Ornua Ingredients Confident on Long Term Outlook for Dairy Exports at FiE 2015

03 Dec 2015 --- The end of the EU milk quota system, coupled with various other market factors have led to a well-documented oversupply of milk and a subsequent fall in prices. But Seamus Greene, International Sales Manager at Ornua Ingredients, is confident of the long term outlook for dairy ingredients, despite the current market. Ornua, which was formed in a rebranding of the Irish Dairy Board, at the same time as the EU milk quota system ended on April 1, 2015, is making its first appearance at a major European food ingredient trade show this week: Fi Europe 2015 in Paris.

Greene, pictured here with Enda Shine [center, Ornua] and Roland Buchwalder [right, Givaudan] noted to FoodIngredientsFirst how the end of the milk quota system has led to a huge adjustment for buyers and sellers in dairy. “We are now operating in a liberated environment, where those who are most efficient are rewarded, because there are no limits in terms of the amount that can be delivered,” he said. “So it brings opportunities on the one side, but also challenges. There has been a significant rise in supply over a short period of time. Managing that oversupply and consumer demand is quite challenging. But long term it is quite positive step, not only for Ireland, but for the European dairy industry as a whole,” he added. 

Greene admitted that there has been somewhat of a “perfect storm,” with the milk quotas ending at around the same time as Russian trade sanctions with EU countries and several other market challenges. “On the one hand you have the benefits of unlimited supply, but on the other, you have various factors that have not been in our favor, such as the Russian ban and the impact of the Chinese lack of demand [for milk powder]. You also have the oil revenue issue of the Middle East, where purchasing power has halved over a period of a year, as a result of falling oil prices. A lot of our business goes into those milk deficit countries, which are oil revenue generators.” 

But Greene is positive in the medium and long term. “If you look at all the studies, general dairy demand is growing. Even in countries like China, which do have challenges at the moment, the westernization of their diet and the movement of their population to the large urban centers, will drive consumption of dairy. Once we get through this current challenge, the long term global demand for dairy will outstrip the supply growth.”

Ornua is the largest exporter of Irish dairy products, with a turnover of €2.3 billion and exports to over 110 countries worldwide. Greene noted that the recent name change better reflects how the business has changed over the past 5-10 years, whereby the Irish Dairy Board name had been outgrown. “The old name gave the impression of a semi-state type of organization; but our business is much more than that – it is more global, international and dealing with both B2B, retailers and consumers,” he explained.

Greene noted how a whole new international business has been added to the Ornua group, including the 2014 acquisition of Luxtor (Spain), which is now known as Ornua Ingredientes España, and several other recent moves. “We have a new state-of-the-art green field plant that has been commissioned in Saudi Arabia, which will serve the growing Middle East market. We recently consolidated our businesses in the UK, which are heavily involved in ingredient cheese solutions. On our branded side, we are growing our branded cheese business in Germany and particularly in the US. As well as extending that range we are now selling Kerrygold cream liqueur, which is on sale in the US, in order to extend the branded offering.”

Europe remains one of the larger markets for Ornua, but it is quite mature, with most of the growth being reported in Africa, the Middle East and South America. In fact, just yesterday, Ornua opened a new Kerrygold packing factory in Nigeria. The facility will provide a new route to market for Irish powdered milk, which will be exported to Nigeria and then packaged and marketed under the Kerrygold brand. Greene noted how South East Asian markets such as China are more challenging for European dairy exporters, however. “We are doing some business in South East Asia, but the reality is that particularly within our sphere, our Oceanic competitors are probably more active there, where particularly in dairy powders, they have a free trade and duty advantage over their European competitors.” 

Within ingredients, the company has six key areas of value added expertise: Functional Ingredient Blends, Cultured Dairy, Functional Beverages, Innovative Cheese, Life Nutrition and Ingredient Engineering. Sports nutrition is currently offering one of the biggest growth opportunities for the company in ingredients. “A lot of our development is going into the sports nutrition area, in supplying innovative powder solutions to people within the sports nutrition and meal replacement sector. We also offer a range of solutions into the functional beverages, which is growing quite significantly and also into cultured dairy, with that being cultured powders and yogurt powders etc.,” he concluded.

Ornua is presenting its ingredient portfolio on stand 6G69 at this year’s FiE in Paris.

By Robin Wyers in Paris