‘We return value to our members’: How cooperatives help to run Ireland’s dairy sector

27-Jun-2023 - Last updated on 27-Jun-2023 at 15:38 GMT

Much of Ireland's dairy sector is run through eight coops. Image source: grafxart8888/Getty Images

Founded in 1961 as the Irish Dairy Board, a government body tasked with exporting Ireland’s dairy produce, Ornua (meaning ‘new gold’ in Irish Gaelic) now exports to 110 markets around the globe each year, and is responsible for world-famous brands such as Kerry Gold and Pilgrim’s Choice. Its corporate structure as a cooperative of cooperatives allows it to succeed through collaboration.

Ornua is Ireland’s largest exporter of dairy products, with a cooperate turnover in 2022 of €3.1 billion. Its products, such as Kerry Gold and Pilgrim’s Choice, are favourites in countries such as Germany and the US. It has three main innovation centres and 16 production facilities. It is also a cooperative, a business run by members rather than a board of shareholders.

“We are a cooperative business. We're a cooperative made up by cooperatives,” said Seán O'Brien, communications manager at Ornua. “50 years ago, when Ireland joined the EU, the business transitioned to a cooperative structure that also coincided with access to the European market.”

It has a strong relationship with its member cooperatives. “We are three points of a triangle. That's why we like to describe it. Our membership is made up of eight cooperatives, all based around the country, supplying dairy produce to us which we then sell on their behalf . . . they’re ultimately our eight shareholders.

“They are owned by 14,000 Irish dairy farming families. Ireland works off a grass-based dairy farming system. And the farmers produce what we feel is a world class produce that goes into world class processing facilities. And ultimately, we're bringing that product to market globally.”

Ornua purchased 387,000 tonnes of product in 2022 from its coops, which worked out as a value of around €2.3 billion. Ireland is the biggest butter exporter in the EU, and the world-famous Kerry Gold brand, which Ornua is responsible for, plays a big part in this.

Cows — Irish dairy cows. Image Source: Augustus Bambridge-Sutton

On top of this, Ornua rewards members with a bonus scheme. “Essentially that is paid out to our members that they ultimately cascade over to their to their farmers suppliers as well,” said O’Brien.

Getting capital to the farmer is central to the organisation structure. “The returns that we generate go back to our members and therefore to the farmers.”

The family farming way of life

“Historically,” said O’Brien, “the Industrial Revolution and how that impacted agriculture and other countries, it impacted differently here in Ireland.

“Many people - economists, historians - you talk to will say that a lot of [industrialisation] didn't really happen here. And therefore, we end up with an agriculture industry that has long standing, you've got all these farm families passing down the farm from generation to generation, whereas other countries may have moved out of that family farming system to more intensive models. That hasn't really happened here. It's a preservation of a long standing tradition, ultimately.”

Ireland, thus, has a dairy sector based more explicitly around family farms than industrialised farming compared with many countries in Europe.

“I think the one thing I would say [about] the dairy industry in Ireland is it's a very connected industry. And you'll see that from even just the structure of Ornua to how the coops interact with one another and some of the farming organisations and industry representative bodies as well."

When the Irish Dairy Board was launched, “the Irish dairy sector was a very different place, there were way more farms and there were way more coops and formed creameries.” Now, it is centred around far fewer coops.

Relationship with Ornua

The relationship between farmers, their coops and, eventually, Ornua, gives successful farmers the opportunity to do more with their product.

Just one example of a successful dairy farm affiliated with one of Ornua's coops is Knockanore Farm, a family-run farm specialising in cheddar cheese. The farm, which has 150 dairy cows, supplies its excess milk to the coop Tirlán.

The farm, which has already seen exponential sales growth in Ireland itself, is keen to look elsewhere for more custom. “The next challenge for us is to look outside of Ireland and see where the opportunities are from an export perspective,” said Eamonn Lonergan, who runs the farm with his son.

Ornua’s eight member coops, O’Brien admitted, could have other customers, but there are strong benefits to their partnership with Ornua.

“The benefit of our structure is that they can be guaranteed a strong and fair price from the product that we purchase. And I think that shows what some of the headline figures [and] in terms of the volume of product that we purchase and the value that we return.”

This extends to its attitude towards profit, which is not as central as with an ordinary business. “We return value to our members. Although we experienced a current growth in turnover last year, our profits were down 18%. And that for a lot of businesses, is probably a bad news story. But given the uniqueness of our business . . . we've returned more back to our members essentially.

“We're really focused on being highly connected as a business,” O’Brien concluded, “and that comes from our cooperative roots. Understanding that, you know, there's that shared value , and that that also is relevant in terms of our people.”