Opinion

Did you hear the joke of the Kerry farmer seeking a ‘leading milk price’?

Did you hear the one about the poor Kerry dairy farmer looking for a ’13th milk payment’ top-up from his PLC dairy processor? His co-op was sitting on €2.25 billion worth of Kerry Group shares!

I don’t encourage or advocate telling Kerryman jokes. However, observing reports of the ongoing back and forth between Kerry PLC and Co-op, on what constitutes a leading milk price or fair ’13th payment’, I find it hard to take the plight of the Kerry milk supplier seriously.

Kerry Group’s share price hit a record high of €93.75 this week. Even though Kerry Co-op is now a minority shareholder of 13.7% in Kerry Group, it still retains more than 20 million shares, or based on the share price, a total value of more than €2 billion.

Not too many Irish dairy co-ops look at figures with that many comma’s on their balance sheet.

So why is Kerry Co-op looking to Kerry PLC to deliver added value for it’s dairy farmers – given the massive value the co-op is sitting on? In the last 52 weeks alone, Kerry Co-op’s share value in Kerry Group increased by over €736 million.

Time for change?

The global dairy market is evolving rapidly. Kerry Group itself is growing globally. The company is now a million miles from its humble origins in a muddy field in Listowel in the 1970’s.

Arguably, dairy production is no longer a core focus of the company. As much as they would like, Kerry Group as a PLC, cannot pay Irish dairy farmers over the odds for milk supplies.

At the same time, the PLC also has to prioritise investment decisions and capital expenditure into projects that deliver the highest return on investment and market value for shareholders. Consequently, investing in dairy commodity plants in Listowel and Charleville may no longer be a priority.

The time has come for the farmer leaders within Kerry Co-op to step forward.

It’s time to stop griping, and looking back to discuss what defined a “leading milk price” in 2015. Instead, they must focus on how they can deliver value for the co-op in 2018 and beyond.

Has the time has come for Kerry Co-op to completely divest from Kerry Group PLC? With a pot of €2.25 billion, they could cash-in and buy the Irish dairy processing assets of Kerry Group, share up existing milk suppliers, and pay-off the dry shareholders.

Golden opportunity

With such a large fund, the co-op could still easily have a couple of hundred million in change to re-invest into state-of-the-art technologies in Listowel and Charleville.

If they were really ambitious, they could aggressively merge with other co-ops across the country. Simply put, the board of Kerry co-op needs to take their destiny into their own hands, rather than looking to PLC management to prop-up milk price.

Kerry Group is the company it is today thanks in no small part to the vision, boldness, blood, sweat, and tears of Kerry Co-op dairy farmers.

They helped build a company into a leading global food ingredients company. This was all done initially with limited access to finances.

If the same passion, leadership, and vision still exists within Kerry Co-op today, can you imagine the dairy company they could create with a kitty of €2.25billion?

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