ndc strategy report

7/30/2019 Ndc Strategy Report

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Dairy: Food for LifeA S T R A T E G Y T O P R O M O T E I R I S H M I L K

& D A I R Y P R O D U C T S 2 0 0 8 - 2 0 1 2


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Dairy: Food or Lie

A Strategy to Promote Irish Milk& Dairy Products 2008 - 2012


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2 A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012

Acknowledgement 4

Chairmans Foreword 5

Chief Executives Foreword 6

Executive Summary 7

Section 1 The National Dairy Council: From Past to Present 19

Section 2 Overview of the Irish Dairy Industry 24

Section 3 The Changing Market Landscape for Irish Dairy Products 34

Section 4 NDCs Vision, Mission, Values and Strategic Objectives 47

Section 5 NDCs Work Programmes 2008 2012 51

5.1 Advocacy & Communications Programme 53

5.2 School Milk & Dairy Programme 565.3 Marketing & Promotion Programme 59

5.4 Issues Management Programme 62

5.5 Nutrition Programme 65

5.6 Accountability & Corporate Governance Programme 68

Section 6 NDC Investment Programme 71

Section 7 What the Strategy Aims to Deliver 73

Glossary 76

Table o Contents


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A Strategy to Promote Irish Milk & Dairy Products 2008 - 2012 3

Executive Summary

Table 1(a): Performance of Irish Dairy Market (2001-2007) 10

Table 1(b): Projected Growth of Irish Dairy Market (2008-2012) 10

Figure 1: National Dairy Councils Core Values 12

Figure 2: Summary of National Dairy Council Work Programmes 14

Table 2: NDC Planned Investment 2008-2012 17Table 3: Key Performance Indicators for National Dairy Council 2008-2012 18

Table 4: Key Performance Indicators for School Milk & Dairy Programme 2008-2012 18

Main Report

Table 1.1: National Dairy Council Promotions Highlights 21

Figure 1.1: Evolution of Role/Remit of International Comparable Models 23

Figure 2.1: Dairy Food Exports (1998-2007) 26

Table 2.1: The Irish Dairy Sector (1960-2006) 26

Figure 2.2: The Utilisation of Milk in Ireland 27

Figure 2.3: The Distribution of Dairy Farms by Size 2006 27

Figure 2.4: World Dairy Prices (2006 & 2007) 30Table 2.2: Projected Population Growth (2007-2050) 31

Figure 2.5: Geographic Distribution of Dairy Farms 32

Table 3.1(a): Performance of Irish Dairy Market (2001-2007) 35

Table 3.1(b): Projected Growth of Irish Dairy Market (2008-2012) 35

Figure 3.1: Per Capita Consumption of Liquid Milk 2006 36

Figure 3.2: Total Liquid Milk Consumption in Ireland 37

Figure 3.3: Per Capita Consumption of Cheese 2006 38

Table 3.2: Segmentation of Yellow Fat Market in Ireland by Value 39

Figure 3.4: Per Capita Consumption of Butter 2006 39

Figure 3.5: Irish Population and Projections to 2021 40

Figure 3.6: Origin and Proportion of Non-Irish Nationals within Population 2006 Census 41

Figure 3.7: Population Growth Forecasts for Each Age Cohort in Ireland 41Table 3.3: Numbers Participating in the Labour Force in Ireland 42

Table 3.4: Mean Dairy Product Intake in Ireland (Grams Per Day) 42

Figure 3.8: Direct Cost of Treating Type II Diabetes & Obesity in Ireland 43

Table 3.5: The Problem of Overweight and Obesity in Irish Children (5-12 Year Olds) 44

Figure 4.1: National Dairy Councils Core Values 50

Figure 5.1: Summary of National Dairy Council Work Programmes 52

Table 5.1: Overview of School Milk Scheme Performance in Ireland 56

Table 5.2: Summary of Work Programmes and Strategic Objectives 70

Table 6.1: NDC Planned Investment 2008-2012 72

Table 7.1: Key Performance Indicators for National Dairy Council 2008-2012 75

Table 7.2: Key Performance Indicators for School Milk & Dairy Programme 2008-2012 75

List o Tables and Figures


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Back Row: Kevin Kiersey, Joe Collum, Conor Ryan, Sean Griffin, Richard Kennedy

Middle Row: Jackie Cahill, Tom Corcoran, Patrick Kelly

Front Row: Eamonn Bray, Mary Purcell, Henry Corbally ( Vice-Chairman), Dominic Cronin (Chairman), Gerald Quain

Not Pictured: Sean McAuliffe (appointed March 2008)

NDC Board

Acknowledgement

The Board and Chief Executive of the National Dairy Council gratefully acknowledge the support and contribution

made by all those involved in the consultation process and in the development of this strategy.


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Currently the Irish dairy industry is well positioned to

take full advantage of opportunities to secure a share of

growing markets both here and abroad.

Today Ireland produces some 5.23 billion litres of milk

a year, which is channelled into four product streams

of butter, cheese, milk powders (including casein) and

liquid milk. This product mix represents a combination of

consumer products and dairy ingredients. The Irish dairy

sector provides employment for approximately 22,000

farmers with a further 9,000 employees in the processing

sector and an additional 4,500 employees in support

and ancillary services. In the region of 85% of Irish dairy

products, valued at 2.36 billion, are exported annually

representing 27% of all food and drink exports.

Investment by Irish dairy farmers reached 834 million

in 2007 and is estimated at 609 million for 2008,

demonstrating the commitment to securing a strong

future for dairy farming in Ireland amidst the evolving

WTO negotiations and CAP Health Check and their

implications at farm level. Equally, 2007 saw 114million in grant assistance awarded by the Department

of Agriculture, Fisheries & Food towards capital projects

aimed at supporting innovation, increased productivity

and new product development to enhance the future

competitiveness of the Irish dairy processing sector.

