Telephone: (+353) 56-72200
Fax: (+353) 56-72222
Web site: http://www.glanbia.com
Sales: EUR 2.39 billion ($2.69 billion) (2002)
Stock Exchanges: Irish
Ticker Symbol: GLANBIA
NAIC: 311511 Fluid Milk Manufacturing; 311119 Other Animal Food Manufacturing; 311512 Creamery Butter Manufacturing; 311513 Cheese Manufacturing; 311514 Dry, Condensed, and Evaporated Dairy Product Manufacturing; 311520 Ice Cream and Frozen Dessert Manufacturing; 311611 Animal (Except Poultry) Slaughtering; 325311 Nitrogenous Fertilizer Manufacturing; 424510 Grain and Field Bean Merchant Wholesalers
Glanbia plc is Ireland's top dairy foods producer and one of Europe's major dairy food groups, with a significant position in the U.S. cheese and food ingredients markets as well. Glanbia (Gaelic for "pure food") has repositioned itself to focus on two core businesses: dairy-based milk products, and the newly added Glanbia Nutritionals division, which specializes in producing nutritional foods. In the process, the company has sold off a number of operations, including its fresh milk and processed meat businesses. In 2003, the company announced its intention to exit the fresh meat business as well. In their place, Glanbia has sold a 49 percent stake in its Glanbia Cheese division to the United States' Leprino Foods Company, the world's leading manufacturer of mozzarella cheese, in exchange for access to Leprino's cheese-making technology. The deal positions Glanbia and the number one European producer of mozzarella cheese, itself one of the fastest-growing cheese segments. The company has also formed a joint venture with Dairy Farmers of America and Selected Milk Producers to establish a new cheesemaking company—with an added goal to create nutritional and low-fat foods and drinks from whey, a byproduct of the cheese-making process. Fueling that effort was the group's announcement that it intends to expand its Idaho-based cheese manufacturing plant in 2003. In that year, the company took its first steps into the Latin American market, forming a joint venture with Uruguayan dairy coop Conaprole. Glanbia is traded on the Irish stock exchange, and is led by Managing Director John Moloney.
Emerging from Ireland's Dairy Consolidation in the 1960s
Dairy products have long formed the backbone of Ireland's agricultural sector. In the early 19th century, the country was among the world's largest producers of dairy products, and especially of butter, which was to remain a primary dairy end product into the 20th century. The invention of the centrifugal separator and its introduction into Ireland in the 1870s transformed the country's dairy sector, which had previously been operated by small, independent farmers. In order to support the cost of acquiring separators, dairy farmers grouped together and built centralized dairy processing facilities, which became known as "creameries."
Initially, creameries were privately held and operated. In the late 1880s, however, dairy farmers began adopting the cooperative format, often to enter into direct competition with the private creameries. The numbers of creameries increased dramatically by 1900, and by the eve of World War I, the country counted nearly 800 plants. The dairy market was unable to support such a large number, however, and the crisis in the country's agricultural market following the war led to a large number of creameries, and especially the more vulnerable, privately held creameries, to shut down.
Government policy intervened in the 1920s to consolidate the dairy market, and especially shift the sector away from privately held creameries, as the Dairy Disposal Company (DCC), established in 1927, began acquiring failing creameries. The government also put into place a number of measures designed to protect the domestic market from outside competition. By the 1930s, the DCC had acquired nearly all of the private creameries, shutting down many of them, while directly controlling the remainder. The DCC had also taken over a large number of struggling cooperatives as well. In the years following World War II, the DCC had reduced the number of individual creameries under its control to just 17 large-scale facilities. At the same time, the number of cooperatives in Ireland had shrunk back to less than 220.
Butter remained the Irish dairy industry's core product, accounting for the vast majority of the creameries' production. The resulting skim milk was then sold at nominal cost to farmers, who used it to feed their livestock. Improvements in transportation, and especially the boom in the automotive sector in the postwar years, presented new growth opportunities, and the first diversification efforts appeared during this period. Among these was the establishment of a cheese plant in Limerick in the late 1940s, and, in 1951, the creation of a factory in Carrick-on-Suir. That facility, called Miloko, brought together nearly 40 cooperative creameries, together with English investors, to produce chocolate crumb, an important ingredient in chocolate preparations, for the English market.
In the early 1960s, the Irish government became determined to lower the trade barriers that had shielded the country's dairy industry. As part of the preparation for that event, the government set up the Irish Agricultural Organisation Society (IAOS), which in turn recommended a drastic consolidation of the sector, reducing the number of creameries in operation throughout the country to less than 20. That process, which involved merging the competing dairy cooperatives, was largely completed by the 1990s.
One of the first of the new, larger cooperatives to emerge was the Waterford Co-op, created in 1964 through the merger of the five Waterford-based cooperatives. The fact that the cooperatives were already neighbors, yet presented little in terms of overlap—and therefore were not direct competitors—allowed the merger process to proceed smoothly. Such was not the case in other regions, where large numbers of competing, and at times hostile, groups resisted amalgamation.
