Global Business Reports

International markets

Irish milk from grass-fed cows

Strengthened market positions

Ornua Foods is responsible for the international marketing and sales of Ornua consumer brands, including the Kerrygold, Pilgrims Choice, Dubliner, Forto, Shannongold, BEO and Eureka! brands. Markets are served by wholly-owned subsidiaries and in-market teams in China, Germany, the Middle East, the UK and the US and by in-market sales, marketing and trading teams and local distributors.

Ornua Foods continued to deliver strong growth, maintaining market-leading positions in many of our core markets. In the US, Kerrygold butter delivered a substantial increase in sales volume, significantly exceeding expectations. While in Germany, Ornua Deutschland achieved a record year of growth across the business. In the UK, Pilgrims Choice, the number two cheddar in the market also achieved record growth.

The success of Ornua’s brands is based on the quality of our products and our close connection to our consumers. From sustainable dairy farms, Irish farmers produce milk of unrivalled quality. Consumer choices are increasingly driven by a desire for sustainably-produced food, which is traceable and has an authentic provenance. Through our involvement with Origin Green, Ireland’s national sustainability programme, we are working in partnership with farmers to ensure we maintain the high standards our customers demand and expect. Every day, in over 110 markets worldwide, the Ornua team tells the story of Irish dairy. We demonstrate how sustainability is at the heart of the Irish farm and how it is at the heart of our business.

Consumers’ tastes are changing and New Product Development (NPD) remains central to our ability to grow our business. Identifying new product opportunities in changing markets has played an increasingly important role in the Ornua business model. New products and new brand extensions have again contributed to growth in 2015; notable successes included Kerrygold Dubliner Wedges, Kerrygold Irish Cream Liqueur and the launch of Kerrygold Soft Blend in Belgium as well as in the Iberia & Mediterranean Islands region.

The development of our new Global Centre of Excellence for butter, Kerrygold Park, in Mitchelstown, Co. Cork will further enhance the NPD capability of our business. The new facility, which will be operational in 2016, will ensure a world-class supply chain that meets the evolving needs of Kerrygold customers and consumers around the world and will also support the growth and development of our iconic Kerrygold brand.

In late 2015, the business made the decision to close the Ornua Russia office as a result of the extended Russian dairy ban and the lack of visibility regarding when it would be lifted.

Ornua Foods North America

2015 marked another significant year for Ornua in the US, achieving 39% growth in volumes year-on-year. The Kerrygold brand continues to perform in the butter and speciality cheese category in the US by boasting a strong national in-store presence and a growing awareness amongst mainstream US consumers.

Kerrygold butter led the charge in 2015; delivering a significant increase in sales volume over the previous year, which makes it the number three branded butter in the US. Kerrygold cheese retained its position as the number one cheddar brand and continues to hold three of the top six positions in the speciality cheddar category.

NPD continues to drive growth. Over the past year, high-profile launches in the US included Kerrygold Dubliner Wedges and Kerrygold Butter Sticks, the latter offering consumers increased convenience and superior quality in the largest segment of the butter category.

Adams Foods Ltd

2015 was another challenging year for the UK as the retail market becomes increasingly competitive. The continued growth of discounters in the market has resulted in price deflation for consumers. There was an oversupply of cheese for the third successive year with no corresponding increase in overall demand, putting pressure on margins for certain areas of the business.

In response to continued pressure from farming organisations and lobby groups, many UK retailers are now exclusively selling British cheese in their own label range. The long-term supply agreement, signed with First Milk in 2014, is a key source of British cheese for Adams Foods Ltd. This complements the Irish cheddar supply which is used in own label retail, the Pilgrims Choice brand and in the foodservice sector.

Against this backdrop, sales volumes were still up with Pilgrims Choice remaining the clear number two UK cheddar brand with a retail value of £71 million, up 5% on 2014. It achieved a record market share on the back of a comprehensive and sustained marketing programme, including a summer TV campaign. The Kerrygold brand, with sales exceeding £22 million, also had a solid year on the back of continued brand investment including the ‘Tales from the Meadow’, which exposed the brand to over 8.8 million UK customers.

Ornua Deutschland

Ornua Deutschland continues on an upward trajectory, with its 2015 results being the best in the history of the business. In line with this success, overall volumes grew by 15.4% to 56,100 tonnes in 2015.