The business of the NDC is primarily concentrated on the

domestic market, valued at 1 billion, where it focuses on

strengthening the market position and driving consumer

consumption of Irish dairy products, traditionally centred

around milk, cheese and butter. This Strategic Plan lays out

a new direction for the organisation in promoting a vibrant

future for the basket of Irish dairy products produced andsees the NDC evolving to change alongside consumer,

market, industry and farming developments.

Within the Irish context, the consumer market for milk,

in terms of per capita consumption, is showing signs of

decline with significant competition from major brands

in the soft drinks, bottled water and juice categories.

However, there is now a heightened awareness amongst

consumers with regard to obesity and the need for a

balanced diet.

Concerns regarding artificial ingredients and added sugars

are resulting in a switch back to basic, natural products

with milk and dairy products well-placed to benefit from

this trend and to regain their position as natural, pure and

good-for-life. In that context, the NDC echoes the support

outlined in the Agri Vision 2015 action plan for the School

Milk Scheme and it intends to lead this initiative, bringing

new thinking and renewed energy to this important

programme.

Butter has come under significant pressure over the

years from the wide variety of spreads available but has

managed to retain a strong position and take advantage

of consumers desire for natural products. Irish consumers

also lag behind their European counterparts in terms

of their consumption of cheese. While there has been

significant innovation in this category in recent years, there

is further opportunity to promote the versatility of cheese

as part of a balanced diet.

With growing pressure from competing categories and

international brands, the industry requires a concerted

drive to maintain the position of Irish milk and dairy

products as a central part of the Irish diet. Furthermore,

recognising the demographic changes within Ireland

from continued growth in birth-rates to the ageing of thepopulation, to the increase in importance of non-Irish

nationals, the National Dairy Council faces considerable

challenges and opportunities to keep dairy at the forefront

of consumer minds.

It is an exciting but challenging time for the Irish dairy

sector, but we are confident that the NDC, in rolling-out its

current Strategic Plan, will deliver many real and tangible

benefits to its funders and stakeholders.

I would like to acknowledge the support of those Irish

dairy farmers who continue to fund the NDC through

the levy scheme. While achieving the recent increase in

support by industry, not all processors contribute to the

NDC, which is a matter of some disquiet and concern. Now,

more than ever before, there is a real need for the whole

sector to support the NDC in delivering on this robust and

far-reaching plan.

I would like to conclude by thanking the very significant

input made by the Board Members and staff of the NDC

into the whole strategic planning process and the resultant

plan.

Dominic Cronin

Chairman

Chairmans Foreword



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The key priority in taking up the position at the helm

of the National Dairy Council in September 2007 was

to embark on a strategic review process, which would

see the development of a new five-year plan for the

organisation. The first strategic review of its kind for

the NDC, the process was led by a comprehensive

consultation phase with all key stakeholders in order to

obtain as much input into this review as possible.

This has entailed meetings with most dairy co-ops

throughout the country and the representative

associations for the processing sector. Equally, the

National Ploughing Championships and the National

Dairy Show, provided the opportunity to survey farmers

on their views while both the IFA and ICMSA have

provided valuable input into the process.

Consultations also took place with relevant food

agencies/bodies and authorities in addition to

the media and, of critical importance, the study

of international comparable models afforded the

opportunity to compare the existing business model of

the NDC with other similar organisations internationally.

Finally, the review encompassed an analysis of

the home market, the potential for developing

new opportunities and the assessment of current

perceptions of the NDC at consumer level.

In parallel with the strategic review, the internal

capability and resources of the NDC have been

reviewed with a programme of restructuring now in

place. This main purpose of the programme is to ensure

that the organisation is equipped with the appropriate

skills and expertise to implement the new strategy

and will operate to a high level of efficiency andeffectiveness. Equally, as an organisation dependent on

industry funding, the need for accountability forms an

integral element of the strategy and the restructuring

will ensure that the correct controls and procedures are

in place for this purpose.

The outcome of the review process has demonstrated

the clear rationale to continue to invest in the work of

the National Dairy Council. While Ireland continues to

lead in consumption per capita of milk within the EU,

there is no doubt that we are operating in a mature

market and one where complacency will inevitably lead

to decline.

Equally, the opportunities that exist within the dairy

category as a whole in light of the current health and

wellness trend, offer the potential to strengthen the

performance of the dairy sector. With the looming

obesity crisis, particularly amongst the younger

population, the timing of this strategy is very apt to

proactively promote locally produced, wholesome,

nutritious milk and dairy products.

My vision for the NDC is an organisation that has

respect and credibility within the industry, is capable

and dynamic in how it undertakes its business and

continually strives to innovate and lead the way with

a fresh approach. The NDC must be based on a value-

added model and must demonstrate the value created

directly for its stakeholders and particularly, the Irish

dairy farmer, without whom, the organisation would

cease to exist.

I look forward to taking on the challenge of

implementing this ambitious strategy and particularly

working with both farmers and processors in achieving

the objectives set out. I equally look forward to

developing opportunities for co-operation with

related food bodies and particularly with respective

dairy councils overseas which, through working in

partnership, can only be to the benefit of both the NDC

and the Irish dairy sector.

As a final comment, I am confident that the strategy

developed is robust in terms of its thinking, objectives

and targets and I would like to thank the members

of the Board and staff for their commitment, time

and effort in supporting the strategy review and

development process over the last number of months.

Helen Brophy

Chief Executive

Chie Executives Foreword


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Executive Summary


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Background to the NDC

The National Dairy Council (NDC), formerly known as the National Dairy Publicity Council, was established in 1964

with the key objective of maintaining and supporting growth in consumption of milk and dairy products in Ireland.

Originally founded as a semi-state body, the organisation evolved to become an industry-funded organisation

subsequent to Ireland joining the EEC in 1973. Initially financed through a combination of Exchequer and EU fundingand now largely by the farmer levy, the NDC quickly found its place at the forefront of industry, gaining prominence as

the spokesperson on dairy matters and undertaking many high profile advertising campaigns and promotional events.

The Councils role in the generic promotion of milk and dairy products presided through many changes that took place

both at industry and at market level. In 1978, the organisation was one of the first food agencies in Ireland to employ a

nutritionist in recognition of the need to promote the health and nutritional benefits of dairy products amidst increased

consumer interest in healthy eating.