With its head start, Waterford was able to grow quickly and by 1966 the cooperative had already branched out with its first diversified product line, cheese production. Waterford stepped up its growth in the early 1970s, acquiring a number of other creameries. In 1973, the cooperative added a new product line, when it acquired the Irish license for the Yoplait product line. In support of that, Waterford built a new yogurt and fresh dairy processing center in Inch, in the county of Wexford. That plant was further expanded in 1978, while in that year Waterford built a new powdered milk plant at Dungarvan.
In the meantime, the group of cooperatives involved in the Miloko chocolate crumb factory sought to expand the facility's operation and also to diversify into other dairy categories. Yet the group met with resistance from its English investors, which preferred to rest with the chocolate crumb plant. In 1966, 25 of the cooperatives involved in the Miloko facilities agreed to join together to establish the Avonmore Creameries Federation. Backed by the British dairy giant Unigate, the new federation began construction of a dairy plant in Ballyragget with a capacity of 100,000 gallons of milk per day.
Avonmore originally focused on production of butter and powdered skim milk. The latter product helped transform the Irish dairy industry. By creating new value for skim milk itself, which previously had been considered as little more than a waste byproduct of butter production, the price of milk grew strongly, stimulating additional production. By 1969, the Ballyragget plant had reached full operating capacity. The following year, the group added casein, a product derived from milk powder, to its operations.
In 1973, and under the encouragement of the IAOS, 21 of the original 25 founding members of the federation agreed to a formal merger, creating Avonmore Farmers Ltd. The cooperative quickly began adding new product lines, starting with the purchase of a 40 percent share in the Roscrea Bacon Factory that same year. By the end of the decade, Avonmore had added other operations, including the 1977 purchase of feed producer Welfed. One year later, the cooperative bought back Unigate's stake in the Ballyragget facility. By the end of the decade, Avonmore's sales had topped £100 million.
International Expansion in the 1980s
Both Avonmore and Waterford expanded strongly into the 1980s. At home, both companies established leading brand names, while Waterford also enjoyed strong sales with its Yoplait franchise. The two cooperatives also continued to add product lines. Avonmore, for example, entered liquid milk production in 1981, a move that helped the company double its sales by 1983. Waterford in the meantime had completed construction of a new grain mill in Clonroche, the largest in Ireland. The Provender Mill, as it was called, produced grains for feed products.
The 1980s, however, marked a period of internationalization for both Avonmore and Waterford. The latter cooperative formed a new subsidiary, Waterford Foods International, in order to explore its international expansion opportunities, entering, among other markets, the United States with cheesemaking operations in Wisconsin. Avonmore followed suit, buying up plants in Wisconsin, Illinois, and Idaho in the late 1980s.
At the same time, both companies established international marketing operations. In Avonmore's case, the company's sales reached markets throughout Europe, and into Mexico, Japan, Korea, and Australia by the early 1990s. Avonmore continued its domestic expansion as well, acquiring several dairies, including Drogheda and Dundalk and Baileboro in 1986. In that year, Waterford enhanced its own European position with a joint venture agreement with the Netherlands' Wessanen to establish manufacturing operations in Ireland in order to produce continental cheese varieties for the European market.
Our Vision. Our Vision is to be the most relevant international player in cheese and nutrition.
Fueling their expansion, both Avonmore and Waterford went public in the 1980s. Avonmore went first, becoming Avonmore Foods Plc in 1987 with a listing on the Irish stock exchange. Waterford followed in 1988, changing its name to Waterford Foods Plc. Both groups remained majority controlled by the dairy farmers that had formed the original cooperatives.
With new access to capital, the companies began to acquire scale. Avonmore launched its U.S. expansion in 1989, spending some £20 million to establish its cheese manufacturing presence there. The company then bought up Ashmount Foods, a producer of meat products in Bradford, England, in 1990, paying £3 million.
Waterford's expansion included its 1989 purchase of a 50 percent stake in Premier Dairies, with Express Group Ireland, part of the Grand Met group, giving it a share in one of Ireland's major dairy brands. In 1991, Avonmore and Waterford nearly came together, launching merger talks to create an Irish super dairy group. Yet the two sides were unable to reach an agreement at that time.
A Merged Dairy Giant for the New Century
Instead, the two rivals continued making acquisitions. In 1992, Avonmore spent £11 million to acquire Churchfield/Tom Parker Dairies, further enhancing its profile in the British dairy market. One year later, Avonmore paid nearly £22 million for Perry Barr, part of the United Kingdom's Dairy Crest, run by Britain's Milk Marketing Board. That purchase helped push the company's revenues past the £1 billion mark and established it as a leading producer of dairy products for the Midlands and western England regions.
Waterford's acquisitions included the purchase of United Co-operative Dairies, based in Manchester, England, for £37.5 million. The following year, Waterford bought Express Group from Grand Met, which, apart from giving it full control of Premier Dairies, also made it Ireland's leading dairy group. Another Waterford acquisition came in 1995 when it bought The Cheese Company, paying IR£125 million.
