Manufacturing & Supply Chain

Ornua, Ireland’s largest exporter of Irish dairy products, has published its operating and financial results for the 12 months ending 31 December 2022 with group turnover rising by 36.7% to reach a record €3.4 billion. Ornua is an Irish dairy co-operative that markets and sells dairy products on behalf of its Members, Ireland’s dairy processors and, in turn, Irish dairy farmers. Headquartered in Dublin, Ornua has a strong global team of 3,000 employees, operating from 10 business units worldwide, including 16 production facilities. Ornua’s core purpose is to build profitable routes to market for Irish dairy products.

Ornua reported group EBITDA and operating profit, pre Ornua Value Payment, of €157.0 million and €127.2 million respectively for 2022, as the group sought to balance high product prices, which were paid to its Member Co-operatives, while also maintaining and growing market share.

As a co-operative whose purpose is to create value for its Members and the 14,000 Irish farming families they represent, Ornua prioritised strong returns throughout the year, reflected in an Ornua Value Payment of €72.5 million which is made up of monthly and year-end cash bonuses and the premium paid on purchases from Members. This is in addition to the strong product prices paid over 387,000MT of premium Irish dairy product purchased in the year, valued at €2.3 billion.

John Jordan (pictured above), CEO of Ornua, said: “Ornua continued to build on its strong and consistent growth trajectory, delivering a robust performance in what was a uniquely challenging year with factors such as rising inflation impacting the entire supply chain. Ornua responded to these shifting market dynamics by remaining focused on our strategy and committed in our efforts to deliver for customers, consumers and our Member Co-operatives. This is reflected in the exceptional sales performance, underpinned by the hard work and commitment of our 3,000-strong global team.”

The group is structured across two divisions: Ornua Foods and Ornua Ingredients. Ornua Foods is responsible for the marketing and sales of Ornua’s consumer brands including Ireland’s most successful food export: Kerrygold, as well as Dubliner, Pilgrims Choice, Forto and BEO milk powders. Ornua Ingredients is responsible for the procurement of Irish and non-Irish dairy products, for the sale of dairy ingredients to food manufacturing and foodservice customers across the world, and for managing volatility through de-risking and trading strategies.

John Jordan added: “The Kerrygold brand reached a significant milestone, celebrating six decades since the brand’s launch in 1962, by achieving continued volume growth globally. The brand’s success is testament to the generations of Irish dairy farming families who produce the best quality milk, our Member Co-operatives, who operate well-invested, world-class manufacturing facilities, and the teams, spanning 60 years, who proudly bring the taste of Kerrygold to the world.

“We are very optimistic for the future of our brands and our business, supported by a newly-remodelled five-year strategy, focused on addressing emerging challenges and opportunities to drive sustainable growth in key markets, ensuring we continue to deliver value for our Member Co-operatives and the 14,000 Irish dairy farming families we represent.”

Business Performance

The Kerrygold brand maintained volume sales growth globally, with over 11 million packets of butter and cheese sold globally each week. The brand’s impact was strengthened by the launch of 16 new Kerrygold products and product extensions in key markets such as Germany, the US, and the Middle East.

Kerrygold continues to be Germany’s most popular dairy brand with almost two-thirds of German households purchasing Kerrygold products in the year; while in the US, Kerrygold butter experienced continued volume sales growth. Key to the brand’s future is the expansion of the global home of Kerrygold – Kerrygold Park – which will be completed later this year and see the Mitchelstown facility double its production capacity to match growing global demand.

The Ornua Ingredients global business continued its strong growth in the year. The successful integration of Whitehall Specialties Inc within the Ornua Ingredients North America business, following the late 2021 acquisition, has been further supported through investment in the facilities, significantly increasing the business’s cheese production capabilities, offering customers increased service throughout the six-site network.

Dairy Markets

The year proved to be an extraordinary one for Irish dairy farmers, with the annualised milk price growing 40% year-on-year. However, input costs also rose rapidly, including fuel, feed, and fertiliser, impacting at farm level. Global milk supply fell by -0.4% in 2022. While remaining resilient, global demand fell by about -1.0% compared to a strong 2021.

Looking at the year ahead, it is expected that Irish dairy supply will be modestly ahead of 2022. Milk supplies are currently ahead of demand, but markets are likely to stabilise in the coming months. Volatility looks set to continue in the areas of energy and input prices however, and an uncertain global economic forecast, and its potential impact on consumer spending, will also present challenges.

Sustainability

The fundamentals of responsibility, sustainability, and equality define Ornua’s co-operative structure and identity, and have guided the business on its sustainability journey. While ongoing, this journey has been further progressed.

In 2021, the Group set a target of achieving a 25% reduction in Scope 1 & 2 emissions by 2025. Last year, in line with this target, Ornua achieved a 4% reduction in Scope 1 and 2 emissions, with a further 6% reduction expected this year, following the implementation of renewable energy at sites across the Group network. In line with a new five-year strategic growth plan, Ornua has committed to the adoption of science-based targets through the SBTi (Science Based Targets initiative), an important step in ensuring the business’s sustainability goals and climate actions are not solely aligned to regulatory requirements but are reflective of the highest industry standards.

Ornua has also continued to invest in key initiatives that; maintain its high responsible sourcing standards; protect Ireland’s grass-based farming system and the welfare of animals; and promote sustainable practices at producer level.

Looking Ahead

Persistent challenges around rising input costs, inflationary pressures, and supply chain issues, as well as macroeconomic factors such as geopolitical uncertainty and climate change continue to cause market disruption. By leveraging the experience, agility, and resilience exhibited in response to the challenges of recent years, Ornua is well-positioned to continue to meet the needs of its customers, colleagues, and communities worldwide. In late 2022, the Ornua Board of Directors approved a new five-year strategic plan for the business, Path to Prosper, which will now guide Ornua to 2027. It aims to stimulate continued sustainable growth for Ornua, building on the consistent progress and success achieved by the business in the last number of years, while responding to new and emerging opportunities and challenges.