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Kerry Group plc

Kerry Group plc

BEGINNINGS AS DAIRY PROCESSOR, THEN DAIRY CO-OP

1986: FORMATION OF KERRY GROUP PLC

MAJOR ACQUISITIONS: DCA AND DALGETY FOOD INGREDIENTS

EARLY 21ST CENTURY: MORE DEALS, SMALL AND LARGE

PRINCIPAL SUBSIDIARIES

PRINCIPAL DIVISIONS

PRINCIPAL COMPETITORS

FURTHER READING

Princes Street,
Tralee, County Kerry
Ireland
Telephone: (+353 66) 718 2000
Fax: (+353 66) 718 2961
Web site: http://www.kerrygroup.com

Public Company
Founded:
1972 as North Kerry Milk Products Limited
Incorporated: 1986
Employees: 23,289
Sales: EUR 4.65 billion ($6.13 billion) (2006)
Stock Exchanges: Dublin London
Ticker Symbol: KYGA
NAIC: 311222 Soybean Processing; 311411 Frozen Fruit, Juice, and Vegetable Manufacturing; 311412 Frozen Specialty Food Manufacturing; 311421 Fruit and Vegetable Canning; 311423 Dried and Dehydrated Food Manufacturing; 311511 Fluid Milk Manufacturing; 311512 Creamery Butter Manufacturing; 311513 Cheese Manufacturing; 311612 Meat Processed from Carcasses; 311615 Poultry Processing; 311813 Frozen Cakes, Pies, and Other Pastries Manufacturing; 311822 Flour Mixes and Dough Manufacturing from Purchased Flour; 311920 Coffee and Tea Manufacturing; 311930 Flavoring Syrup and Concentrate Manufacturing; 311942 Spice and Extract Manufacturing; 311991 Perishable Prepared Food Manufacturing; 311999 All Other Miscellaneous Food Manufacturing; 312112 Bottled Water Manufacturing

Kerry Group plc is one of the main global suppliers of food ingredients and flavors as well as a leading processor and marketer of branded consumer foods mainly in Ireland and the United Kingdom. The Irish firm operates manufacturing plants in 19 countries, with sales of its 10,000-plus products reaching more than 140 countries. Kerrys ingredients operations, which generate around two-thirds of its overall revenues, supply multinational and other food processors with seasonings, coating systems, sweet ingredients, nutritional systems, fruit preparations, bakery ingredients, specialty proteins, and other ingredients and flavors. The balance of revenues is derived from the companys own branded food processing operations, which include processed meats and specialty poultry products (Ballyfree, Mattes-sons, Richmond, and Walls), dairy products and juices (Dawn), dairy spreads (Low Low, Kerrymaid, and Move Over Butter), cheese and cheese snacks (Cheestrings and Golden Vale), chilled and frozen ready meals (Denny and Rye Valley), sandwiches (Freshways), chilled desserts (Dawn), and mineral water (Kerry Spring). Kerry also operates an agribusiness division, which represents the companys founding focus and is responsible for coordinating the companys 5,700-strong contingent of raw milk and other dairy suppliers. Geographically, Kerry derives about 65 percent of its revenues in Europe, 27 percent in the Americas, and 8 percent in the Asia-Pacific region. Kerry Co-operative Creameries Limited holds a 28 percent stake in Kerry Group.

BEGINNINGS AS DAIRY PROCESSOR, THEN DAIRY CO-OP

Kerry Group traces its origins to the founding in 1972 of North Kerry Milk Products Limited (NKMP) to operate a newly built dairy ingredients processing plant in Listowel, County Kerry, Ireland. NKMP had three shareholders: Dairy Disposal Company, Irelands state-owned dairy processing company, which owned a 42.5 percent stake; a federation of eight small farmer cooperatives in Kerry, which also owned 42.5 percent; and the U.S. firm Erie Casein Company, Inc., which held the remaining 15 percent. The company was set up to manufacture milk protein (casein), a dairy ingredient used in food processing, plastics, and glue. The plan was to export the casein to the United States, hence the involvement of Erie Casein. During its first year, NKMP produced 2,000 tons of casein from 16 million gallons of skim milk, earning profits of EUR 127,000 on sales of EUR 1.3 million. Heading the company from its formation was 27-year-old Denis Brosnan, the second son of a local dairy farmer, who had earned bachelors and masters degrees in food science from University College Cork.

When Ireland joined the European Economic Community (EEC) in 1973, small dairies in the nation began merging in order to compete with the larger milk companies operating within the EEC. After securing an injection of capital from milk suppliers in County Kerry, NKMP joined this wave of consolidation by acquiring Dairy Disposal Company and its creameries for EUR 1.5 million. NKMP also purchased six of the eight independent farmer cooperatives that had joined in at the founding. As a result of these maneuvers, NKMP was made a subsidiary of the newly formed Kerry Co-operative Creameries Limited, which began trading in January 1974. Kerry Co-op started out as the smallest of Irelands six major agricultural cooperatives. Revenues in its first year were EUR 29 million. From these beginnings, Kerry grew over the next two decades into one of the worlds leading specialist food ingredients producers and distributors. The introduction of the company on the Dublin and London stock exchanges in the mid-1980s made millionaires out of many of the co-ops founding members.

