Radical New Dairy Industry Structures Proposed
18 November 2004
Radical decisions involving the creation of a world class marketing body for dairy and other food products and new arrangements between processors are essential in the new circumstances created by CAP reform and future WTO agreements.
This proposition was put forward by Aaron Forde, Chief Executive of Connacht Gold Co-op when he addressed the Teagasc National Dairy Conference at the Slieve Russell Hotel, Co. Cavan.
Mr. Forde said that experience in Ireland and abroad did not confirm that large scale amalgamations of co-operatives were a guarantee of successful future development or of clear benefit to shareholders. However, world class marketing of large scale volumes of product was not just desirable but essential in the increasingly competitive world wide dairy market, he said.
The future lay in new product development combined with maximum efficiency in the processing and marketing of traditional dairy products, the Connacht Gold Co-op Chief Executive said. He gave examples of different co-operatives of different sizes in Europe and New Zealand which emphasised that efficiency and not scale determined their ability to respond to the needs of shareholders and the market.
He proposed two models to meet the challenge of competing on world markets. The first ‘The Asset Sharing Model’ involved decisions to process milk in plants which were benchmarked against best performance elsewhere in the world. Ownership did not have to arise and the dividend to milk suppliers would derive from best practice and scale processing, he said.
“The benefits will have to be visible to all parties and trust will build over time in an enterprise which in reality would copper fasten what is already happening in a random way between processors”, Aaron Forde said.
The second model involved a ’Federation Ownership Model’, for the Irish Dairy Board. This would place all milk processing assets in the ownership of a ‘new’ Irish Dairy Board which would be responsible for all processing and marketing.
“Under this new model, the co-ops would retain their own identities, including milk collection and any other activities engaged in currently, or subsequently developed,” he stressed.
He suggested that all of the ingredients to do the job existed – the infrastructure, raw materials and expertise – all that was required was a change of mindset.
“The model would be a little like involvement in the EU – giving up a little sovereignty but gaining through participation in a strong entity, more capable of delivering a world competitive dairy business”, Aaron Forde said.
A set of principals would have to be adopted to guide the new entity. This would include making best use of synergies, elimination of duplication, benchmarking globally and respecting communities while making the necessary progress.
He said the challenges facing the farmer shareholder and their processing enterprises meant that the status quo was not an option. He was putting forward his personal view as a contribution to the debate that was urgently needed if most of the Irish dairy industry was not to be left behind.
Proceedings of the National Dairy Conference are available. (1.47MB PDF document)
