Irish dairy industry should look at the New Zealand example

At the risk of being seen as a dairy bore, Current Account returns yet again to the rationalisation of (or rather the absence of) the Irish dairy industry. But if any factor is going to give the Irish dairy industry the kick up the backside it needs to sort itself out, then maybe plans by New Zealand's farmers and processors to create a new grouping controlling 60 per cent of the local milk pool could be it.

New Zealand farmers, like their Irish counterparts, are suffering from falling incomes. But the difference is that the New Zealand lot seem a bit more enlightened and the industry there does not seem to suffer from the petty local jealousies that plague the Irish dairy industry and which make rationalisation an extraordinarily difficult proposition.

Why is that? New Zealand dairy processing is primarily owned by the farmers through their co-ops, which in turn own the joint marketing company, the New Zealand Dairy Board. Sounds a bit like the relationship between the Irish co-ops and the Irish Dairy Board, doesn't it.

But there the similarity ends. New Zealand farmers are now backing a move to combine the NZ Dairy Board's world-renowned international marketing expertise with the manufacturing capacity of the country's processing plants. The end result is a company with sales of more than £3 billion, a load of manufacturing plants in New Zealand and abroad manufacturing 800 different dairy products to 115 countries.

The inter co-op rivalries that had plagued New Zealand now seem to be a thing of the past, following the merger earlier this year of the two biggest co-ops in the North Island and South Island to create a dairy giant with 60 per cent of the milk pool.

That merger, still being investigated by the competition regulators, spurred the third-biggest dairy group Kiwi Dairies to propose that the 10 remaining dairy groups amalgamate with the merged North Island-South Island grouping to create a single giant dairy company.

Farmers and the New Zealand government are keen on the idea, so it looks like going ahead. If it does, it will create an even stronger competitor to Glanbia and the other Irish dairy groups. Glanbia, to its credit, has done its part towards rationalising the Irish industry through the Avonmore-Waterford merger. It's time for other players to play their part.

In Ireland, even the Munster co-ops cannot find it in themselves to put aside their local rivalries and create one company of scale that can compete with the giants being created by mergers in New Zealand, the US and continental Europe. If that sort of ostrich thinking continues, then the prospects are indeed gloomy for the Irish diary industry.

So the next time the IFA or other pressure groups bleat on about the fall in farm incomes, maybe it's time for some hard question to be asked.