IN WHAT WILL come as a surprise to absolutely no one, businesses tend to compete with each other.<\/p>\n
One company sells something for \u20ac10, another sells the same for \u20ac9 to try to win customers, and so on. Most of these disputes are barely noticed, accepted as the normal cut and thrust of the marketplace.<\/p>\n
So why has a row over Irish butter sales grabbed so much attention that the government is being asked to weigh in?<\/p>\n
On one side, we have Ornua. A co-operative which sells dairy products on behalf of farmers and processors, it is probably best-known for its Kerrygold butter brand.<\/p>\n
On the other, we have Tirl\u00e1n. It is another big cooperative formed from Glanbia, a Kilkenny-based company which is now one of the world\u2019s largest nutrition businesses.<\/p>\n
Ornua has about 14,000 farmer members, while Tirl\u00e1n has approximately 5,000.<\/p>\n
To confuse matters somewhat, Tirl\u00e1n is actually part of Ornua.<\/p>\n
In addition to the \u2018normal\u2019 farmers, Ornua also has seven major processor members. Tirl\u00e1n is one of these, with the power to nominate directors to Ornua\u2019s board.<\/p>\n
But despite this, these seven co-op members still run their own businesses. And this is where the friction comes in \u2013 because Tirl\u00e1n owns Truly Grass Fed, a premium dairy brand which it sells in the US, in competition with Ornua\u2019s Kerrygold.<\/p>\n
Previously, the US prices were fairly close, with Kerrygold coming in a bit more expensive. Reportedly about $19.28 (\u20ac16.72) for just under 1kg of butter, versus $16.90 (\u20ac14.66) for Truly Grass Fed, a difference of about 12%.<\/p>\n
However, Tirl\u00e1n recently struck a deal with Costco, a huge membership-only retailer which sells products in bulk at low prices.<\/p>\n
Tirl\u00e1n\u2019s butter will be sold at about $15 per kg \u2013 substantially lower than Kerrygold, which costs about $21 per kg.<\/p>\n
This is the heart of the \u2018war\u2019 between the two.\n<\/p>\n
Price war<\/p>\n
Many Irish farming groups are concerned at Tirl\u00e1n effectively undercutting Ornua, worried that the move could devalue the status of Irish grass-fed butter.<\/p>\n
The ultimate concern of many co-op members is that, if retail prices are driven lower, they will end up being paid less for their dairy.<\/p>\n
The Irish Creamery Milk Suppliers Association (ICMSA), a group first established to tackle reducing milk prices, is one of those against the move.<\/p>\n
\u201cIt won\u2019t be the executives concerned who suffer: it\u2019ll be the dairy farmer,\u201d Denis Drennan, the groups\u2019 leader, told the Irish Times.<\/p>\n
Meanwhile, the Irish Farmers\u2019 Association (IFA) has come out with similar concerns, saying the Tirl\u00e1n deal risks triggering a \u201crace to the bottom\u201d which would ultimately slash the margin farmers\u2019 get for their milk.<\/p>\n
It\u2019s also worth noting that private-label brands such as Costco have become increasingly popular in the US amid cost of living pressures. This means the Costco deal is seen as very important in the American market, which is a key one for Irish dairy farmers.<\/p>\n
Ornua as a whole has revenues of about \u20ac3.5 billion. Approximately $1 billion (\u20ac860 million) of this comes from US retail sales of Kerrygold \u2013 so the sector is absolutely crucial for the co-op.<\/p>\n
For its part, Tirl\u00e1n has said that the move is good business for its 5,000 member farmers.<\/p>\n
The organisation also said that \u2018developments\u2019 are \u2018market-led\u2019, extending beyond \u2018any single supplier, source country or brand\u2019.<\/p>\n
Effectively, it is saying that it isn\u2019t the responsibility of any one organisation to set the price of Irish butter. The product will naturally set itself at a level that makes sense in the market.<\/p>\n
This also isn\u2019t the first time these concerns have arisen. There were similar worries when Tirl\u00e1n first launched Truly Grass Fed in the US back in 2018.<\/p>\n
The fears back then were similar \u2013 that the brand would undercut Kerrygold\u2019s \u2018gilded\u2019 position in the US market. The tension resulted in the cancellation of a directors\u2019 meeting at Ornua at the time.<\/p>\n