This ongoing need to inform and educate the Irish public on the goodness and nutritional value of dairy products has

continued to act as the key focal point for the organisation and has been manifested through several high profile TV

advertising campaigns in recent years.

Strategic Review ProcessIn September 2007, the Board of the NDC decided to embark on a strategic review of the organisation and its activities

with the aim of developing a clear roadmap for the future, encompassed in a new five year strategic plan (2008-2012).

Notwithstanding the successes of the past, this decision was taken by the Board to ensure that the organisation would

continue to deliver services of real value and relevance to the Irish dairy sector into the future.

Central to the development of this strategy was the review and consultation process undertaken, which involved

significant engagement with key stakeholder groups involved in the dairy sector including:

Farmersover120farmerscompletedaquestionnaireattheNationalPloughingChampionshipsand

MillstreetNationalDairyShow;

Co-operatives/DairyProcessorstheNDCCEOmetwithseniormanagement/Boardsofdairyprocessors

inadditiontoseniormanagementandBoardoftheIrishDairyBoard;

DairyRepresentativeOrganisationsIFADairyCommittee;ICMSA;NationalMilkAgency;NationalDairies

Association;IrishDairyIndustryAssociation;IFAFreshMilkProducersGroup;

GovernmentDepartments/AgenciesDepartmentofAgriculture,Fisheries&Food,FoodSafetyAuthority,

Safefood;

MediaCEOmeetingswithacross-sectionofmediacorrespondentsinvolvedinthefood/dairysector;

Consumersaseriesofconsumerfocusgroupswereundertakeninadditiontoanationallyrepresentative

surveyonconsumerattitudestowardsmilkanddairyproducts.

In addition, as part of the review process, the study of twelve international comparable models provided the

opportunity to compare the existing business model of the NDC with other similar organisations. Equally, the roles of

collective bodies including the International Dairy Federation (IDF), International Milk Promotion Group (IMP) and the

Executive Summary


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newly established Global Dairy Platform (GDP) served in understanding the benefits of international networking and

collective thinking on dairy-related issues.

On concluding this process, it was very clear that the NDC had reached a watershed in its life and needed to re-

position its services to become a key agency in the dairy support infrastructure. However, while there were several

critical messages emerging from the consultation process, there was also a very strong consensus view expressed in

the need for the organisation more than ever in todays changing environment.

The strong core message was that the NDC had performed an important function in the past but that the

challenging market and consumer trends mean that its future role must undergo fundamental change in order for

the organisation to retain its relevance.

The support of existing stakeholders therefore, who continue to fund the organisation, particularly through this

transition period, is recognised in this respect and serves as a strong endorsement of the potential role the NDC can

play in the future to support the sector.

The Dairy Sector in Context

Irelands long tradition in dairying has led to the well-established dairy industry that exists today, internationally

recognised for its innovation, technological, marketing and brand capability. Providing employment for just over22,000 farmers, 9,000 employees in the processing industry and an additional 4,500 positions in support and

ancillary services, the dairy sector forms the largest component of Irelands food and drink industry exporting 2.36

billion annually and representing 27% of all food and drink exports.

Producing an estimated 5,235 million litres per annum, the sector has evolved from a narrow product portfolio

position dominated by butter to a more diversified range reflecting the technology depth in the sector and the

effective value-added business model adopted. In this context, 2007 saw 114 million awarded by the Department

of Agriculture, Fisheries & Food towards supporting developments in innovation, increased productivity and new

product development to further drive the competitiveness of the sector.

Equally, at farming level, the sector has experienced major changes with rationalisation occurring in recent years

and this is expected to continue. The number of dairy farmers has reduced from 68,000 in 1984 to the current figure

of just over 22,000 and this has resulted in larger farm sizes and increases in the average quota to the current level

of 231,000 litres. Amidst this change, there have been major developments at farm level with almost 1.5 billion

invested between 2007 and 2008.

The future potential of the sector is therefore recognised with the prospect for market expansion and growth

envisaged despite the uncertainty of evolving WTO negotiations and the CAP Health Check reforms. The absence

of public stocks within the EU is a particular feature of this positive outlook for dairy product prices with the

International Dairy Federation (IDF) stating that the current surge in demand is not just current and has been

present over a number of years, but a significant amount of new demand has been met from Intervention stocks

which have now disappeared.

Combined with a number of international factors including projected world population growth, energy prices,

increased fuel demand and demand for renewable energy resources, climatic effects, growing demand for dairy


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products in China and India and the prospect of quota abolition, this new price paradigm emanating from the changed

supply and demand profile is in sharp contrast to both the intent and expectation of the reform of the EU dairy market

support system which began in 2005.

Given the positive international outlook together with strong potential within the home market, the relative

competitive position of the Irish dairy sector augers well for future prosperity.

Irelands Changing Market Landscape or Milk and Dairy Products

The Irish market for milk and dairy products remains significant, valued at 1 billion with high levels of market

penetration achieved. However, this enviable market position continues to be challenged in light of competing

categories, dairy-free alternatives and health-related concerns, particularly in relation to cholesterol and recommended

daily fat intake levels.

While the market is significant in size, on closer analysis, sales have reached a mature stage and for some products, are

largely static or showing signs of decline.

As is illustrated, the market grew by 17% to 957 million over the 2001-2006 period and is projected to grow by 11%

from 2008 up to 2012 to 1.115 billion. Milk forms a major component of sales, representing 44% of total sales at just

over 440 million and remains largely static but showing signs of decline, while doorstep delivery continues to decline

representing just over 7% of total sales today.

Opportunities for growth in butter, cheese and yogurt still remain positive and are largely being driven by innovation

in new flavours, product varieties, portion sizes and pack formats to meet changing consumer demands. Increased

focus on health issues will be a critical factor for the future, particularly for butter and cheese as will the continued

competition from international brands.