A primary component in Kerrys growth was its steady expansion through acquisition, as well as a willingness to invest in new production and other facilities. Through the 1970s, Kerry Co-op grew to include a large number of dairy farms and processing plants in the counties of Cork, Killarney, Galway, and Limerick, supplying to the companys Dairy Disposal Company. By the mid-1980s, Kerry Co-op counted several thousand members.

In the early 1980s, Kerry began branching out from its dairy core into other food product categories. An early addition was the pork products category, which the company entered with the acquisitions of two prominent Irish pork products producers, Duffy Meats and Henry Denny & Sons, both acquired in 1982. The move into food processing raised Kerry to a prominent position in Irelands food industry. By the middle of the decade, Kerry Co-ops annual sales topped IR£200 million. In 1983, in the meantime, Kerry bought out Erie Caseins 15 percent interest in it and also began laying the foundation for international growth by establishing U.S. and U.K. headquarters, in Chicago and London, respectively.

1986: FORMATION OF KERRY GROUP PLC

By the mid-1980s the little dairy co-op had expanded to include a number of manufacturing and other food processing facilities, located throughout Ireland and Northern Ireland. Needing capital to fund further growth, Kerry Co-op made a novel move: It restructured in 1986 as a full-fledged corporation. Kerry Group plc was incorporated and then acquired the property and assets of Kerry Co-op in exchange for 90 million common shares in Kerry Group. Then in October 1986 an initial public offering (IPO) of shares in Kerry Group was made via a listing on the Irish stock exchange. Following the IPO, Kerry Co-op retained a large stake in Kerry Group. Brosnan continued to manage the company as chief executive of Kerry Group. The newly public company reported strong growth after its first full year of operations, with revenues nearing IR£300 million, and net profits of nearly IR£6.3 million.

COMPANY PERSPECTIVES

Kerry Group will be a major international specialist food ingredients corporation; a leading international flavour technology company; a leading supplier of added value brands and customer branded foods to the Irish and UK markets.

Brosnan led Kerry on an accelerated drive to build the business into a vertically integrated food production conglomerate, doubling the companys revenues before the end of the decade. The company continued its expansion in Ireland with the 1986 acquisition of Snowcream Dairies Moate, and the formation of a Convenience Foods division, bringing the company into this increasingly prominent market, particularly with the steady adoption of this food trend among European consumers. Parallel to this move was the stepping up of Kerrys specialty ingredients business. At the same time, Kerry also established a presence in the United States, opening a dairy processing facility in Jackson, Wisconsin, in 1987. Kerry continued to build its U.S. presence, adding additional facilities in Wisconsin and Illinois especially. Part of the companys U.S. growth came from the acquisition of existing businesses, including the important 1988 acquisition of Beatreme Food Ingredients from Beatrice Corporation for $130 million. The purchase of Beatreme proved to be a watershed move and a quite risky one as the price paid was equivalent to Kerrys market capitalization at the time.

Rounding out the 1980s, Kerrys acquisitions included Grove and Ballytree, adding turkey products to the companys food production division. These companies were added in 1988, as was S.W.M. Chard, which gave Kerry a presence in the English market. At the end of 1989, Kerry, which had reached revenues of IR£584 million, began looking to expand onto the European continent. This was achieved the following year when the company purchased Milac, of Germany.

At the end of 1991, Kerrys annual sales surged to IR£755 million. The company had continued to invest in its British expansion, acquiring Eastleigh Flavors for its ingredients business in 1990, as well as food processors A.E. Button and Sons and Miller-Robirch. The company added several more U.K.-based businesses in the early 1990s, including the foods division acquisition of Buxted Duckling and the food ingredients producer Tingles Ltd. The Irish poultry processing company Kantoher Food Products was also acquired in 1992. At the same time, Kerry increased its market focus with the formation of Kerry Spring Water in Ireland in 1993. Between 1990 and 1993, Kerry also added Dairyland Products and Northlands to its ingredients division, both in the United States. These were joined by the companys move into Canada, with the 1993 acquisitions of Malcolm Foods and Research Foods, in Ontario and Vancouver. In 1994 Kerry widened its presence in the Americas through the commissioning of a state-ofthe-art dairy processing facility in Irapuato, Mexico; this plant was set up to supply both the Mexican and Central American markets. Back in Ireland, the company began construction on one of the pork processing industrys most advanced plants, in Shillelagh.

MAJOR ACQUISITIONS: DCA AND DALGETY FOOD INGREDIENTS

Kerrys acquisition drive continued into the late 1990s, bringing the company into France and Italy, with the purchases of Ciprial S.A. and its Aptunion, Ravifruit, Gasparini, and Gial subsidiaries in 1996; into Poland, with the acquisition of U.K.-based Margetts in 1994; to Malaysia, in 1997, with the purchase of SDF Foods; and Brazil, with the acquisition of Star & Arty in 1998. In the United Kingdom, Kerry added both Mattessons and Walls to its list of brands.