Kerrygold butter grew by almost 14% in 2015, extending its market-leading position. In the fourth quarter of 2015, Kerrygold Extra overtook the market leader in the spreadable category and looks set to hold this position in 2016. Another major highlight was the 43% market growth in cheese, where Ornua Deutschland also enjoyed the market-leading position in the cheddar segment.

A robust investment programme ensures Ornua Deutschland has the infrastructure in place to support the further growth that is expected in 2016.

International

2015 marked another significant year for Ornua in the US, achieving 39% growth in volumes year-on-year. The Kerrygold brand continues to perform in the butter and speciality cheese category in the US by boasting a strong national in-store presence and a growing awareness amongst mainstream US consumers.

Kerrygold butter led the charge in 2015; delivering a significant increase in sales volume over the previous year, which makes it the number three branded butter in the US. Kerrygold cheese retained its position as the number one cheddar brand and continues to hold three of the top six positions in the speciality cheddar category.

NPD continues to drive growth. Over the past year, high-profile launches in the US included Kerrygold Dubliner Wedges and Kerrygold Butter Sticks, the latter offering consumers increased convenience and superior quality in the largest segment of the butter category.

Developing routes to market

Strong growth in Ireland

Growth of Ornua Ingredientes España

Ornua Ingredients is responsible for the procurement of Irish and non-Irish dairy products and for the sale of dairy ingredients to food manufacturers and foodservice customers. Headquartered in Ireland, Ornua Ingredients is supported by key subsidiaries in Saudi Arabia, Spain, the UK and the US. Our extensive product range, excellent customer service, product development expertise and technical support ensures that we are committed to delivering solutions to meet our customers’ needs.

The division provides an increasingly important route to market for Irish dairy products. As Ireland expands its dairy output in the post-quota environment, increasing sales of cheese and other ingredients to food manufacturers will play a key role in achieving our growth objectives.

2015 saw a solid performance throughout the business, with strong growth in Ireland, a turnaround performance in the UK, the establishment of Ornua Ingredients UK and further development of the recently established Ornua Ingredientes España.

Working with our customers to innovate and develop our food solutions is critical for the successful growth of Ornua Ingredients. The new innovation kitchen at Ornua Ingredientes España and the completion of the innovation hub at our new cheese manufacturing facility in Saudi Arabia are just two examples of the investment we are making to ensure we respond to the changing requirements of our customers.

Ireland

Ornua Trading & Ingredients Ireland

Ornua Trading & Ingredients Ireland (OTII) is responsible for the procurement of products from Irish dairy processors and third party suppliers and the sale of dairy ingredients to global food manufacturers and brand owners.

In a challenging market, 2015 was a good year for OTII. Additional value was returned to members through above market returns and member purchases were up a further 16% to a new record high. OTII was also in a position to support a number of fixed price schemes which members offered to farmers during the year. Significant investments in routes to market performed well during the year, good trading positions were taken and inventories were managed well in a volatile environment.

Within OTII, the subsidiary sales and international business units performed particularly well with volumes growing strongly, providing an important route to market for Irish dairy produce.

In 2015, OTII restructured its international sales network and increased its in-market presence in the strategically important markets of North and West Africa and the Middle East.


UK

Dairy Ingredients (UK) Ltd

Dairy Ingredients (UK) Ltd (DIUK) is a butter trading business and a major supplier to the UK food manufacturing sector. DIUK achieved a good performance in 2015, supported by strong trading expertise that enabled the business to manage volatile conditions well. Supply was constrained in the first quarter but increased through the year as a result of the removal of quotas. In 2016, DIUK looks to enhance its position further as it continues to provide a key and growing route to market for Irish butter.

Adams Food Ingredients Limited

Adams Food Ingredients Limited (AFI) is a leading powder blending business based in Leek. AFI provides sourcing, blending, formulating and packing excellence to leading food manufacturers and nutritional brand owners in the UK and internationally.

AFI enjoyed a turnaround in performance in 2015, following a strategic review of the business and the subsequent implementation of a robust management strategy. The Foodtec business, which was acquired in 2014, was successfully integrated into the existing Leek facility. Foodtec’s performance, coupled with substantial growth in the nutritional food category, saw blended volume growth of 35% year-on-year and a return to strong profitability for the company.