A key feature of retail sales is the growing dominance of private label, particularly for milk, with retailers holding anestimated 50% of market share for fresh milk and continuing to win share from competing branded products. This

poses a number of key concerns for industry in relation to the commoditisation of product and the consequent

downward pressure on pricing.

At consumer level, the prospects for the sector are positive with Ireland continuing to enjoy economic growth and

despite a global slowdown, prospects remain good with Irelands economic growth level projected to grow at 2% per

annum up to 2015.

There are a number of key changes in the consumer landscape that pose both challenges and opportunities for milk

and dairy products. Domestic demand should grow on the basis of population projections from the Central Statistics

Office, which forecast an increase of 20% in population up to over 5 million by 2021. However, with Ireland becoming a

country of net immigration, this will be challenging as some of the migrant population are entering from geographies

where milk and dairy consumption is not established within the mainstay dietary habits.

2001(m) 2002(m) 2003(m) 2004(m) 2005(m) 2006(m) 2007(m)

Value o Irish

Dairy Market820 851 868 901 925 957 981

2008(m) 2009(m) 2010(m) 2011(m) 2012(m)

Value o Irish Dairy Market 1,008 1,035 1,062 1,088 1,115

Table 1(a): Perormance o Irish Dairy Market (2001-2007) Source: Mintel/CSO

Table 1(b): Projected Growth o Irish Dairy Market (2008-2012) Source: Mintel/CSO


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The continued strong birth rates demonstrate potential for milk and dairy products as does the growing ageing

population and increased life expectancy. Also, the general increased focus on health and wellbeing and the link

with diet is driving consumers to take a greater interest in healthy eating and a desire for natural foods despite the

growing problems of obesity, particularly amongst the younger generation.

Time pressures, long commuting distances, smaller household sizes and less time spent on food preparation are

leading to over reliance on convenience foods and inadequate nutrient intake. Given the nutritional value of

dairy foods, it will be critical to retain strong consumption levels for the future. Milk and dairy products are well

positioned from a health and nutrition perspective but face strong competition from heavily marketed brands with

subsequent intake of dairy foods below the three portions per day recommended by the Department of Health and

Children.

In addition, consumers are becoming more issue driven considering ethical issues and environmental issues when

making food choices. Terms such as food miles and carbon footprints are now commonly used and can determine

purchasing decisions, which also has important implications for the dairy sector.

Given the anticipated demographic changes and the increased consumer desire for products that are both natural

and healthy, the market outlook for milk and dairy is positive and provides the backdrop for the development of thefuture roadmap for the NDC.

However, the evolving complexities and dynamics pose real challenges for the future in driving the positive

position and consumption of dairy foods. This will require a detailed understanding of the market and effective

communications and marketing strategies to be deployed.

VisionIn this regard, the NDCs vision is:

The realisation of this vision will help to position the NDC as an important contributor to the sustainability and

growth of milk and dairy in Ireland.

The Board and management of the NDC are ever mindful of the fact that as an organisation, it is funded by the

dairy farmers of Ireland. As such, their interests and the long-term sustainability of the sector are at the heart of the

organisations raison dtre.

Mission

Thus, the mission of the NDC is:

Delivering on this mission will result in many benefits to the sector, not least the strengthening of the position of

milk and dairy in the minds of consumers, more informed and streamlined lines of communication to various media

and interest groups as well as back into the sector, resulting in an uplift in the consumption of milk and dairy withinthe home market.

to be the authoritative and trusted voice in advancing

the consumer perception and consumption o Irish milk and

dairy products.

to support Irish dairy armers by driving the positive position

and consumption o milk and dairy products through integrated

marketing and communications programmes, based on inormed

scientic evidence.


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Core Values

The values that the NDC wish to convey and embed in the culture and ways-of-working of the organisation are

encapsulated in the diagram below.

Trusted:

The NDC will seek to build trust with key stakeholder groups through the provision of well-informed and balanced

views and information.

Innovative:

The NDC will strive to be innovative, bringing new ideas and a fresh approach to the work undertaken.

Forward-looking:

The NDC will endeavour to be forward-looking, pre-empting issues and matters of interest and importance to the

funders and the milk and dairy sector.

Authoritative:

The NDC will ensure that the views and opinions of the organisation are rooted in robust scientific research so that it

can speak with authority.

Accessible:

The NDC will at all times engage openly with the many stakeholder groups and be accessible and responsive.

Figure 1: National Dairy Councils Core Values

Innova

tive

Forward

-

Look

ing

Acce

ssib

le

Authoritative

Trusted


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Strategic ObjectivesConsistent with, and underpinning, the Vision and Mission for the organisation, the NDC aims to achieve the

following between 2008 and 2012.

1. Enhance the position and image o milk and dairy products through a proactive and well-inormed

advocacy and communications strategy.

2. Increase the consumption o milk by young people by leading the re-vitalisation o the School Milk

Scheme at primary and secondary levels.

3. Strengthen the position and image o milk and dairy in terms o usage and attitudes amongst all target

consumer segments by means o more inormed market research and delivery o eective marketing

campaigns.

4. Inorm, advise and publicly represent the milk and dairy industry through building a systematic approach

to, and competency in, Issues Management.

5. Be recognised as the national centre o knowledge on dairy nutrition and related matters o importance

to consumers.

6. Restructure and develop the NDC as a competent, efcient and eective organisation operating to a

high standard o integrity and accountability, thereby delivering value to unders and key stakeholders.

Success or otherwise in the attainment of these objectives will be the main basis on which the success of the NDC

will be evaluated.

The achievement of these objectives requires the NDC to engage in a wide range of activities which are organised

into discrete work programmes.


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Outline o Work ProgrammesThere are six key work programmes which correlate to a specific strategic objective:

1. Advocacy & Communications Programme

2. School Milk & Dairy Programme

3. Marketing & Promotion Programme

4. Issues Management Programme

5. Nutrition Programme

6. Accountability & Corporate Governance Programme

The overall aims of these work programmes are summarised in Figure 2.