KEY DATES

1972:
North Kerry Milk Products Limited (NKMP) is created to operate a dairy ingredients processing plant in Listowel, County Kerry, Ireland; Denis Brosnan is the managing director.
1974:
NKMP is made a subsidiary of the newly formed Kerry Co-operative Creameries Limited.
1982:
Kerry Co-op begins branching out with the acquisition of two Irish producers of pork products.
1986:
Kerry Group plc is incorporated, acquires the property and assets of Kerry Co-op, and is then taken public; Kerry Co-op ends up with a large stake in Kerry Group.
1988:
Kerry Group acquires the U.S.-based Beat-reme Food Ingredients.
1994:
Company completes an important food ingredients acquisition, that of DCA.
1998:
Kerry acquires the food ingredients division of Dalgety PLC.
2001:
Golden Vale plc, an Irish producer of dairy products, prepared meals, and snacks, is acquired; Brosnan steps down as chief executive at year-end, with Hugh Friel succeeding him.
2004:
Kerry acquires the food ingredients business of Quest.

Two important acquisitions highlighted Kerrys expansion. The first came in 1994, when the company acquired the food processing business of DCA, elevating the company to a major position among North Americas specialty ingredients producers, especially among the coatings and bakery market segments. DCA was acquired from Allied Domecq plc for $402 million.

In addition to bolstering the groups North American position, the DCA purchase also introduced it to the Australian and New Zealand markets. After digesting this purchase, including restructuring its U.S. holdings into the new subsidiary, Kerry Inc., Kerry Group once again began eyeing a new large-scale acquisition.

The opportunity for renewed expansion came in February 1998, when Kerry Group announced its agreement to purchase the food ingredients businesses of the U.K.-based Dalgety PLC. For a price of IR£384 million, Kerry acquired Dalgety Food Ingredients plants in the United Kingdom and in Hungary and the Netherlandsnew markets for Kerryas well as plants in France, Italy, and Germany. The Dalgety acquisition firmly established Kerry as the top specialty ingredients producer in Europe, and one of the worlds leaders in its specific categories. It also marked the firms entrance into a new market sector through Dalgetys flavors operations. Moreover, it helped boost Kerrys revenues beyond EUR 2 billion for its 1998 fiscal year.

Among other 1998 acquisitions, Kerry purchased the ingredients businesses of Burns, Philp & Company Ltd., which had manufacturing bases in Australia and New Zealand, and this deal led to a major expansion of Kerrys seasonings, flavors, coatings, marinades, and bakery ingredients business in the Asia-Pacific region. On the consumer foods side, the company completed a new manufacturing plant in Burton-on-Trent to position itself for further growth in the burgeoning market in the United Kingdom for chilled ready meals. In 1999 Kerry strengthened its position in snack seasoning by acquiring the German firm Tukania Proca GmbH.

At the same time, Kerry was turning its attention to two new markets: the Far East and South America. Both of these markets represented a huge pool of potential customers, both for the companys own food products and brands, and for its ingredients products. The companys initial forays into these markets included plant acquisitions in Malaysia and Brazil.

Important changes in Kerry Groups ownership structure also occurred in the late 1990s. The company adopted a rule change in 1996 that allowed Kerry Coops interest in Kerry Group to drop below 51 percent to as low as 20 percent without an additional rule change. After this change was adopted, the co-op distributed one-quarter of its shares in Kerry Group to the individual cooperative members, thereby reducing the co-ops stake from 52 percent to 39 percent. By 1999 the co-ops stake had been further reduced to 37 percent.

EARLY 21ST CENTURY: MORE DEALS, SMALL AND LARGE

The dealmaking continued in the new century as Kerry Group acquired the U.S.-based Shade Foods and Specialty Food Ingredients, the European arm of Shade Foods, from the Swiss agricultural commodities group Andre in 2000 for approximately $80 million. The acquired units manufactured flavored particulates and specialty chocolate coatings for producers of ready-to-eat cereals, ice cream, and dairy, confectionery, and bakery products. In a similar vein, Kerry purchased York Dragee, a U.K.-based company providing chocolate inclusions and coated particulates to the cereal, confectionery, bakery, and ice cream sectors across Europe. Strengthening its U.S. operations, Kerry completed a third 2000 acquisition, paying ConAgra, Inc., $35 million for Armour Food Ingredients, a leading producer of savory flavorings, cheese and dairy flavorings, and specialty lipid powders. Also in 2000 Kerry sold the North American bakery business it had acquired as part of the purchase of DCA to the Pillsbury Company for a little over $100 million. For the year pretax profits were up 16 percent to EUR 173.2 million, while revenues were up nearly 7 percent to EUR 2.62 billion.

The year 2001 proved momentous for Kerry on the leadership front as Brosnan stepped aside from day-today operations at year-end, becoming nonexecutive chairman, while Hugh Friel took over as chief executive. Friel had been Kerrys deputy all the way back to the groups founding in 1972. During his final year as chief executive, Brosnan spearheaded several more acquisitions, which in the aggregate cost Kerry EUR 617 million. The largest and most significant of these by far was the September purchase of Golden Vale plc for a total cost, including assumed debt, of EUR 391 million. Operating 13 manufacturing facilities in Ireland and the United Kingdom, Golden Vale was a major food processor, specializing in cheeses, dairy spreads, prepared meals, snack products, milk, butter, and dairy ingredients.

