The chief executive of Ornua, which includes the Kerrygold brand, says the company is preparing for high prices in the short-term.
John Jordan was speaking as part of a panel discussion at the European Dairy Farmers’ Congress in Co. Cork this week.
Ornua is Ireland’s largest exporter of Irish dairy products and recently announced a significant product expansion into the Middle East with the launch of Kerrygold butter sticks in Saudi Arabia, Kuwait.
An attendee from Germany at the conference in Cork outlined that the price of 250g of Kerrgold butter has increased in price by €1.00 in her country and she has now resorted to buying cheaper German butter as a result.
She questioned the Ornua CEO about the company’s plan going forward in terms of product pricing.
Jordon responded by stating: “It’s a serious challenge. I think it’s a serious challenge, not just for Kerrygold in Germany, but for all of dairy.
“[Covid-19] changed consumer buying patterns, so people consumed in retail and ate at home. Certainly in Ireland, and I think in other countries, social media went alive with people baking and cooking at home.”
“That was really good for dairy consumption. We’re seeing post-Covid… suddenly we’re hit with incredible inflation, incredible volatility in pricing,” he added.
Ornua and prices
The pattern of consumer buying and where this trend will go in the near future is an area of consideration for all manufacturers and retailers at present and Ornua plans to focus on this.
“We’re now trying to understand exactly that point. What will consumers do? What will you and I do when we go to retail supermarkets?” he added.
“Will we eat out less because costs are high and our pocket is a little squeezed? Will be trade down to other products? Will we buy on price promotion? Will we come out of butter and buy, god forbid, margarine?
“I genuinely do not have the answer. Over the next six months, it’s really important for all of us to stay close to consumers and understand what those buying behaviours will be,” Jordan added. “We’re planning for high prices.
Jordan said that the company will have to consider whether it invests in price promotion to attract consumers to buy Kerrygold, or whether it should suffer volume loss while maintaining a price with a margin.
“That’s the finance sums you do,” he told the conference.
Earlier this month, Ornua reported a 1.3% increase in operating profit – from €151.8 million in 2020 to €153.7 million in 2021 – in its operating and financial results.