Mr. Vincent Buckley:

I am accompanied by Ms Anne Randels, Mr. Joe O'Flynn and Mr. Bernard Condon who will help me to answer queries on my presentation and other questions on the Irish Dairy Board.

Our core purpose is to build a profitable route to market for Irish dairy products. Ours is a co-operative owned by our member suppliers, with industry and farmer representatives at board level. We are the exporting arm of the dairy industry. The board was established in 1961 as a semi-State company and became a co-operative in 1973. We have a turnover of €2 billion. It is a multinational company, with over 3,300 employees, of whom 150 are in Ireland, while the rest are based mainly in the United Kingdom, elsewhere in the European Union and the United States. We are the owner of the Kerrygold brand, Ireland's only international food brand. Our business is undergoing a significant transformation in preparation for the removal of milk quotas in 2015 and to meet our Food Harvest 2020 targets, as members will see as the presentation progresses. We are responsible for marketing Ireland's unique selling point - its world class milk which cannot be matched anywhere in the global market. We take great pleasure in promoting a premium food and offer a product that is Irish, pure, tasty and natural.

The next slide shows the level of business done by the company. We export 270,000 tonnes annually, which means that every day 34 containers of food leave our shores or 12,000 containers per annum. Members can see a representative range of our products on the same slide. We have three business platforms - consumer foods, dairy trade and ingredients, and distribution. Consumer foods account for roughly 40% of our turnover. We have subsidiaries in Germany and the United Kingdom which are critical to our business there. Consumer foods represent the branded part of our business. Dairy trade and ingredients are non-branded. They represent the value-added ingredients and formulation side of our business. The distribution company is one the Irish Dairy Board acquired 30 years ago. There is a distribution-wide business in the United States.

The next slide shows that we have three branded product categories, namely, butter and blends, cheese and milk powders. I shall make a brief comment on each of them. Kerrygold is the No. 1 butter brand in Germany, the No. 1 imported brand in the USA and has a retail selling price, RSP, figure of €500 million globally. Kerrygold Extra is one of our most successful campaigns which was launched in Germany in 2009. The product has exceeded our expectations.

On our cheese sector, Pilgrims Choice cheddar is ranked No. 2 in the UK market. Dubliner cheese is also one of our brands which is doing very well in the United States. I have been told that it is enjoying double digit market growth. Another lesser known brand was launched in conjunction with Tesco in recent times. Our milk powders are mainly for sale in African markets.

I shall outline how well our brands are performing. Recent statistics show that in 2010 there was 7% volume growth and 21% value growth. In 2011 there was 5% volume growth and 19% value growth. In 2012 we have set ourselves a target of 7% volume growth.

The next slide indicates the footprint of our export markets. We export to 80 markets around the world and were honoured to have been awarded the title of exporter of the year in 2010. Members can see from the graph that our markets are well positioned all over the world. Our focus for the period 2012 to 2015 is on supporting our commitment to Food Harvest 2020 using the four pillars of operational excellence, value added growth, market expansion, and talent placement and development. We believe our business strategy is working across the board, as is clear from our Food Harvest 2020 implementation update. We are confident that our core markets will continue to deliver strong growth, with significant volumes across our branded range, in the coming years. We are developing new marketing and distribution channels in new markets, for example, in Algeria and Russia. Last year the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, visited both regions with our team as part of a trade mission and was very successful. The Middle East and north African markets are important to us and there is a great opportunity to develop new market routes for our branded powder products in sub-Saharan Africa in countries such as Democratic Republic of Congo, Angola and Nigeria. Members can question my colleagues on this subject later.

As part of our strategy for developing markets and expanding the demand for milk powder, in the past 18 months we have placed 15 new personnel in market positions in places such as China, the Middle East, north Africa, Russia and Nigeria. We have also embarked on an acquisitions programme. In the past year we have acquired three new businesses - Thiel Cheese and Meadow Ingredients in the USA and The Cheese Warehouse in the United Kingdom. We believe the latter acquisition will give us a figure of roughly 5,000 tonnes and a direct route to market. Our growth targets can be achieved by having offices and sales teams positioned in certain markets around the world. They can also be achieved through having joint ventures, local partnerships, agents, local distribution systems and acquisitions. We realise every market does not have the same fit and that each market has its requirements in gaining a footprint. I have outlined how we will strive to achieve our objectives in these markets.

