This time last year, John Jordan, the chief executive of Ireland's largest dairy export business Ornua, was staring down the barrel of a gun. Covid had just hit and the food industry was scrambling to adjust. Lockdowns in Europe and the US had effectively shut down the food service sector, triggering a colossal decline in demand.
With a quarter of Ornua’s sales tied into the UK market, the company was also in the crosshairs of Brexit. It is the UK’s largest supplier of cheddar cheese. At that stage a no-deal outcome with tariffs was still a distinct possibility.
The group's stellar incursion into the US market had also been checked. Former US president Donald Trump had slapped tariffs on a range of EU food products, including Kerrygold – Ornua's flagship butter and cheese brand – which were costing it $50 million a year. Even by the volatile standards of the food industry, this was a perfect storm.
And yet Ornua’s 2020 financial accounts, published this month, appear untrammelled by these events. Revenue rose to a record €2.34 billion, while operating profit increased by 69 per cent to €83 million.
“It was a unique performance in a unique year,” says Jordan. That’s something of an understatement.
Ornua capitalised on a massive pick-up in food retail – grocery – as consumers switched from eating out to eating in. This led to a surge in sales of butter and cheese.
Kerrygold sales, which broke through the €1 billion mark in 2018, hit €1.3 billion last year, with with more than 10 million packets being sold a week. Buoyed by the performance, Jordan has now set a sales target for Kerrygold of €2 billion by 2025.
Apart from Germany – its biggest market – much of the additional growth will come from the US, where Kerrygold butter is now the number two butter brand with a 10 per cent market share.
The US market has been a difficult play for many Irish firms. C&C, Aryzta and Greencore were all forced into high-profile retreats after sinking hundreds of millions into US ventures.
Ornua’s foray across the pond has been more of a slow-burn – it started back in the late 1980s – but it’s paying big dividends now. “The key was to get people to physically taste it,” says Jordan. “American butter is white, it’s crumbly, brittle...Kerrygold is yellow, soft, creamy because of the grass.”
At the height of its marketing push in the US, Ornua was conducting over 10,000 in-store samplings a year.
But it hasn’t been all plain sailing. In 2018 it became embroiled in a legal case connected to its marketing campaign, which plays up the grass-fed nature of the cows that supply its milk.
The legal action taken in California claimed Ornua's marketing constituted "false and misleading advertising" as Irish cows eat other materials, such as grain or soya, when weather is bad and some of these feeds can be genetically modified. While the case was thrown out, the bad publicity around it still rankles. "The judge threw it out on the grounds that Irish family farms do operate a predominately grass-fed production system," Jordan says.
At around the same time Glanbia, a 25 per cent shareholder in Ornua, launched its own Truly Grass Fed butter brand in the US. The name was unmistakably a dig at Kerrygold.
Jordan plays down the episode, but it had a definite impact, leading to tensions between it and shareholders and an overhaul of Ornua’s governance structure to make it more independent, particularly from stakeholders who compete directly with it.
Leading co-ops
Ornua, formerly An Bord Bainne and later the Irish Dairy Board, is owned by eight of the country's leading co-ops; Glanbia Ireland, Aurivo, Carberry, Lakelands, Arrabawn, Dairygold, Tipperary Co-op, North Cork Co-op. These eight groups sell about €1 billion worth of butter, cheese and milk powders to Ornua each year, much of which is sold under the Kerrygold label, though it has been manufacturing its own butter at a new high-tech plant in Mitchelstown, Co Cork – Kerrygold Park – since 2016.
Ornua was set up in 1961 – it’s 60 years old this year - as an export agency for the Irish co-ops. The industry was fragmented, and there were over 100 co-ops producing way more milk than the domestic market could consume.
The Kerrygold brand – the genius idea of 26-year-old chief executive Tony O’Reilly (a post he held before he went on to become the chief executive of Heinz) – was designed to amalgamate the output under one umbrella brand.
With the advent of EU membership in the 1970s it was sold by the government to the co-ops and retains the legal status of a co-op itself. The group, which employs 2,400 staff, rebranded from the Irish Dairy Board to Ornua in 2015 as the yoke of EU milk quotas was lifted.
The massive pick-up in dairy production since the lifting of quotas – driven by increased global demand particularly from Asia – has, however, put Ireland's food industry on a collision course with the State's climate change agenda.
