The sale of parts of Tipperary-based dairy co-operative Arrabawn’s business to Sligo-based dairy co-operative Aurivo is to be subject to a full investigation by the State’s competition watchdog.
Headquartered in Nenagh, Arrabawn is a member-owned co-op that employs more than 400 people, collects milk from more than 1,000 shareholder farmers and generates a turnover of about €270 million per year.
Its business activities include the sale of dairy products, food ingredients and animal feed products, as well as the operation of agricultural retail stores.
The deal with Aurivo, which is the owner of the Connacht Gold and Donegal Creameries brands, concerns assets comprising parts of Arrabawn’s business for the supply of branded and unbranded liquid milk, cream and butter products.
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Aurivo’s primary activities are in the sale of dairy ingredients and dairy products such as powders and fresh milk, cream, butter and ready-to-drink protein shakes.
It is also active in the operation of agri-retail outlets that sell animal feeds, agricultural goods, hardware and other products.
In a statement on Friday, the Competition and Consumer Protection Commission (CCPC) said it had decided to carry out a full “phase two” investigation into the deal following its extended preliminary investigation which began in February.
It said a full investigation was required in order to establish if the proposed acquisition could lead to a substantial lessening of competition in the State.
The CCPC is obliged to carry out a phase two investigation when it has been unable to form the view that the result of a merger or acquisition would not be to substantially lessen competition in markets for goods or services in the State.
The sale of the Arrabawn assets was agreed by the two groups in August and was welcomed at the time by the Irish Co-operative Organisation Society, which is a promotional body for the sector.
Its president, James O’Donnell, commended the “courage” of both organisations in agreeing a “historic” strategic move to rationalise the domestic liquid milk business.
“I believe this move will prove to be a positive one for liquid milk suppliers across the region and nationally,” he said. “It will allow Aurivo to achieve even greater scale and reach in their consumer food business.
“It will also allow Arrabawn the opportunity to focus on their core manufacturing business which has been transformed in recent times, particularly with the recent investment of €30 million in the Nenagh plant.”
However, Irish Farmers’ Association liquid milk chair Keith O’Boyle described Arrabawn’s decision to exit the business as “a serious indictment of the liquid milk sector”.
“IFA has been highlighting the precarious situation of the liquid milk business for the last number of years and this is now playing out with Arrabawn leaving the sector,” he said.
“We cannot have a situation where any other processor or farmer feels forced to leave the liquid milk sector. The only way to guarantee this is by retailers paying a fair price for fresh milk. If this doesn’t transpire, a regular supply of fresh milk on supermarket shelves is in real jeopardy.”
Operating profits at Aurivo jumped more than 41 per cent in 2022 to €17.8 million despite the impact of rampant price inflation across its cost base and higher milk prices.
The year was described as “an exceptionally challenging one” by Aurivo chief executive Donal Tierney, who pointed to “significant inflationary pressure and volatility” against the backdrop of the surge in energy prices that followed Russia’s invasion of Ukraine.
While turnover at the group climbed by a third to €764 million, its cost of sales – including wages and energy costs – also jumped by 27 per cent to €638.3 million.