Investment continues in allergen blending, packing capacity and innovation with a strong business generation pipeline and a number of substantial new projects agreed with key customers for delivery in 2016. The business is well positioned for further top and bottom line growth in 2016.

The Meadow Cheese Company Limited

The Meadow Cheese Company Limited (Meadow) supplies customised dairy solutions to the food manufacturing and foodservice sectors. Meadow’s volumes remained constant throughout the year and margins increased, despite tough market conditions.

In 2015 Meadow commissioned a new innovative production line, sold under the Palatina brand, which was successfully launched in the UK and the Middle East.

The Cheese Warehouse Limited

The Cheese Warehouse specialises in grating natural and processed cheese in a variety of formats. With an emphasis on quality and service, a high level of technical support and a commitment to innovation and category insights, it aims to be the UK’s foremost supplier of cheese to the foodservice and food manufacturing sectors.

The business enjoyed further volume and margin growth in 2015 with progress in targeted national key accounts laying a solid foundation for the business in 2016.

Ornua Ingredients UK Limited

On 31 December 2015, The Meadow Cheese Company and The Cheese Warehouse were merged to form “Ornua Ingredients UK Ltd”. This integration took effect from 1 January 2016 and creates a business with scale and technology advantages in the market.


Ornua Ingredientes España

Ornua established Ornua Ingredientes España in summer 2014, when it acquired the business and assets of Luxtor S.A., a Spanish pizza cheese business. The business supplies a large range of products to the foodservice and food manufacturing sectors in southern Europe and provides an immediate route to the Spanish market for Irish dairy products.

2015 saw a number of key projects coming to completion including the opening of a state-of-the-art innovation kitchen, an extensive refurbishment and modernisation of the site, and the successful launch of a number of new products in the marketplace. Ornua Ingredientes España was a prize-winner in this year’s prestigious International Cheese Awards.


Ornua Ingredients North America

Ornua Ingredients North America, headquartered in Hilbert, Wisconsin, produces functional cheese solutions for US food ingredient and foodservice customers. Despite a small volume growth in 2015, the company experienced a reduction in profitability due to low availability of cheese solids for processing, record butter input costs and low CME cheese prices.  In response, a strategic review of the business was undertaken, from which a robust management strategy was put in place.  The second half of the year saw a number of strategic customer wins.

This momentum positions the business for significant volume and profitability growth in 2016. In addition, the business streamlined the operation of its two production factories to cater for these new contracts and is investing significant additional resources in strategic research projects to meet customer needs for “clean label” cheese.


Ornua Saudi Arabia

2015 saw Al Wazeen Trading’s second year of business within the Ornua Group. During a year of very turbulent market conditions, trading volumes were down. In response to these challenging conditions, the management team are focussed on strengthening its in-market presence and sales structure to deliver the planned growth in the business.

The construction of a new cheese recombination factory near Riyadh was completed at the end of 2015, and commissioning will take place in the first quarter of 2016. The €20 million state-of-the-art facility will manufacture white cheeses for the Saudi Arabian market, the fifth largest dairy importer in the world, as well as providing a central hub to access the high growth dairy markets in the Middle East North Africa region.

The new facility will use pioneering technology developed by Ornua and Teagasc to produce a range of bespoke fresh white cheeses for the increasingly sophisticated bakery sector, retail delis and foodservice customers. The facility also includes an Innovation Hub which will be used to co-develop customised ‘white cheese’ solutions with customers.


Ornua Foodservice

The Ornua Foodservice business focussed on exploring opportunities within the foodservice channel in 2015, via direct sales to global pizza chains such as Telepizza and business-to-business consumer brands within the out-of-home channel, and the creation of a bespoke foodservice brand, Palatina.

The initial Palatina range was created to leverage Ornua’s global expertise in cheese solutions which includes Individually Quick Frozen (IQF) Mozzarella and Cheddar, Palatina Melt, Cheese Ropes, Nacho Cheese Sauce and Palatina Cream Cheese Blend. The range was developed using Ornua technologies across our manufacturing sites.

Ornua’s value-added technologies, combined with foodservice channel insights, have ensured that the Palatina range has been specifically developed to offer versatile, functional, and great tasting products for operators and chefs alike.

With a vision to become the preferred supplier of branded, value-added foodservice solutions to the out-of-home market, Palatina has planned launches across Europe, Middle East and China.