With regard to value being added through research and development and premium returns, we are investing in new product development, the acquisition of consumer insights and marketing. In order to achieve valued added growth, we must identify customer needs through market research. In recent times we have increased our marketing spend. An additional €7 million was allocated in 2012, while €1.5 million has been spent on our innovation initiatives, including developing our consumer insight capability. As members can see from my presentation, in 2011 we launched 40 new products between the two categories of consumer foods and dairy trade and ingredients. We are enhancing value through co-opetition in respect of Kerrygold Cashel Blue.

As part of the Food Harvest 2020 process, we have three business models. Lean and efficient manufacturing is an important business model that we introduced at three of our UK sites and which resulted in substantial savings. The process has been rolled out across other areas of our business. We are updated at our monthly meetings and know that the lean and efficient business model has resulted in substantial savings. There are a number of projects in train with our members to integrate the supply chain more efficiently. The business transformation or right-sizing business model is crucial to allow us to achieve our goals. We have completed a programme of non-core asset disposal. We have also completed a €65 million capital investment programme in our UK subsidiaries and are actively involved in a market and acquisitions programme. We are busy at board level. We have strengthened our financial capability with a new innovative funding facility that was put in place last year, of which members are probably aware. We refinanced the business which provided for growth and funding for our members in the short to medium term.

As marketeers, we work closely with our members and processors. Many meetings have taken place between both parties to ensure production possibilities are married with market requirements. It is important that we balance production growth and market opportunities.

We have categorised the sales opportunities. The management team has identified the product type that needs to be manufactured and whether it should go through the branded, ingredients or food service channel. Will substantial growth be achieved through either incremental sales in our present businesses, new customers and new routes to markets? What challenges do we face beyond 2015? I will not go into them in great detail, but we see the following challenges: matching sales with production growth; investment will be challenging; substantial investment will be required in plant, personnel, research and development, marketing and acquisitions, to mention just a few. We also see a need to focus on value added products and increased flexibility in manufacturing to respond to market needs. It is vital that processing facilities are flexible to produce the quantities we may need at various times. It goes without saying the base product must be globally competitive. It is vital also that the home environment be conducive to the Irish Dairy Board competing in the global marketplace. Market volatility is a given and managing that volatility will prove challenging. We will develop the sustainability platform, but we recognise that ensuring a comprehensive and cohesive national sustainability platform for Irish dairying to drive Dairy Ireland's unique selling points is crucial.

How can the Government work with us to deliver on our commitment to Food Harvest 2020? Support for investment in processing to meet market needs post the quota environment is vital. Members may be aware of a document launched by the IFA with the help of the processing industry. I see the Chairman has a copy and perhaps other members of the committee have seen it also. Funding of the industry is vital and farmers must invest significantly at farm level. However, it will be very difficult for the farmers of Ireland to fund the processing industry. Therefore, we believe incentives need to be given, as outlined in the booklet to ensure investors will invest in the industry and make it possible for it to develop. We have set out the basis for funding which is urgently needed by the industry. It is not within the scope of farmers and the industry to fund investment.

There needs to be a pro-business support commitment across all Government agencies from national policy formulation to implementation. A pro-business approach is vital.

We stress the importance of Government supported specific trade missions to emerging markets. In many cases, it will require a government to government approach. We wish to impress on members the importance of these missions and the fact that they should be acutely aware of the importance of Government support in that area.

The Irish Dairy Board is on target to deliver on its commitments under Food Harvest 2020. The transformation of our business is ongoing to meet the new challenges. We are working in close collaboration with our members and developing new products to market through the various channels. Our chief executive is abroad on business dealing specifically with that issue. It is important that we continue to invest in new innovative products to meet the needs of our global markets, our sales team and place more people in the market. That is something we have been doing and will continue to do. We are committed to operating in a sustainable fashion and promoting sustainable production both at farm and company level. We recognise the importance of the dairy industry to the economy and the benefits it can bring to it in term of generating revenue.

I thank the Chairman and members for their attention. My colleagues will answer questions raised and discuss the issues involved.