Kerry Group remained on course following the change in chief executives, as Friel maintained the firms steady expansion, primarily through acquisition. Though considerable sums were spent on acquisitions in 2002 and 2003EUR 273.4 million and EUR 207.7 million, respectivelythe focus in these years was on smaller, bolt-on acquisitions that built on the existing operations rather than pushing the company into new sectors. In consumer foods, for example, convenience foods remained a high priority, and Kerry picked up two Irish companies in 2002. These were Deli Products Ltd., producer of chilled convenience food-to-go, and sandwich maker Freshways. A year later the company acquired the ready meals and chilled dessert business of Hibernia Foods plc. Another important development in 2002 was the creation of a new flavor division called Mastertaste, which served to provide a higher profile for this portion of Kerrys ingredients business. Mastertaste aimed to offer a wide range of innovative, high-quality, authentic flavors for food and beverage applications. In August 2003 Brosnan retired from the company board, and Denis Buckley, a Kerry Group director since its creation in 1986, was named the new chairman.

Friel accelerated the pace of acquisition in 2004, spending EUR 711.7 million on deals that year, more than half of which was used for just one purchase. In April, Kerry acquired the food ingredients business of Quest from Imperial Chemical Industries PLC for EUR 366.9 million. The acquired unit, which produced yeasts, proteins, emulsifiers, and cultures used in snack, bakery, dairy, and pharmaceutical products, had operations in the Netherlands, the United States, Canada, Malaysia, the Philippines, Ireland, and the United Kingdom. It became the basis for a new Kerry BioScience division, which was focused on so-called bio-ingredients and pharma-ingredients. Among the other acquisitions completed in 2004, several were smaller purchases of ingredients and flavors companies, including Ernsts Food Ingredients, Manheimer, Flavurence, Laboratorios Krauss, Fructamine, Oregon Chai, and Extreme Foods.

The Quest deal helped push Kerry Groups revenues over the EUR 4 billion mark in 2004. This blockbuster acquisition was followed by a return to more modest dealmaking. In March 2005 Kerry significantly expanded its operations in China by acquiring Hangzhou Lanli Food Industry Company Limited and also endeavoring to build a new factory in Hangzhou to supply ingredients and flavorings to both Chinese food companies and multinationals with operations in China, such as Groupe Danone, Unilever, and Nestlé S.A. Later in 2005 Kerry acquired Noon Group Limited for around £124 million (EUR 179 million) to augment its position in the fast-growing chilled ready-meals market. London-based Noon produced Indian, Thai, Oriental, and other Asian precooked meals mainly for major U.K. supermarket chains.

During 2006 Kerry completed only two acquisitions of any note, the spring purchases of two U.S. food ingredients businesses, Custom Industries, supplier of powders to the bakery and ready-to-eat cereal sectors, and Nuvex Ingredients, producer of high-protein and fiber nutritional lines for makers of breakfast cereals, functional foods, and nutritional snacks. The two companies were purchased for a combined $83 million (EUR 68 million). One of the main reasons for the slowdown in acquisition activity was that private-equity firms, flush with cash, were in the midst of a major acquisition spree that was driving prices higher than Kerry was willing to pay. In illustration, in August 2006 the company pursued an acquisition of the European frozen foods business of Unilever, which included the Birds Eye brand, but was outbid by the U.K. private-equity group Permira Advisers LLP.

Overall, 2006 proved to be difficult for Kerry Group. Results in the first half of the year were hampered by an unprecedented surge in energy and energy-related costs plus a falling dollar, forcing the company to issue its first profit warning since becoming a publicly traded company. In September the firm launched a restructuring program through which it intended to sell or close 11 manufacturing sites by the end of 2007. Pretax profits fell sharply in 2006, down 25 percent to EUR 221.1 million, and after-tax profits were down as well after Kerry took a EUR 73 million write-off in connection with several divestments completed during the year. The company nevertheless managed to achieve a sales increase of nearly 5 percent to EUR 4.65 billion. Early results from 2007 were more positive than the previous year, which signaled brighter prospects for Kerry Group and perhaps a return to more robust acquisition activity.