1. Advocacy & Communications ProgrammeFundamental to the success of the Ir ish dairy sector is the necessity to ensure that milk and dairy products are

positioned positively within the minds of consumers. This requires a concerted effort to combat the unsubstantiated,

inaccurate facts and misinformation that are currently being provided to consumers.

The purpose of the Advocacy & Communications Programme therefore, is to establish the NDC as the trusted and

respected advocate for the Irish dairy sector and to take a proactive approach in communicating the health and

nutritional benefits of milk and dairy products to the consumer.

In order to achieve this, the programme will be based on informed scientific evidence, distilled into user-friendly

arguments, which will form the basis of specific communications campaigns for key target groups. In this context,

it is recognised that the key target may not always be the consumer but groups who are important influencers on

consumer purchasing decisions (e.g.. medical profession, media).

Information will also be prepared and relayed specifically for NDC members with the redevelopment of the NDCs web

site acting as a central communications platform in this respect, in facilitating regular updates, newsletters or alerts as

required.

Figure 2: Summary o National Dairy Council Work Programmes

NationalDairyCouncil-KeyWorkProgrammes

Advocacy&

Communications

Act as the trustedadvocate or the

Irish dairy sector &

implement

a proactive

communications

strategy

Lead thedevelopment o a

new consumer -

ocused School

Milk &

Dairy Programme

Strengthen the

position and imageo Irish milk and dairy

products through

eective targeted

marketing campaigns

based on inormed

market insight

Develop andimplement an

Issues Management

Plan or the dairy

sector on consumer

matters

Be recognised

as the national

centre o

knowledge on

dairy nutrition

Develop the NDCas an efcient,

competent

organisation

delivering value to

its members

SchoolMilk&Dairy

Programme

Marketing&Promotion

IssuesManagement

NutritionAccountability&

Governance


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The success o the NDCs role as an advocate will be determined by the level o recognition o the NDC as the rst

point o contact on all matters related to the consumption o dairy products and the subsequent recognition o the

messages communicated by the NDC to the various stakeholder groups.

2. School Milk & Dairy ProgrammeThe School Milk Scheme has operated in Ireland since 1982 with 3.2 million gallons of milk sold at its peak in 1983.

The continued decline in participation in the scheme and the lack of drive to market milk and dairy products more

appealingly to young people is a fundamental concern for the sector with the School Milk Scheme seen as the

vehicle to drive the consumer base for the future.

The main goal of the School Milk & Dairy Programme therefore, is to lead the revitalisation of the School Milk

Scheme and to obtain increased participation by children and teenagers in addition to increasing the number of

schools involved nationally.

The new School Milk & Dairy Programme will seek to address key weaknesses within the existing scheme and willoffer a more attractive and appealing product to children and teenagers, in addition to supporting that offering

with significant marketing support.

The key deliverable or this programme will be to increase consumption o milk and other dairy products through the

new programme in co-operation with NDC member dairies and through delivering a co-ordinated marketing drive

to strengthen the position o milk and dairy products in the 5-18 year age bracket.

3. Marketing & Promotion ProgrammeIn parallel with undertaking specific communications campaigns, the need to maintain the visibility of milk and

dairy products at consumer level and reinforce their relevance to consumer lifestyles is critical to support and drive

consumption.The purpose of the Marketing & Promotion Programme in this respect is to strengthen the image and position of

dairy products in a way that is meaningful and impactful for consumers. Critical to this programme will be to gain

deeper insight into consumer behaviour through establishing a more informed market insight tool to understand

purchasing and usage behaviour in addition to attitudes, drivers and motivations within specific consumer

segments.

This will facilitate the development of targeted marketing and promotion campaigns that will allow the NDC to

inform, educate and strengthen the image and perception of dairy products. Consideration of appropriate tools

and media geared to specific audiences will be necessary in addition to considering the potential for developing a

quality/eco mark for members to allow for product differentiation at the point of purchase.

Through building knowledge and insight o the market, the NDC will deliver eective marketing campaigns to

targeted consumer segments that complement and support NDC members marketing and brand activity.

4. Issues Management ProgrammeWhile the Irish dairy sector has not suffered any significant crisis in consumer confidence to date, the importance

of identifying potential issues and the management of these issues is believed critical to the success of the strategy

and the continued safe passage of the industry.

In this context, the aim of the Issues Management Programme, is to ensure that the interests and concerns of the

consumer are understood and prioritised in order to maintain their trust in the health and nutritional benefits of

milk and dairy products.


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The NDCs programme will be based on partnering and co-operating across several fields of expertise and will centre

on the establishment of a National Issues Management Committee, comprised of industry representatives in addition

to technical, scientific and nutritional experts as required.

By developing a comprehensive Issues Management Plan, the NDC will ensure that the objectives and targets o the

strategy can be achieved while reducing the risk o exposure to unoreseen circumstances or threats that may arise.

5. Nutrition ProgrammeMilk and dairy products contain a wide range of essential nutrients required for growth, development and overall

health and wellbeing throughout ones life cycle. Given such health properties which are scientifically robust and

well-documented, the NDC is concerned at the confusing and sometimes inaccurate beliefs and perceptions held by

consumers.

The aim of the Nutrition Programme therefore, is to provide the basis and foundation for communicating, marketing

and promoting milk and dairy products to key target groups. The NDC will therefore strengthen the existing nutrition

advisory service by widening the existing network and proactively interacting in the areas of clinical nutrition,

community nutrition, business, industry research and education.

This will also require the NDC to adopt a more authoritative approach in working to assist in shaping future policy and

the regulatory framework in which the dairy sector operates.

Forming the oundation or other programmes within the strategy and providing a solid scientic basis or the

development o key messages to combat inaccurate and misinormation is the required deliverable. The key outcome

thereore, is to position the NDC as a key centre o nutrition science and knowledge supporting the role o dairy oods as

an integral part o a balanced diet and lie style.