The Government’s Climate Action Bill enshrines emissions reduction targets in law, and puts the country on a path to carbon neutrality by 2050. This will involve strict and binding targets for reducing agricultural emissions, which account for 30 per cent of total emissions here.
For years Irish governments and industry have been fudging the issue, announcing plans and aims on climate while announcing ever-bigger food production targets. Jordan, however, believes the Government’s Bill will prove to be a “catalyst” for change. “If it’s legal-binding it sort of puts it in red pen as something we have to do,” he says.
Ireland – whether it’s true or not – trades internationally on its image as a pristine piece of pasture, unspoilt by heavy industry, and ideal for natural farming practices. “If we undermine that by not doing real tangible things it puts at risk the dairy sector and the value add we’ve created..it can’t be just talk,” says Jordan.
However, he suggests the industry is still in a quandary about the best way to “green” its farming practices. “How do we make substantial change? Is it like investing in anaerobic digesters? We don’t know, but if it was, that is something we can physically do.”
Climate change is undoubtedly the biggest issue facing the food industry here.
Graduate trainee
Originally from Clondalkin in Dublin, Jordan came into Ornua as a graduate trainee in 1993 after completing a degree in biotechnology at Dublin City University. He exited for a period of four years in the late 1990s as a result of a potential promotion that he did not think was right for him. He says he didn't have the courage to have a "candid career conversation".
The episode left its mark. “Now I put huge emphasis on those career conversations, about succession planing, about being really open and honest with people, allowing them to talk about where they’d like their careers to go.”
He was coaxed back to Ornua in 2003, taking up the role as vice-president for Kerrygold based in Chicago, moving his family there in the process.
It seems like a stint in the US is now mandatory for anyone attempting to scale the Ornua echelon. In 2015 he was promoted to head-up Ornua Foods Europe, before becoming overall chief executive in 2018.
Covid means he has not been on a flight for 15 months – he would normally make many international trips a year to meet customers and colleagues. “I’m married 25 years this year, and this is the first year that myself and my wife have slept under the same roof 365 days consecutively...needless to say she’s keen I get back flying soon,” he jokes.
Jordan has a reputation as a direct communicator. He doesn’t shrink from talking about the potential difficulties facing the group. Despite the free trade agreed between the EU and UK, Brexit remains a problem area.
Since the start of the year imports of food and drink from the EU into the UK are down 17 per cent, while UK exports to the EU are down 41 per cent. How much of this is related to the pandemic or pre-Brexit stockpiling has still to be ascertained.
Jordan and Ornua are, however, right in the middle of this equation, and stand as one of the most exposed Irish enterprises – it’s Pilgrim Cheese brand is the number two cheddar brand in the UK. Ornua has four sites in the UK in and around the Manchester area, historically the cheddar capital of the UK, employing around 1,000 people.
Prior to Brexit, Ornua could deliver product to UK customers within 24 hours. Now it’s a 12-step process, he says, requiring significant paperwork which extends the delivery time. And it’s going to get worse.
The UK is scheduled to bring in its export health certificate requirement in October, an official document that confirms your export meets the health requirements of the destination country.
“Post-October 1st, when the rules are due to come in, the Department of Agriculture here will be processing between 4,000 and 6,000 health certs a week,” Jordan says. “That means the delay in getting product from here to the UK goes from a 24-hour turnaround to being 10 to 14 days.”
He says this poses serious challenges for “just-in-time” delivery schedules.
Size and scale
Ornua has, to a certain extent, the size and scale to manage the increased level of administration, but for smaller firms “it’s a real difficulty”.
The long-term impact of Brexit is impossible to predict.
The UK is a food-deficit country, and therefore will continue to import significant amounts of food. The key question from a dairy perspective is, will in the next 10 years British farmers produce more milk and make the UK more self-sufficient?
“There’s nothing at this stage that would indicate a significant change in the output of UK milk. Therefore we believe they’ll continue to import significant volumes of dairy products, and Ireland will play a major role in that,” says Jordan.
It’s an optimistic note to end on.
CV
Name: John Jordan
Age: 51
Lives: Maynooth, Co Kildare
Family: Married with three sons.
Interests: GAA, rugby, gritty crime dramas and walks with Buddy (his lockdown dog)
Something you might expect: eats Kerrygold butter, is an early bird, and is strong supporter of diversity
Something you might not expect: joined a choir in 2019 to challenge himself and to step out of his comfort zone (no previous experience)