M. L. Cohen

Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

Ballysimon Warehousing Limited; Castleisland Cattle Breeding Society Limited; Charleville Research Limited Services; Dawn Dairies Limited; Duffy Meats Limited; Freshways Limited; Glenealy Farms (Turkeys) Limited; Golden Vale Dairies Limited; Golden Vale Farms Limited; Golden Vale Food Products Limited; Golden Vale Foods Limited; Henry Denny & Sons (Ireland) Limited; Irish Cold Stores Limited; Kerry Agribusiness Holdings Limited; Kerry Creameries Limited; Kerry Farm Supplies Limited; Kerry Ingredients (Ireland) Limited; Kerrykreem Limited; Platters Food Company Limited; Rye Valley Foods Limited; Snowcream (Midlands) Limited; National Food Ingredients Limited; National Rusks Limited; William Blake Limited; Henry Denny & Sons (NI) Limited (U.K.); Dairy Produce Packers Limited (U.K.); Golden Cow Dairies Limited (U.K.); Leckpatrick Dairies Limited (U.K.); Diversity Foods Limited (U.K.); Kerry Foods Limited (U.K.); Kerry Savoury Foods Limited (U.K.); Noon Group Limited (U.K.); Dairyborn Foods Limited (U.K.); Cereal Innovations Limited (U.K.); Dale Country Foods Limited (U.K.); EBI Foods Limited (U.K.); Kerry Ingredients (UK) Limited; Gordon Jopling (Foods) Limited (U.K.); Kerry Group B.V. (Netherlands); Kerry Bio-Science B.V. (Netherlands); Kerry Ingredients B.V. (Netherlands); Kerry Foods France Sarl; Kerry Ingredients France S.A.S.; Kerry Ingredients GmbH (Germany); Kerry Ingredients (Denmark) A/S; Kerry Ingredients Italia S.p.A. (Italy); Mastertaste S.p.A. (Italy); Kerry Polska Sp. z.o.o. (Poland); Kerry Hungaria KFT (Hungary); Kerry Ingredients Australia Pty. Limited; Kerry Ingredients (NZ) Limited (New Zealand); Flavurence Corporation (U.S.A.); Geneva Flavors Inc. (U.S.A.); Guernsey Bel, Inc. (U.S.A.); GB Seasonings Inc. (U.S.A.); Kerry Biofunctional Ingredients Inc. (U.S.A.); Kerry Holding Co. (U.S.A.); Kerry Inc. (U.S.A.); Mastertaste Holding Co. (U.S.A.); Nuvex Ingredients Inc. (U.S.A.); Hickory Specialties, Inc. (U.S.A.); Janas Classics, Inc. (U.S.A.); Oregon Chai, Inc. (U.S.A.); Stearns & Lehman, Inc. (U.S.A.); Kerry (Canada) Inc.; Rector Foods Limited (Canada); Nutrisens Inc. (Canada); Kerry Ingredients (de Mexico) S.A. de C.V.; Kerry do Brasil Ltda. (Brazil); Kerry BioScience Egypt Misr L.L.; Kerry Ingredients South Africa (Pty) Limited; Kerry Ingredients (Thailand) Limited; Kerry Food Ingredients (Philippines), Inc.; Kerry Ingredients (S) Pte Limited (Singapore); Kerry Ingredients (M) Sdn. Bhd. (Malaysia); Kerry Japan Kabushiki Kaisha; Kerry Food Ingredients (Hangzhou) Company Limited (China); Kerry Ingredients Trading (Shanghai) Limited (China); Kerry Limited Liability Company (Russia).

PRINCIPAL DIVISIONS

Kerry Bio-Science; Kerry Foods; Kerry Ingredients; Mastertaste.

PRINCIPAL COMPETITORS

Givaudan SA; International Flavors & Fragrances Inc.; Symrise GmbH & Co. KG; McCormick & Company, Incorporated; Glanbia plc; Firmenich SA; Northern Foods plc; Uniq plc; Greencore Group plc; Bakkavör Group hf.; Perkins Foods Holdings Ltd.; Premier Foods plc; Cargill, Incorporated; Danisco A/S; Associated British Foods plc.

FURTHER READING

Boyle, Pat, Kerry Group Reveals Ingredients of $440m U.S. Quest Takeover, Irish Independent (Dublin), March 3, 2004.

Canniffe, Mary, Kerry Group Annual Profit Surges 18.6% to £51.2m, Irish Times (Dublin), March 5, 1997.

, Kerry Group Pays $35m for Food Firm Armour to Expand Its Capacity in U.S., Irish Times (Dublin), October 18, 2000, p. 19.

, Kerry Group Well Positioned to Raise Profits, Irish Times (Dublin), March 5, 1997.

Coyle, Dominic, Kerry Group Pays $62m for Two U.S. Flavour and Ingredient Companies, Irish Times (Dublin), October 11, 2003, p. 16.

Firn, David, and Astrid Wendlandt, ICI Sells Food Unit to Kerry for $440m, Financial Times, March 3, 2004, p. 22.

Harding, Ted, Kerry Group Set to Exceed the Revised Profit Forecasts, Sunday Business Post (Dublin), March 9, 1998.

Kennelly, James J., The Kerry Way: The History of Kerry Group, 19722000, Dublin: Oak Tree Press, 2001, 457 p.

Kerry Buys Malaysian Food Company, European Report, May 1, 1996.

Kerry: Picking the Right Strategy, Dairy Industries International, July 1994, p. 31.

Kerry Weathering Storm but Doubts Remain, Irish Examiner (Cork), February 28, 2007.

McGrath, Brendan, Co-op to Cut Stake in Kerry Group to 39%, Irish Times (Dublin), May 16, 1996, p. 17.

, Kerry Group Looks to Far East Market, Irish Times (Dublin), May 27, 1997.

, Kerry in $80m Buy from Swiss, Irish Times (Dublin), October 1, 1999, p. 51.

, Kerry Targets South American Market, Irish Times (Dublin), August 16, 1999, p. 16.

, Mega Deals Create £600m Debt, Irish Times (Dublin), January 27, 1998, p. 18.

Micheau, Ed, Kerrys Global Kingdom, Business and Finance, March 16, 2000.

Mudd, Tom, Global Movers and Shakers: Kerry Group and Nestlé Expand Existing Markets while Nurturing New Opportunities, Industry Week, August 21, 2000, pp. 71, 73, 75.

, Milk Money: Denis Brosnan Turns a Tiny, Irish Dairy Co-op into a Lucrative, Worldwide Food Conglomerate, Industry Week, January 15, 2001, pp. 65, 6769.

OKane, Paul, Co-op Transformed by Commonsense Approach, Irish Times (Dublin), November 8, 1994, p. 14.

, Kerry Eyes Up a Kingdom, Sunday Tribune (Dublin), March 2, 2003, p. 3.