6. Accountability & Corporate Governance ProgrammeAs an externally funded body, the NDC is accountable to its supporters with the need to ensure that the organisation

operates to a high standard of integrity. Equally critical to the success of the strategy is to ensure that the organisation

is equipped with the appropriate skills and competence in order to drive the implementation of the strategy effectively.

The purpose of the Accountability & Corporate Governance Programme therefore, is to restructure and develop the

NDC as a competent, efficient and effective organisation that has the respect of its stakeholders and funders.

This requires a restructuring programme to be undertaken in order to right-size the organisation, deploy the required

set of competencies to deliver upon the strategy and to review the internal efficiencies of key functions carried out.

In addition, the programme will create the appropriate corporate governance structures, policies and procedures

thereby encompassing the role and responsibilities of the Board, improving the overall integrity of the organisation.

While being dierent rom the development programmes, this programme is viewed as a priority within the strategy inorder to rebuild and maintain condence in the work o the organisation, the success o which will be determined by the

continuation and expansion o the unding required to implement the strategy.

Investment PlanOver the period 20082012, the NDC aims to invest 14 million in strengthening the position and driving the

consumption of milk and dairy products. This is an unprecedented level of investment, which is essentially being made

available by the dairy farmers of Ireland through the levy contribution. It is also important to acknowledge the annual

contribution made by the Irish Dairy Board to the NDC, which is much appreciated.


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However, the investment of 14 million is based on the current levy received from the industry and there is no

doubt that the strategy will be further strengthened by the increased levy contribution of current non-members.

An illustrative breakdown of this investment programme over the key strategic areas of the plan is outlined below.

The School Milk & Dairy Programme together with the Marketing & Promotion Programme represent the two most

significant areas for investment, at just under 68% of the total.

At all times, it is intended to have a reserve of circa 1 million as a contingency fund in the event of an unforeseen

event which requires immediate attention by the NDC.

In making this level of investment, the NDC is mindful of the need to deliver real value to its funders andstakeholders, and in executing the proposed work programmes, delivering value-for-money will be a key priority.

What the Strategy Aims to DeliverAs the NDC is not directly engaged in sales, it is believed particularly important to demonstrate the impact and

value of the work programmes to both funders and stakeholders. CSO/Mintel projections for dairy are positive in

forecasting an 11% increase over the 2008-2012 period to a total market value of 1.15 billion. In this capacity, the

role of the NDC is to ensure that the programmes implemented within the context of the strategy, have a direct

impact on helping to achieve this growth.

Based on the overall need to strengthen the position and image of milk and dairy products, omnibus research

was commissioned by the NDC for the purpose of establishing baseline indicators on current consumer attitudesamongst the adult population (15+ years) in Ireland. The fieldwork was undertaken in April 2008 by TNS/MRBI and

involved a nationally representative sample of 1,017 adults. The results proved very interesting in establishing a

number of key issues at consumer level:

Whileencourageingly,4in5adultsclaimtoconsumemilkeveryday,over25%disagreethattheywill

consumemoreinthefuture.Thisisdespitethefactthat94%believemilkprovideskeynutritional

benefitsfortheirhealthandwellbeing.

Thislikelihoodofconsumptionalsoappearstodeclinewithage(e.g.86%of15-24yearoldsvs.65%of

55+claimstheywillconsumemoremilkinthefuture)underliningtheneedtogenerateincreased

frequencyofconsumption.

Furthermore,4in5adultsareoftheopinionthatteenagersarenotconsumingenoughmilk

demonstratingtheawarenessofthiskeyissuehighlightedintherecentTeenSurvey(IUNA2008).

2008 m

2009 m

2010 m

2011 m

2012 m

Total m

% o total

Advocacy & Communications

Programme0.3 0.5 0.5 0.6 0.6 2.5 18%

School Milk & Dairy Programme 0.45 0.7 0.8 0.8 0.8 3.55 25%

Marketing & Promotion Programme 1 1.2 1.2 1.3 1.3 6 43%

Issues Management Programme 0.2 0.2 0.1 0.1 0.1 0.7 5%

Nutrition Programme 0.25 0.25 0.25 0.25 0.25 1.25 9%

Total Investment 2.2 2.85 2.85 3.05 3.05 14 100%

Table 2: NDC Planned Investment 2008-2012


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31%ofthepopulationdisagreethatmilkisanatural,unprocessedfoodindicatingtheneedtopromote

thenaturalimageofmilkwiththelinkagebacktothefarm/producerrequiredforreassurancein

thisrespect.

Inaddition,with17%ofthepopulationbelievingthatmilkisharmfultotheirhealth,thefocusonthe

nutritionalbenefitsandhealthpropertiesofmilkiscriticalforthefuture. Interestinglyaswell,abouthalfofalladultsbelievesoyamilkisequallyasgoodascowsmilk,highlighting

thegrowthandsuccessofalternativestodairyandpresentingaclearchallengeforthedairysector.

While90%ofadultsbelievecheeseisanessentialsourceofcalcium,thereareclearhealthconcerns

regardingcholesterolandfatbeingdetrimentaltohealth.

Equally,thesameconcernsareexpressedforbutterparticularlyintheolderagegroupswith25%ofthose

55+claimingtoneverusebutterwhile38%ofalladultsclaimtobetryingtocutdownonusingbutter.

Finally,atamoregenerallevel,over25%ofadultsbelievetheydonotconsumetherecommended

threeservingsofdairyperdayfortheirhealthandwellbeing,whichdemonstratesbothachallengeand

opportunitytoincreaseconsumptionfrequency.

The results of the research have been analysed to create a set of performance indicators based on achieving consumer

attitudinal shifts in key areas over the 2008-2012 period. These are illustrated below in Table 3 and show a projected5-10% change over the five-year period, which will be tracked and monitored on an annual basis.

Aside from these indicators, specific targets have also been set for the School Milk & Dairy Programme, which are

shown in Table 4 below.

In the partnership with NDC member dairies, it is targeted to increase the current pupil/student numbers participating

in the School Milk Scheme by 35-50% up to a projected level of 127,500. In achieving this increase in participation, it is

projected that milk consumption can increase from the current 3.7 million litres up to a potential 5.5 million litres.