Ornua said at the time that these concerns were overplayed in the media.<\/p>\n
However, it appears much less sanguine about the latest Costco deal, saying that competing on price alone is not \u201cin the best interests of the farmers we represent\u201d.<\/p>\n
It said the move risked devaluing \u201cthe Irish grass-fed butter proposition\u201d and added that the greatest long-term value for Irish dairy farmers \u201cis created when our members continue to invest through Kerrygold\u201d.<\/p>\n
However, it\u2019s worth noting that despite the competition, Kerrygold\u2019s sales have increased. It first cracked $1 billion in the US last year, showing its revenues are still rising. The milestone came years after the launch of Truly Grass Fed.<\/p>\n
But the latest Costco deal still stings as it has the potential to be a bigger market mover.<\/p>\n
It also goes against Tirl\u00e1n\u2019s initial marketing of Truly Grass Fed. The company previously said it intended to sell the butter at a \u201cprice premium above Kerrygold\u201d and for the two to not be direct competitors.<\/p>\n
The politics of it all<\/p>\n
Of course, it\u2019s also worth noting the political element. Irish dairy farmers are viewed as being a key part of the country\u2019s cultural heritage.<\/p>\n
The government typically supports them when it can, which is why it is being asked for its take on the deal.<\/p>\n
Smartly, it said it does not comment on private commercial arrangements, sidestepping the temptation to play favourites.<\/p>\n
A final important point worth noting. Tirl\u00e1n\u2019s Costco deal will apparently give it a better price per kg of product than the one Tirl\u00e1n receives from the Ornua.<\/p>\n
While Ornua can argue about the importance of keeping Irish butter as a premium product, it\u2019s not hard to see why Tirl\u00e1n would feel it has to accept the best deal on the table for its 5,000 members.<\/p>\n
Realistically, with the government not wanting to get involved, the Tirl\u00e1n deal will most likely proceed as planned.<\/p>\n
If there are signs in a year or two that Kerrygold\u2019s US sales suffer, and Irish dairy farmers get lower payouts as a result, then the pressure on politicians could ramp up significantly.<\/p>\n
There is evidence that this could happen. Exports of Irish butter to Germany have halved over the last four years. There are concerns that this is due to competition on pricing in Germany making the market a less attractive one for Irish co-ops.<\/p>\n
But even if Kerrygold\u2019s US sales take a hit, the more likely scenario is that there would be a push for Tirl\u00e1n to strike some kind of new commercial deal with Ornua, rather than a complete 180.<\/p>\n
Especially if the Costco arrangement is providing a better return to Tirl\u00e1n farmers.<\/p>\n
Ornua could take the \u2018nuclear\u2019 option and try to eject Tirl\u00e1n as a member to discourage it from pursuing the deal.<\/p>\n
But the most likely approach is the status quo \u2013 the Costco deal goes ahead, and all sides wait to see how the dust settles.<\/p>\n","protected":false},"excerpt":{"rendered":"IN WHAT WILL come as a surprise to absolutely no one, businesses tend to compete with each other.…\n","protected":false},"author":2,"featured_media":639813,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[73],"tags":[79,10459,270664,22116,18,19,17,152117,193747,115265,270665],"class_list":["post-639812","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-butter","tag-butter-wars","tag-costco","tag-eire","tag-ie","tag-ireland","tag-kerrygold","tag-ornua","tag-tirlan","tag-truly-grass-fed"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/117104078198138970","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/639812","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=639812"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/639812\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/639813"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=639812"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=639812"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=639812"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}