, Kerry Goes into Orbit with U.S. Fruit Juice Buy, Sunday Tribune (Dublin), September 14, 2003, p. 1.

OMahony, Brian, Kerry to Remain Cautious on Acquisitions, Irish Examiner (Cork), August 31, 2005.

Osullivan, Jane, Kerry Buys Four Companies for EUR 170m, Irish Times (Dublin), May 11, 2004, p. 19.

, Kerry Buys Two U.S. Firms for $83m, Irish Times (Dublin), April 12, 2006, p. 17.

, Kerry Group Chief Is in No Rush to Change Winning Recipe, Irish Times (Dublin), February 28, 2003, p. 61.

, Kerry Group Pays £394m for Food Ingredients Businesses of Dalgety, Irish Times (Dublin), January 27, 1998, p. 18.

, Kerrys Spend Hits $135m As It Buys Two U.S. Food Firms, Irish Times (Dublin), April 3, 2003, p. 16.

Shanahan, Ella, Charm Offensive Yields Brosnans Finest Hour, Irish Times (Dublin), August 20, 2001, p. 16.

Slattery, Laura, Kerry Group Profits Fall 26% Despite Rise in Sales, Irish Times (Dublin), February 28, 2007, p. 19.

Smith, Peter, Noon Products Sold to Kerry Group for £125m, Financial Times, August 6, 2005, p. 3.

Smyth, Jamie, Kerry Group Buys Chinese Firm, Irish Times (Dublin), January 21, 2005, p. 11.

Taaffe, Claire, Kerry Group: Big Cheeses of Marketing, Business and Finance, July 1, 2004.

Toops, Diane, Taking the High Road with Kerry Groups Denis Brosnan, Food Processing, September 1995, pp. 1921.

Wagner, Jeffrey, Yane Chandera, and W. D. Dobson, The Evolution of Irelands Kerry Group/PLC: Implications for the U.S. and Global Dairy-Food Industries (Babcock Institute Discussion Paper), Madison: Babcock Institute for International Dairy Research and Development, University of Wisconsin, 2000, 22 p.

Wall, Vincent, Sensing the Future, Business and Finance, January 11, 2001, p. 8.

Walsh, Kerri, Kerry Buys Two Food Ingredients Makers, Chemical Week, April 26, 2006, p. 54.

Webb, Nick, Kerry Made by Sealing a Friel Deal, Sunday Independent (Dublin), March 14, 2004.

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Kerry Group plc

Kerry Group plc

Princes Street
Tralee
County Kerry
Ireland
(353) 66 22433
Fax:(353) 66 22353

Public Company
Incorporated:
1974 as Kerry Co-Operative Creameries Limited
Employees: 9,800
Sales: IR£ 1.34 billion (US $1.92 billion) (1997)
Stock Exchanges: Dublin London
Ticker Symbol: Kerry
SICs: 2051 Bread, Cake & Related Products; 2099 Food Preparations, Not Elsewhere Classified; 2034 Dehydrated Fruits, Vegetables & Soups; 2045 Prepared Flour Mixes & Doughs; 2011 Meat Packing Plants; 2013 Sausages & Other Prepared Meats; 2015 Poultry Slaughtering & Processing; 2021 Creamery Butter; 2022 CheeseNatural & Processed; 2026 Fluid Milk

Kerry Group plc is fast becoming one of the worlds leading food ingredients suppliers. Based in Ireland, the Kerry Group has expanded its operations worldwide, with a strong presence throughout Europe and the United States, and a growing presence in the Pacific Rim region. Kerry operates manufacturing plants in 14 countries, with sales of its more than 7,000 products reaching more than 70 countries. Kerry continues to expand rapidly, primarily through a strong program of acquisitions. After acquiring the U.S. DCA Food Industries in 1994giving Kerry a prominent position in the North American ingredients marketthe company went after bigger fish in 1998, acquiring the ingredients operations of fellow U.K. producer Dalgety PLC. That acquisition is expected to boost Kerrys 1998 revenues past IR£ 2 billion.

Kerrys operations are separated along three primary market targets. The first and most important for the companys annual sales is its Food Ingredients division, which accounts for more than half of Kerrys sales and nearly three-quarters of its annual operating profits. Supplying primarily multinational and other food processors, Kerry Ingredients produces more than 6,000 individual products for categories including seasonings and coatings; dehydrates; dairy; fruit preparation; bakery goods, including a leading share of the U.S. donut mix market; and specialty ingredients. The companys ingredients include flavoring agents, functional ingredientssuch as those required for processing yogurt or ice cream, and the many consistency and flavor enhancers and additives found in processed foods. A primary market for this division is the seasonings and coatings market segment, including crumb and batter systems for meat, poultry, fish, and convenience foods.

Through subsidiaries Lucas Ingredients, Produits Jaeger, PAC, Morton Foods, and ABC, Kerry has captured the European leadership for these products. Kerrys Ingredients division also produces pre-packed flour and baked goods mixes for the private label market and for the companys own Homepride and Greens labels, themselves leaders in many European and other global markets. Other Kerry ingredients brands include Kerry PSF, Aptunion, and Ravifruit, which have captured leading positions in the fruit processing market; and the companys Trumato line of enhanced powdered tomato products, developed in the companys greenseed Irapuato, Mexico facility.