Central to the implementation of the strategy will be the continued evaluation of investment against these targets in

measuring the overall effectiveness of the work programmes in achieving the strategic objectives set out.

ConsumerAttitudestoMilk&DairyProducts2008

Agree

2012

Agree%Change

Milk plays a vital role as part o a healthy

balanced diet53% 58-63% +5-10%

Milk is a natural unprocessed ood 69% 74-79% +5-10%

Milk is something I will consume more o in the

uture 71% 76-81% +5-10%

Butter can be consumed as part o a healthybalanced diet

44% 49-54% +5-10%

Cheese is benefcial to my health and is notattening/detrimental i consumed in moderation

55% 60-65% +5-10%

It is important or ones health to consume threeportions o dairy per day

71% 76-81% +5-10%

SchoolMilk&DairyProgramme 2008 2012 %Change

Number o pupils/students participating 85,000* 114,750-127,500 +35-50%

Litres o milk consumed (million) 3.7* 4.9-5.5 +35-50%

Table 3: Key Perormance Indicators or National Dairy Council 2008-2012

Table 4: Key Perormance Indicators or School Milk & Dairy Programme 2008-2012

* Most recent figures by Department of Agriculture, Fisheries & Food (2004)

Source: TNS Phonebus Survey 2008


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Section 1

The National Dairy Council: From Past to Present


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1.1 Overview o the NDC to Date

Formerly known as the National Dairy Publicity Council, the National Dairy Council (NDC) was established by

the Minister of Agriculture in 1964, as a semi-state body. The aims of the Council were defined as maintaining and

supporting the growth in the consumption of milk and dairy products.

The Council changed from a semi-state body to an industry-financed organisation in 1973 subsequent to Ireland

joining the EEC. In 1978, the European Commission commenced a financial support programme to assist the

undertaking of national promotional campaigns in an effort to increase dairy consumption and thereby reduce the

problem of disposing of surplus milk production within the EEC.

With the assistance of EU funding, the popularity of milk, butter and cheese has been maintained and developed in

Ireland by a range of successful marketing and promotional programmes over the years. The NDC has been behind

many well-known campaigns from Butter is the Cream to Dem Bones, Dem Bones Need Calcium and has played an

important role in communicating the benefits of dairy produce to the Irish consumer.

The accompanying music to this campaign Pride of the Herd was composed by Shaun Davy, the well-known piper

and subsequently entered the Irish record charts with great effect. It remains today a haunting anthem to the origins

and traditions of an industry emerging from the worlds greenest dairy land.

The Councils role in the generic promotion of milk and dairy products has over time presided through the many

changes that have taken place in the industry in terms of its structure, amalgamation and rationalisation.

Originally funded through both Exchequer and EU funding, the National Dairy Council quickly grew and found its place

at the forefront of activities representing the industry in many different situations. It quickly gained prominence as

the spokesperson on dairy matters, while undertaking various high profile promotions, event sponsorship and media

campaigns

In the early 1960s, it had a very popular 15-minute weekly radio slot on RTE 1 hosted by Gay Byrne which grew steadily

in listenership. The organisation also opened the Cookery Kitchen Information Service at that time.

In 1978, it was one of the first food organisations in Ireland to employ a nutritionist on its staff in support of the growing

attitudes towards healthy eating, which was in its infancy at that stage.

Some of the high profile events included:

TheMilkFunRunstagednationallyinconjunctionwiththedairiesandacharitytoraisefunds

and awareness for the selected cause.

TheMilkSuperstars,whichfeaturedhighproleathletesandwell-knownpersonalitiesfrom

TV/Radiocompetingonaweeklytelevisionprogrammefortheultimatesportingtitle.

TheMilkRswassponsoredfor22yearsinassociationwithFBDInsuranceandtravelledthecountrywhile

commandinghighnetworkproleinadditiontopressandradiocoverage.

TheMilkMusicAwards,anannualawardsceremonytransmittedliveontelevisionfollowinga

polling system used in the weeks leading up to the event.

Other examples of successful promotions are detailed in Table 1.1 opposite.

S E C T I O N 1

The National Dairy Council:

From Past to Present


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1.2 Strategic Review Process and Stakeholder Feedback

In September 2007, the Board decided to embark on a strategic review of the NDC with a view to developing a new

five-year plan for the organisation. Notwithstanding the successes of the past, the review was deemed necessary in

terms of ensuring the future continuation of the organisation in playing an effective and critical role within the dairy

sector.

As part of the research and consultation process undertaken to inform the NDCs new strategy, significant

consultation was undertaken with regard to the key stakeholder groups involved in the milk and dairy sector

including:

Farmersover120farmerscompletedaquestionnaireattheNationalPloughingChampionshipsand

MillstreetNationalDairyShow;

Co-operatives/DairyProcessorstheNDCCEOmetwithseniormanagement/Boardsofdairyprocessors

inadditiontoseniormanagementandBoardoftheIrishDairyBoard;

DairyRepresentativeOrganisationsIFADairyCommittee;ICMSA;NationalMilkAgency;NationalDairies

Association;IrishDairyIndustryAssociation;IFAFreshMilkProducersGroup;

GovernmentDepartments/AgenciesDepartmentofAgriculture,Fisheries&Food,FoodSafetyAuthority,

Safefood;

MediaCEOmeetingswithacross-sectionofmediacorrespondentsinvolvedinthefood/dairysector;

Whats Cooking. An eight-week TV programme transmitted on RTE 1.

Cheese SuperMum. A road show event which had its fnal staged and judged on The Late Late Show

with Gay Byrne.

Radio 2 Food File with Gerry Ryan. A weekly slot to promote dairy-based ood recipes with a high volume

o postal requests.

Pennywise Kitchen with Jimmy Greely on 2FM eatured avourite ood preerences o pop superstars in the

music industry.

The National Cheese Board Awards was endorsed by Bord Filte and promoted nationally the wide

availability and versatility o armhouse and industry cheeses.

