Kerry Group

Background

Formation

Its name comes from the rural county Kerry in Ireland, in 1972 a small independent cooperative societies and milk suppliers merged and became Kerry Co-op. 13 men in their late 20's worked together in a parking lot of a milk processing plant, for about 18 months. Farmers of Kerry got together and bought 83% stake of an aforementioned milk processing plant outside of Listowel. The membership to the group was open to all milk suppliers, and on return the got shares of the company, all equally distributed, for a democratic control of the Co-op (one member one vote). Nine thousand dairy farmers responded to this. In 1973 Ireland joined the European Economic Community (EEC) and this accelerated the merger of many small dairies in Ireland so as to be able to compete with the larger milk companies. By 1974 there job was to consolidate and rationalize the various operations involved with the collection, processing and distribution of milk, butter and other dairy products of casein (a protein powder extracted from milk).

In the period 1974 - 1979 Kerry expanded its milk business in a similar fashion to other dairy Co-ops. EEC entry had brought better milk prices, increased milk volumes and improved farm incomes in Ireland. Kerry Co-op grew organically simply by taking the milk that came its way, processing it and meeting all other farmer requirements in terms of inputs and on-farm services. Its milk supply increased from 67 million gallons in 1974 to 87 million gallons in 1978.

The 80's (Down and Up again)

By the year 1979 Kerry lost almost 20% of its milk supply because the county was chosen as a pilot area for a bovine disease eradication scheme. This is when they realized that they could not rely only on dairy products and diversify into more 'value added' activities.

In 1980 a five year corporate plan was defined and agreed by the Board, as research and development became a priority, ass well as the diversification into the convenience meat products business with the acquisition of the Denny pork and savory products business in Ireland and made its first incursion into beef processing, again, on the home market. In 1983 it was decided to establish U.S. and UK headquarters - opening offices in the Hancock Centre in Chicago and in London. The Erie Casein company's interest in NKMP was acquired and with its customer base in the U.S. Kerry embarked on the long road of carving a niche in the specialist food ingredient sector.

90's (Kerry group turns PLC)

For serious need of capital the corporate structure would have to be changed and consequently the concept of Kerry Group plc emerged and Kerry took the first steps in becoming an Irish multinational. In 1986, shareholders of Kerry Co-operative approved their Directors' recommendation that Kerry Co-op should seek additional financial investors and change its structure to facilitate this. In October 1986 a public offering of shares in Kerry Group plc was made at Ђ0.66 per share and the shares were listed on the Dublin stock exchange.

Kerry opened its first overseas food ingredients manufacturing plant in Jackson, Wisconsin in 1987 and the following year made its significant acquisition of Beatreme Food Ingredients, a division of the Beatrice Corporation. Beatreme, the premier specialty food ingredient supplier in the U.S. market was acquired by Kerry for US$130m.

Mission Statement

* Kerry Group will be:

- a major international specialist food ingredients corporation

- a leading international flavour technology company

- a leading supplier of added value brands and customer branded foods to the Irish and UK markets

* We will be leaders in our selected markets - excelling in product quality, technical and marketing creativity and service to our customers - through the skills and wholehearted commitment of our employees

* We are committed to the highest standards of business and ethical behavior, to fulfilling our responsibilities to the communities which we serve and to the creation of long-term value for all stakeholders on a socially and environmentally sustainable basis.

SWOT Analysis

Strengths

The major strength of the Kerry Group is procurement. Procurement allows Kerry to use available global resources in specialty ingredients, seasonings, coating systems, sweet ingredients, nutritional systems, and specialty proteins; by doing this they are able to acquire the highest-quality raw materials.

Strength of Kerry is technological development. Through technological development Kerry is able to develop flavors and gain an advantage over the competition. Kerry gains this technological advantage through research and development and acquisitions.

Weaknesses

The weaknesses of Kerry Group include the firm infrastructure. The Group's debt-to-equity ratio is inordinately high for a company of Kerry's size. Another weakness is in Kerry's Human Resource Management division.

Management encourages the employees to think "Kerry" or in sense be "Kerryized," if employees do not follow this style of thinking they are let go. This type of HRM does not promote a high sense of creativity.

Opportunities

The opportunities of the Kerry Group include rivalry and suppliers. Rivalry is low for the company. Kerry does not compete with one particular firm head-to-head across their entire product line.

Also, Kerry owns most of their suppliers which allows the company to control cost and production; this in turn creates a huge opportunity for Kerry.

Threats

The threats for Kerry Group, which also include rivalry, as well as new entrants and substitution, rivalry was also a threat for the Kerry Group because many of Kerry's competitors are actual buyers.

Reverse integration could occur, which means that buyers begin making the product themselves. Another threat for Kerry Group is new entrants. The barriers to enter this kind of industry are very low still the production is very high in the Kerry group, which could