In the United States, Kerrys DCA and other subsidiaries have enabled the company to take a leading share of the processed cheese and dairy products categories. Kerry has also targeted the South American market for growth, with a production facility in Brazil serving that country and the Argentinean and Chilean food production markets. Kerry is also making moves to expand its presence in the Asia-Pacific region. In addition to a manufacturing facility in Sydney, Australia, Kerry has purchased a second production plant in Johor Bahru, Malaysia, from which to serve the booming population of the region.

Representing approximately one-third of the Kerry Groups annual revenues, the Kerry Foods division is one of the United Kingdoms leading manufacturers of refrigerated food products for the companys own Richmond, Walls, Denny, Ballyfree, and Mattessons brands, as well as for private label and other third-party brands. Kerry Foods specializes in five product categories, with an emphasis on pork and other meat products, cold cuts, poultry, dairy, and convenience foods products. Kerry Foods focuses primarily on the Irish and U.K. markets, in which the company has built up an extensive distribution network, while continuing a steady expansion in the European Community markets. All of the divisions manufacturing facilities are located in the United Kingdom and Ireland, including the companys Shillelagh, Ireland pork processing facility, commissioned in 1994, which remains one of Europes most technologically advanced food processing plants.

In addition to meat products, which account for approximately 80 percent of Kerry Foods production, this division also manufactures and distributes dairy products, yellow fat products, including the companys popular Move Over Butter and Kerry maid brands, and fruit juices and bottled waters.

The last of the three Kerry divisions is Kerry Agribusiness, which represents the companys founding focus. Kerry Agribusiness is responsible for the coordination of the companys 4,000-strong contingent of raw milk and other dairy suppliers. Kerry Agribusiness provides services to its network of dairy farm suppliers to assist them in maintaining the nutritional quality of their milk products while maximizing their production and cost efficiency. Kerry Agribusiness provides technical services, including breeding technology, services, and research, as well as a fleet of milk delivery vehicles and feed products to complement traditional grazing methods.

These three divisions enable Kerry to provide a vertically integrated food production, processing, and distribution system that has grown to take a leading role in the United Kingdom and European markets. The chief architect of the companys growth has been Denis Brosnan, managing director, who has overseen the company since its public listing in the mid-1980s.

Dairy Co-Op in the 1970s

The Kerry Group was formally established as Kerry Cooperative Creameries Limited in 1974, in Kerry County, Ireland. The Cooperative combined the dairy and dairy processing interests of a number of the regions dairy farms, including a dairy and dairy ingredients processing plant opened in Listowel, Ireland, in 1972. In less than 30 years, the company would grow from this small provincial creamery to one of the worlds leading specialist food ingredients producers and distributors. The introduction of the company on the Dublin and London stock exchanges in the mid-1980s made millionaires out of many of the co-ops founding members.

A primary component in Kerry growth was its steady expansion through acquisition, as well as a willingness to invest in new production and other facilities. Through the 1970s, Kerry grew to include a large number of dairy farms and processing plants in the counties of Cork, Killarney, Galway, and Limerick, supplying to the companys Dairy Disposal Company, established in 1974 as the originator of the later Kerry Foods division. By the mid-1980s, the Kerry Co-op counted several thousand members.

In the early 1980s, Kerry began branching out from its dairy core into other food product categories. An early addition was the pork products category, which the company entered with the acquisitions of two prominent Irish pork products producers, Duffy Meats and Henry Denny & Sons, both acquired in 1982. The move into food processing raised Kerry to a prominent position in Irelands food industry. By the middle of the decade, Kerrys annual sales topped IR£200 million.

By then the little dairy co-op had expanded to include a number of manufacturing and other food processing facilities, located throughout Ireland and Northern Ireland. In 1986, the co-op made the decision to transform into a full-fledged corporation, listing its shares on the Irish stock exchange. Leading this transformation was Denis Brosnan, who also served as the chief executive of the founding Kerry Co-Op. The newly public company reported strong growth after its first full year of operations, with revenues nearing IR£ 300 million, and net profits of nearly IR£ 6.3 million.

Brosnan led Kerry on an accelerated drive to build the business into a vertically integrated food production conglomerate, doubling the companys revenues before the end of the decade. The company continued its expansion in Ireland with the 1986 acquisition of Snowcream Dairies Moate, and the formation of a Convenience Foods division, bringing the company into this increasingly prominent marketparticularly with the steady adoption of this food trend among European consumers. Parallel to this move was the stepping up of Kerrys specialty ingredients business. At the same time, Kerry also established a presence in the United States, opening a dairy processing facility in Jackson, Wisconsin in 1987. Kerry continued to build its U.S. presence, adding additional facilities in Wisconsin and Illinois especially. Part of the companys U.S. growth came from the acquisition of existing businesses, including the 1988 acquisition of Beatreme Food Ingredients.

Company Perspectives:

Kerry is committed to being a leader in its selected markets through technological creativity, total quality and superior customer service. The Group is focused on contintuing to expand its presence in global food ingredients markets and on the further development of its consumer foods businesses in Europe.

Rounding out the 1980s, Kerrys acquisitions included Grove and Bally tree, adding turkey products to the companys food production division. These companies were added in 1988, as was S.W.M. Chard, which gave Kerry a presence in the English market. At the end of 1989, Kerry, which had reached revenues of IR£ 584 million, began looking to expand onto the European continent. This was achieved the following year when the company purchased Milac, of Germany.

