Annual Report 2009 - Dairygold

Dairygold Co-Operative Society Limited Annual Report and Accounts 2009
Management
I was appointed Chief Executive in July
2009 and I feel privileged to have been
selected by the Board to take on this
role of responsibility within the Society,
only the third to do so since Dairygold’s
establishment through merger in 1990.
I would like to thank the Board for its
ongoing encouragement and support
during my tenure to-date as Chief
Executive.
I accepted the position knowing full well
the challenges that lay ahead. Dairygold’s
success is largely reliant on international
market factors outside of our control. I
am confident that the new management
team with its skillset and the organisation
structure put in place will help ensure
that the hard work required to succeed is
delivered.
The new structure will see each person
take full responsibility for their functional
areas across our entire business both in
Ireland and overseas where applicable. The
changes are also designed to facilitate clear
lines of responsibility and accountability
while creating a single point of ownership
and focus on growing the business.
ERP
In 2009 the Society successfully
implemented an integrated business
information system, covering all Financial,
Sales, Procurement, Inventory, Payroll,
Point of Sale, Milk Management and
Share Management activities for its Irish
operations. The new business information
system provides management with
enhanced capability to optimise the
performance of the business.
Dairy Markets
For all dairy processing businesses
the continuing slump in returns from
international dairy markets presents
the most severe of challenges. The well
documented fall in international demand
for dairy produce resulted in milk price
returns being forced down to 25 year
lows for most of 2009.
The supply side is now slowly correcting
itself with production easing back in
most geographies. The EU will be under
quota by as much as 5% in this current
quota year to March 2010. The global
demand for dairy produce remains weak,
as buyers are slow to commit to longer
term contracts or to invest in stocks.
Underpinning all expectations for a
sustained recovery in dairy prices
is the expectation of some form of
economic recovery globally. Consumer
confidence will not return without it.
Despite all of these factors, Dairygold
remains cautiously optimistic about an
improvement in market returns in 2010.
As a Co-Op, milk price is at the core of
our commitment to Members and we will
continue to strive to pay the best milk
price possible within prevailing market
conditions.
Dairygold Food
Ingredients
Dairygold’s strategy in milk utilisation is
to follow the European model by directing
more milk away from butterfat and
towards cheese and added value dairy
ingredients, both products which are
on the growth curve globally. Our dairy
processing business, Dairygold Food
Ingredients, is now firmly focussed on
providing cheese and dairy ingredient
solutions to the international food
processing, baby food and ready meals
sectors.
Over the past number of years we
have invested in modernising plant
and operations to target these product
areas and provide greater flexibility in
manufacturing customised products to
deliver on individual customer needs.
These investments have put Dairygold in
a very strong position to compete for an
increased share of these markets.
In our ingredients business the
Castlefarm, Mitchelstown site has
one of the largest demineralised whey
manufacturing plants in Europe and is the
foundation for Dairygold’s focus on the
premium Baby Food market. The delivery
of this strategy was made possible by
significant investment in the Castlefarm
facility.
Our ingredients business has a particular
focus on the infant milk formula sector
and Dairygold has developed strong
commercial relationships with a number
of key players. The business is developing
a foothold in the Asian market where
there is significant growth potential. In
China alone some 18 million babies are
born each year - more than the total born
each year in Europe and the Americas
combined.
In our cheese business the Clonmel
Road, Mitchelstown site has one of the
most efficient cheddar cheese plants in
Britain and Ireland whilst our Mogeely
site remains a dedicated producer of
speciality cheeses for export, including
the leading brands Jarlsberg and Regato.
Meanwhile our Mallow site continues to
provide the additional capacity needed to
manage peak milk intake and ingredient
processing during the summer season.
In the UK, our Dairygold Food Ingredients
businesses, based in Leeds and in
Crewe, are both profitable and growing
businesses. They have established
Dairygold as a leading supplier of a
range of formatted cheeses and soft
cheeses to the UK’s Ready Meals and
Food Manufacturing sectors. Following an
investment programme at both facilities
during 2009, the manufacturing capability
now exists to meet significant increases
in demand from their industrial customer
base over the coming years.
In September, Dairygold acquired
the French based cheese ingredients
supplier, Solailoire. The company, based
near Nantes, offers customised cheese
solutions to industrial customers in
the ready meals and snack sectors.
The acquisition provides Dairygold
with access to the French and broader
European markets while the technology
allows us to extend our overall value
added product offering.
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