Irish food firms prepare to survive UK's beef crisis

THE British BSE crisis is bad news for the Irish food sector. Irish companies control 30 per cent of Britain's beef processing, 25 per cent of its cheese making and 18 per cent of the UK liquid milk business. Britain's BSE crisis directly affects nearly every large Irish beef and dairy company.

In addition, Irish companies export £200 million worth of beef to Britain each year as part of the more than £1.4 billion worth of Irish food imported into Britain each year. This figure includes more than £250 million worth of dairy products.

As with their British counterparts, the implications for Irish beef and dairy processors of the crisis will not be fully known until the British government decides how it will address the situation. However, if the ban on exports of British beef is maintained, along with some culling of the British national herd, the industry is facing very severe difficulties.

In spite of the uncertainty, it is apparent at this stage that Irish companies with beef, cheese and milk operations in Britain will be the among the worst affected. These include two of Ireland's largest beef processors Irish Food Processors / AIBP, which operates in Britain as ABP, and Kepak. Over half of the £750 million a year turnover of Irish Food Processors, formerly Goodman International, is generated by its British plants. Kepak, the other large processor has invested around £15 million in its British operation in the last 12 months. These plants now account for a third of the company's £300 million turnover.

Along with Dawn Meats, these two companies slaughter and process British beef for the British market, primarily the supermarket chains. Irish Food Processors (IFP) claims to have 10 per cent of the British beef and lamb processing markets, and 30 per cent of the British supermarket business. IFP's customers include most of the large supermarket chains.

Kepak's customer list includes Tesco and Sainsbury. Last year the Clonee, Co Meath based, group spent £12 million acquiring three plants in Britain, which operate under the name British Beef. Earlier this year Kepak agreed to buy Aberdeen based Buchan Meats for £2.7 million.

Kerry Group's British subsidiary, South West Meats in Chard, Somerset, prepares meat for Marks and Spencer. Kerry also has a substantial British chilled meats, sausage and meat pie business, Matteson Walls which it bought from Unilever in 1994 for £25 million. However, this business could actually benefit from increased sales of pork products as consumers switch from beef, said a Kerry spokesman.

In addition to their British operations, Irish Food Processors, Kepak and Dawn Meats also export Irish beef, lamb and pigmeat to Britain from their Irish plants, as do Avonmore Foods and Dairygold. All five companies must be hoping that increased demand for lamb and pigmeat may compensate them for the fall in demand for beef. Kerry, moving increasingly into food ingredients, claims that beef related products account for less than 5 per cent of its £1.2 billion turnover. Avonmore says that only 8 per cent of last year's operating profits of £45 million came from beef exports to Britain.

Dairygold has sounded a similarly sanguine note. Exports of beef to Britain account for less than £15 million of its annual meat product sales of £170 million.

However of greater concern to Dairygold and Avonmore, and to a greater extent their neighbour Waterford Foods, is the prospect of a cull of older British cattle. The suggestion earlier this week that all cattle over 30 months old should be slaughtered, must have seriously concerned the managements of these companies. Such a move would seriously reduce available liquid milk supplies in Britain.

Avonmore and Waterford each has 8 per cent of the fiercely competitive market for liquid milk in Britain. Waterford has operations in Manchester and Durham while Avonmore operates in Birmingham and Salisbury.

Waterford arguably has the most to lose from the decimal ion of the British dairy herd. The company would have to find alternative milk supplies to feed the eight cheese factories operated by its subsidiary the Cheese Company. Last year Waterford borrowed heavily to pay £125 million for the Middlesex based Cheese Company. Britain's second largest maker of cheddar cheese. Mr Matt Walsh the managing director of Waterford said this week that the company could divert its surplus Irish milk to Britain. But at what cost?

Dairygold's chief executive Mr Dennis Lucy could also be faced with having to find the milk to feed its British cheese operation. Dairygold paid £21 million in 1994 for the Somerset based cheese producer Horlicks Farm and Dairies as well as cheese distributor Rawson and Co.

It is possible that some Irish dairy groups could actually benefit from a milk shortage in Britain.

Mr Jim O'Mahony the chief executive of Golden Vale said this week that the group could divert up to two thirds of its Irish milk pool to Britain and still source milk elsewhere for its Irish processing operations.

These include its processed cheese operations in Coleraine which manufactures cheese slices for burger chains.

However, Mr O'Mahony admitted that the group's business in the North, where it has 30 per cent of the liquid milk market, would suffer because of the British government's decision not to give the North's cattle special status. This is despite there being only 170 recorded cases last year of the disease in the Northern Ireland herd of more than one million cattle.

Despite this Mr O'Mahony remains optimistic. A sentiment that does not appear to be shared by many of his peers.