an editorial supplement to The Grocer Land of plenty Helen Gregory reports on an industry that is growing on both sides of the border, kept buoyant by an image of pastures that are lush, healthy and fertile The image of Ireland as a lush and fertile land, producing clean and healthy dairy products is still strong in consumers' minds and one which helps keep the industry buoyant both sides of the border. The island is a big dairy producer with 284,385 dairy cows in the north and 1,250,000 in the south, and exports around the world, with the UK as a major market. Most manufacturers supply the major multiples with own label goods, while those that sell branded products, such as Kerrygold, trade well on public perception that their offer is free-range ­ almost organic. Last year, dairy production in the Republic increased across all the main product categories, except cheese. Butter was up 1.5% to 137,000 tonnes, while skimmed milk powder and whole milk powder grew 1.1% and 4.4% to 95,000 tonnes and 38,000 tonnes respectively. Cheese, at 95,500 tonnes, registered a marginal decline of 1.1%. Irish Dairy Board managing director Dr Noel Cawley says: "2000 was an exceptional year for Irish and international dairy industries, as SMP prices reached near record levels and markets for all other dairy products experienced some improvement. "It is the strength of the international SMP market which will drive Irish milk prices next year and the outlook for this market, at least in the first quarter of 2001, remains positive." The Northern Ireland dairy industry processes 1.55 billion litres of milk per year, which is about 11% of the UK quota. Gross turnover is £600m a year and at 27% is the largest sector within the province's food and drinks processing sector. Some 85% of milk production is manufactured into dairy products of which 76% is exported. Great Britain is the largest market for the industry at 35%, followed by Northern Ireland itself (24%), non-EU markets (29%) and EU countries (12%). The industry in the north has undergone a number of changes in the last year: Fermanagh Creameries closed last December following the Unigate takeover by Dairy Crest; Express Dairies and the liquid milk interests of Leckpatrick (Golden Vale) merged in February with all production now based at the Express site; the Bangor Dairies (Dromona Quality Foods) production site closed at the end of last year and its liquid milk is now produced by the Ballyrashane Co-op and Glanbia Cheese's Magheralin (Mozzarella plant) has expanded following its tie up with Leprino. Northern Ireland Dairy Association director Paul Archer highlights the rapid rationalisation taking place in the region. "The smaller farmers are disappearing and there are only three milk bottling plants left. The industry is seeing rapid change and the big operators are getting bigger." Milk production is increasing due to the introduction of milk quotas. Value adding is the name of the game for many Northern Irish companies and United Dairy Farmers is one of the firms at the forefront of this development. It has produced new concepts such as Snack Spirals (sticks with a cheese dip) and organic butter as well as the usual fare such as butter, yogurts and cheese. Dromona Quality Foods, a wholly-owned subsidiary of United Dairy Farmers, is the largest dairy product manufacturing company in Northern Ireland with a turnover in excess of £80m. It processes 300 million litres of milk a year into milk powders, speciality butters, dairy spreads and margarines, yogurts, snack desserts, cultured cream and Cheddar cheese. The company produces the Dromona spreads and Spelga yogurt brands for its home market as well as supplying to national chains under own-brand labels, including Tesco and Asda. It also produces and packs a range of Cheddar cheeses. Chief executive David Dobbin says it aims to concentrate more and more on niche products. "We're better equipped to handle small volumes of specialist products ­ we can control the food chain. "We're putting a lot more resource into product development. We're trying to reposition ourselves as a niche, innovative player in both branded and own label. Dromona Spreadable Butter is a good example of that and we want to take that to the GB market. "We now have the challenge of building up brand awareness and are looking at ways that we can introduce a marketing campaign." Dobbin says most of his competitors are also trying to get into added value, although United Dairy Farmers is now also forging ahead in the export market. Pritchitt Foods in Newtownards is another Northern Ireland company which is working on new product development and has just won the award for product innovation at Hospitality Week for its Twinners product ­ long life milk sold with cereal from Ennis Food together in a foodservice pack. It also packs for Slim Fast and So Good (soy milk, as well as producing long life milk cartons for tea and coffee. The lion's share of its output goes to the UK. Bobby Lawes, R&D director at Pritchitt Foods, says the trend is for companies to look to produce more variety of specialist products. "Our slogan is food design for food service and we're now working on similar products. There are a lot of other companies doing the same thing and as there is so much more milk produced than we can consume in Ireland, we need to find different ways of repackaging it." Meanwhile, Golden Vale has just invested £9m in its new cheese processing plant in Coleraine, Northern Ireland, and Con Lucey, executive director of the cheese and spreads division, says it helps keep up its position as one of the big three processed cheese companies in Europe. Its cheese strings were one of the biggest success stories for the company in the last five years. "We've got a product development centre for processed cheese and have got a number of new products coming out this year, including a pack of extra mature cheddar slices and a premium range of cheese spreads ­ one Brie and one Blue cheese." Lucey says the firm is not a commodities player and that there are most opportunities for the company in food service. "We're sticking to processed cheese ­ especially niche ones ­ ice cream and sweet and savoury sauces. "We're interested in innovation and really need to bring in something new every six months." The Irish Dairy Board is the major international exporter of Irish dairy products and is Ireland's single biggest exporter and a major food distribution company in overseas markets with annual sales of IR£1.3bn. In the south, the board owns the Kerrygold brand which is divided up into retail business, food ingredients and commodity trading. Kerrygold is one of the biggest southern dairy firms which has a rapidly expanding international presence. It is the leading branded butter in Germany, the biggest producer of fresh food in the Los Angeles market and is one of the major dairy brands in the UK. The company is now looking to markets in Spain and Portugal for future prospects. It also boasts good links with producers in the north and has a good working relationship with United Dairy Farmers there. The company has big global ambitions and is looking for distribution across the whole of America, as well as a bigger foothold in England. To enforce its position, this year Kerrygold will spend 16m euros investing in the brand worldwide in an effort to increase the profile and the company's net worth. Advertising remains "old-style" in Germany where Ireland's traditional qualities are promoted, but in the UK, where consumers are more savvy, the Kerrygold brand will be pushed heavily. Cawley says: "The big growth area for us is industrial cheese usage, such as on pizzas. We're obviously trying to add value for retail products." He does not believe the firm will go down the organic route as the perception of Kerrygold products, as with dairy products in general, is one of healthy and natural. Kerrygold has just launched Dubliner premium cheese in the UK as well as a tubbed, spreadable pure butter which Cawley says is selling well. He predicts a lot more sharing of facilities between producers as well as more consolidation in the marketplace after 2004-5, when there's a quota review One of its biggest rivals in the south, Glanbia, is the largest dairy processor in the British Isles, processes 30% of the national milk pool and has a 50% share of the Irish liquid milk market. It is heavily involved in cheese, producing 250,000 tonnes a year and recently linked up with mozzarella manufacturer Leprino for a venture which means the pair produce the biggest slice of the pizza cheese market in Europe ­ a market growing 8% year-on-year. Communications director Michael Patten says the firm's future strategy will be heavily involved in cheese, along with nutritional products manufactured using whey by-product. Patten says the UK cheese market is very own label focused. "I believe there are opportunities for people to add new ways to create value in the sector. "There's a shift in consumer trends towards functional foods. People are looking for extra value and we areat the forefront of developing the market." {{SUPPLEMENTS }}