Leading the Ingredients Market in the 1990s

At the end of 1991, Kerrys annual sales surged to IR£ 755 million. The company had continued to invest in its British expansion, acquiring Eastleigh Flavors for its ingredients business in 1990, as well as food processors A.E. Button and Sons and Miller-Robirch. The company added several more U.K.-based businesses in the early 1990s, including the foods division acquisitions of Buxted Duckling, and Kantoher Food Products, and the food ingredients producer Tingles Ltd. At the same time, Kerry increased its market focus with the formation of Kerry Spring Water in Ireland. Between 1990 and 1993, Kerry also added Dairyland Products and Northlands to its ingredients division, both in the United States. These were joined by the companys move into Canada, with the 1993 acquisitions of Malcolm Foods and Research Foods, in Ontario and Vancouver. In 1994, Kerry added to its North American presence with the commissioning of a state-of-the-art dairy processing facility in Irapuato. In Ireland, the company began construction on one of the pork processing industrys most advanced plants, in Shillelagh.

Kerrys acquisition drive continued into the late 1990s, bringing the company into France and Italy, with the purchases of Ciprial S.A. and its Aptunion, Ravifruit, Gasparini, and Gial subsidiaries in 1996; into Poland, with the acquisition of U.K.-based Margetts in 1994; to Malaysia, in 1997, with the purchase of SDF Foods; and Brazil, with the acquisition of Star & Arty in 1998. In the United Kingdom, Kerry added both Mattessons and Walls to its list of brands.

Two important acquisitions highlighted Kerrys expansion. The first came in 1994, when the company acquired the food processing business of DC A, elevating the company to a major position among North Americas specialty ingredients producers, especially among the coatings and bakery market segments. The DC A purchase, which cost the company some IR£ 250 million, also introduced it to the Australian and New Zealand markets. After digesting this purchase, including restructuring its U.S. holdings into the new subsidiary, Kerry Inc., the Kerry Group once again began eyeing a new large-scale acquisition.

The opportunity for renewed expansion came in February 1998, when the Kerry Group announced its agreement to purchase the food ingredients businesses of the U.K.s Dalgety PLC. For a price of IR£ 384 million, Kerry acquired Dalgety Food Ingredients plants in the United Kingdom and in Hungary and the Netherlandsnew markets for Kerryas well as plants in France, Italy, and Germany. The Dalgety acquisition firmly established Kerry as the top specialty ingredients producer in Europe, and one of the worlds leaders in its specific categories.

With the Dalgety acquisition expected to boost Kerrys revenues beyond IR£ 2 billion for its 1998 fiscal year, Kerry was already turning its attention to two new markets: the Far East and South America. Both of these markets represented a huge pool of potential customers, both for the companys own food products and brands, and for its ingredients products. The companys initial forays into these markets included plant acquisitions in Malaysia and Brazil, while the company forecasted that these markets would reach some 25 percent of the companys revenues early in the next century.

Principal Subsidiaries

Castleisland Cattle Breeding Society Ltd.; Dawn Dairies Ltd.; Duffy Meats Ltd.; Glenealy Farms (Turkeys) Ltd.; Grove Turkeys Ltd.; Henry Denny & Sons Ltd.; Kerry Holdings Ltd.; Kerry Ingredients Ltd.; Kerry Agribusiness Holdings Ltd.; Kerry Creameries Ltd.; Kerry Farm Supplies Ltd.; Kerrykreem Ltd.; Snowcream (Midlands) Ltd.; A.E. Button & Sons Ltd. (U.K.); G.R. Spinks & Co. Ltd. (U.K.); Kerry Foods Ltd. (U.K.); South West Meat Ltd. (U.K.); Henry Denny & Sons (NI) Ltd. (Northern Ireland); Kerry Group BV (Netherlands); Pegromar Sp.z. O.O. (Poland); Ciprial S.A. (France); Kerry Ingredients France S.A.; G.I.A.L. S.r.l (Italy); Gasparini S.r.l (Italy); Kerry Ingredients GmbH (Germany); Kerry Ingredients Australia Pty. Ltd.; Kerry Ingredients (New Zealand) Ltd.; Kerry Inc. (U.S.A.); Kerry (Canada) Inc.; Kerry Ingredients S.A. de C.V. (Mexico); Kerry Ingredients (S) Pte. Ltd. (Singapore).

Further Reading

Canniffe, Mary, Kerry Group Annual Profit Surges 18.6% to £51.2m, Irish Times, March 5, 1997.

_____, Kerry Group Well Positioned to Raise Profits, Irish Times, March 5, 1997.

Harding, Ted, Kerry Group Set to Exceed the Revised Profit Forecasts, Sunday Business Post (Ireland), March 9, 1998. Kerry Buys Malaysian Food Company, European Report, May 1, 1996.

McGrath, Brendan, Co-op to Cut Stake in Kerry Group to 39%, Irish Times, May 16, 1996.

_____, Kerry Group Looks to Far East Market, Irish Times, May 27, 1997.

_____, Mega Deals Create £600m Debt, Irish Times, January 27, 1998.

OSullivan, Jane, Kerry Group Pays £394m for Dalgety, Irish Times, January 27, 1998.

M. L. Cohen

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