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April 29, 2021 9:56 am Kerry Creameries has written to milk suppliers telling them that their milk supply contracts will terminate in 2026. The letter to suppliers says: “With regard to your existing milk supply contract with Kerry Creameries Limited, we wish to inform you that we intend to enter good faith negotiations with milk suppliers and the board of Kerry Co-operative Creameries to agree a new long-term milk supply contract. “Kerry Creameries hereby notifies you that your current milk supply contract will terminate on April 30, 2026,” the letter says. “Should the terms of a new milk supply contract be negotiated they would come into effect after April 30, 2026, or such earlier date as may be agreed.”
Where now for Kerry milk suppliers - what could happen the dairy business? In modern Ireland the only real changes to the structure of dairy processing have been mergers of a certain kind. It has usually involved a strong dairy processor purchasing a financially weaker entity. Irish dairy processing is largely co-op-owned, or at least has a strong farmer influence. Glanbia and Kerry are the standout differences, and between them they have almost 50% of the ROI milk pool. Glanbia operates a hybrid shared plc and co-op model. In Kerry, the plc controls the milk processing while Kerry farmers own 12% of the plc and are organised in Kerry Creameries Limited.
SHARING OPTIONS: The Kerry Co-op board is meeting to try to finalise details of a proposed new structure. Farmer anger at speculation and the lack of information on what shape any future deal between Kerry Co-op and Kerry Group will take is boiling over in Kerry. Farmers have been in contact with the Irish Farmers Journal all morning suggesting they don’t need the see the detail just yet, but what they really want is a vision of the big picture and what key issues are under discussion. IFA president Tim Cullinan said it is critical that farmers who supply Kerry Co-op are fully consulted on a joint venture before any deal is finalised.
The more UK-facing convenience meals business is believed to be more challenged and therefore less attractive to acquirers. Other companies such as Greencore, Bakkavor and Samworth dominate the UK chilled consumer market, as Kerry has focused instead on growing its leading taste and nutrition business. While sources said one of those three, or possibly Two Sisters or McEvoy, could try to consolidate the sector, trade acquisitions in convenience foods are relatively rare. Industry sources speculated that Kerry's consumer food brands would therefore most likely be broken up and sold piece by piece to regional buyers seeking food factories near their existing production facilities.