IHA). Kerry sponsors the county's GAA teams although the company's managing director is known to also have a soft spot for Manchester United.

At 54, few expect Mr Brosnan to rest on his laurels.

Analysts believe Kerry will be back on the expansion trail in two years once the Dalgety acquisition is bedded down. Some say it may even manage a few fill-in acquisitions in far-flung places before then.