Yet Waterford's expansion came at a cost, as the group struggled to maintain profitability in the mid-1990s. By 1997, after Waterford posted a profit warning, the group once again found itself in merger talks with Avonmore. After rejecting an initial offer from Avonmore, for £280 million, Waterford agreed to Avonmore's next offer, for £377 million. The merged group, called Avonmore Waterford, not only became Ireland's largest dairy group, it also claimed a 10 percent share of the British milk market and a 20 percent share of the U.K. cheese market.
Avonmore Waterford began restructuring its operations, shutting down or selling off a number of plants and operations, including its Avonmore cheese plants in Wisconsin and Illinois, which were sold to Canada's Saputo Inc. in 1998. That year, the company sold off its fresh juice business, Waterford Juices, to Princes Ltd. for £14 million. The company's remaining operations were then placed under a new operating structure based on two primary dairy divisions, Consumer and Food Ingredients.
In February 1999, Avonmore Waterford changed its name, taking the Gaelic word for "pure food" as its own. Becoming Glanbia, the company now started a streamlining effort. In June 1999, the group sold off its U.K.-based fresh milk business to Express Dairies for £100 million. That same year, the company sold its Irish beef unit to DaWn Meat, for £110 million. These moves were made as part of the company's shift toward a focus on its growing food ingredients segment.
Glanbia achieved a new phase in its growth in 2000 when it signed an agreement with the United States' Leprino in which it transferred a 49 percent stake in its Glanbia Cheese division in exchange for Leprino's cheese technology. The deal made Glanbia the leading producer of mozzarella and pizza cheese—Leprino's specialty—in Europe. In the United States, Glanbia's operational focus switched to Idaho, where it began a large-scale expansion of its cheese production facility. That move also stepped up the group's production of cheese byproduct whey, which was fast becoming a highly sought after food ingredient. In 2003, the group created a joint venture with Dairy Farmers of America and Selected Milk Producers to build a new whey processing plant.
As Glanbia continued to refine its focus, targeting the new and fast-growing "nutritional" foods segment, the company began selling off its non-core segments, including its processed meat component, which was sold in 2002. In 2003, the company announced its intention to exit the fresh meat market as well. In the meantime, Glanbia sought new markets for expansion. In 2003, the company announced that it had reached an agreement with Uruguay's Conaprole cooperative to create and market dairy products for the Latin American market. Glanbia, already one of Europe's top dairy groups, now set its sights on joining the ranks of the global dairy giants.
- Irish dairy cooperatives, in conjunction with British investors, found Miloko chocolate crumb ingredient plant in Carrick-on-Suir.
- Five Waterford-based dairy cooperatives merge to form the Waterford Cooperative.
- Twenty-five cooperatives involved in Miloko plant decide to form a new partnership, the Avonmore Creameries Federation, and build new plant in Ballyragget in partnership with England's Unigate.
- Most of the Avonmore Federation cooperatives formally merge into Avonmore.
- Avonmore goes public as Avonmore Foods Plc.
- Waterford goes public as Waterford Foods Plc.
- Avonmore and Waterford merge, forming Avonmore Waterford.
- Company changes name to Glanbia, meaning "pure food" in Gaelic.
- Company sells 49 percent stake in Glanbia Cheese to Leprino in exchange for cheesemaking technology.
- Glanbia forms joint venture with Dairy Farmers of America and Selected Milk Producers to build whey processing plant; forms joint venture with Conaprole (Uruguay) to enter Latin American market.
Glanbia Cheese UK; Glanbia Dairies Ireland; Glanbia Foods Inc. (U.S.A.); Glanbia Foods Ireland; Glanbia Foods UK; Glanbia Ingredients Europe; Glanbia Meats Ireland; Glanbia Milk UK.
Nestlé Suisse S.A.; Kroger Co.; Publix Super Markets Inc.; Cirio S.p.A.; Co-operative Group CWS Ltd.; Dean Foods Co.; Southern Foods Group L.P.; Prairie Farms Dairy Inc.; Parmalat S.p.A.; Lactalis; Arla Foods amba; Friesland Coberco Dairy Foods Holding N.V.; Campina Melkunie UA.
Boyle, Pat, "Modest Moloney Has Got the Right Ingredients for Glanbia," Irish Independent, August 31, 2002.
Breathnach, Proinnsias, "The Evolution of the Spatial Structure of the Irish Dairy Processing Industry," Department of Geography, National University of Ireland, Maynooth.
Cope, Nigel, "Glanbia Plans Glorious Future on Winning Whey," Independent, July 18, 2003, p. 21.
"Glanbia Starting to Get a Bigger Pizza the Action," Journal, August 28, 2003, p. 27.
Jenkins, William, "Restructuring of Irish Dairy Co-operatives Since 1950: An Example from County Tipperary," Department of Geography, University College Dublin.
"New Glanbia Plan Would Replace 'Failed' Restructuring," Irish Independent, September 23, 2003.
Truman, Richard, "Whey to Go for Glanbia," Dairy Industries International, April 2002, p. 18.
—M. L. Cohen