The Young Home Economist Competition, Panel o Ches in Ireland, Schools Computer Programmes andMedical Seminars are examples o other areas that the Council targeted in its quest or publicity and sales.

Table 1.1: National Dairy Council Promotions Highlights


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Consumersaseriesofconsumerfocusgroupswereundertakeninadditiontoanationallyrepresentative

surveyonconsumerattitudestowardsmilkanddairyproducts.

A number of critical messages emerged from the whole consultation process, not least the fact that there was

confusion on the role of the NDC and a low level of awareness of its services including its nutrition and health

programmes. However, there were some very clear and coherent views expressed about the role that the NDC could

have and the issues that it should be in a position to address on behalf of the industry. Such views were typically

expressed in comments like

the industry has no clear, uniied voice when it comes to addressing nutritional issues in the media,

there is a need to deend the position o milk and dairy in light o national and international scares,

the nutritional value and naturalness o milk needs to be promoted,

the School Milk Scheme is important because these are the years when young people are weaned o milk by izzy

drinks.

On concluding the research and consultation process, it was clear that the NDC had reached a watershed in its life and

that it needed to re-position itself to become a key agency in the dairy support infrastructure, delivering appreciated

and value-adding services of real relevance to the sector.

The strong core message was that the NDC had performed an important function in the past but the challenging

market and consumer trends mean that its future role must undergo fundamental change in order for the organisation

to retain its relevance.

In this capacity, the support of the stakeholders who continue to fund the NDC, particularly through this transition

period, is recognised and serves as a strong endorsement of the potential role the organisation can play in the future to

support the sector.

1.3 International Models o Milk and Dairy Promotional

Organisations

As part of the research programme informing this Strategic Plan, the roles and activities of those other international

dairy organisations involved in supporting the milk and dairy sectors in their respective countries were reviewed. Many

were represented at the World Dairy Summit in Dublin in September 2007 where initial contact was made and followed

up. It is interesting to see how these organisations have evolved over time in keeping with the needs of and challenges

facing the sector.

By and large, the more progressive of these organisations seek to influence and shape policy and consumerperceptions by being an informed advocate for the sector on nutritional-related issues. In addition, they are more

strategic in how they market and promote milk and dairy, with a healthy reliance on insightful consumer market

research.

Figure 1.1 captures the essence of this evolution to being a more value-enhancing organisation. Typically these

organisations, like the NDC, are small but have deep competencies around: communications and advocacy; policy

influence; input to regulatory matters; promotion and marketing.

Most are funded by way of a levy, collected from either processors or producers or a combination of both. The

composition of their Boards has also evolved to include members with broader and complementary skill sets drawn

from the worlds of academia, research, healthcare and business.


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Another noticeable feature is the extent to which such organisations are networked nationally and internationally,

with links into organisations such as the International Dairy Federation (IDF) and the International Milk Promotion

Group (IMP).

In terms of joined-up-thinking, the newly established, Global Dairy Platform (GDP), set up in 2007, aims to act as an

umbrella body for the dairy industry worldwide. The rationale for the organisation is based on the recognition that

acting collectively in a co-ordinated manner, the dairy industry can accomplish more.

The main aim of GDP is to provide insight, guidance and networking to enable the global dairy industry promote

and advocate milk and dairy products. Still in the infant stages of development, it is worth noting the premise on

which GDP was established the recognised need for co-operation for the collective benefit of the dairy industry

worldwide not too dissimilar from the NDCs role at national level.

1.4 Conclusion

A huge wealth of knowledge, insight and advice was gleaned from undertaking the research and consultation

programme, which has helped to shape the strategic agenda for the NDC. The experiences and initiatives of other

comparable dairy councils internationally have proven to be fertile ground for thought, while the development of

such relationships will be even more important going forward.

While this Strategic Plan has been designed to respond to a number of key issues and challenges facing the milk

and dairy sector, the NDC is committed to staying in-tune with the needs of its funders and stakeholders, and being

agile, so that it continues to be truly relevant and value-enhancing long into the future.

Figure 1.1: Evolution o the Role/Remit o International Comparable Models

Value-AddedModels

Advocacy

Inuencingpolicy& regulatory environment

Sophisticatedcommunicationsprogrammes

Recognisedindustry spokesperson

Targetedmarketingbasedonconsumer/market insight

Crisis/Issuesmanagement

Nutritionalexpertise&knowledge

BasicModels

Genericmass-marketadvertising

Reactivemediacommunications

Development/Disseminationofinormation material

SchoolMilkProgrammes

Promotionalevents Com

petenc

ycom

plexity

/soph

istica

tion

Cons

umer

-Mu

lti-sta

keholde

rengage

ment


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Section 2

Overview o the Irish Dairy Industry


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2.1 Historical Overview

Ireland has a long tradition in dairying and established a reputation for quality butter as far back as the 18th century.

The Cork Butter Exchange played a pivotal role, from 1770 onwards until the First World War, in the trade of Irish

butter throughout the British Empire. The economic war with Britain in the 1930s saw a decline in the butter trade

to the UK, with the consequence that the industry went through a contraction in the two decades which followed,with the number of creameries falling from 274 in 1929 to 193 in 1951.

The 1950s saw a revival in fortunes with trade to Britain resuming. The Irish dairy sector entered a renaissance

period in the 1960s and 1970s. These years were significant firstly for, the establishment of Bord Bainne in 1961 and

secondly, the entry into the EEC in 1973.

The launch of the Kerrygold brand was a watershed for the industry, successfully diversifying Irish butter into

international markets across the UK, Europe, the Middle East and America. EU entry enabled the dairy sector to

expand rapidly and adopt new technologies such as spray drying. These new technologies provided processing

solutions for skim milk, which previously had been returned to farms as a by-product fed to pigs, for close to zero

economic value.

The period saw a phase of rationalisation with the demise of the dairy disposal company-run creameries and the

emergence of co-operatives. Other developments in the 1970s saw the diversification from butter into cheesemanufacture with cheese output rising from 5,000 tons in 1960 to 45,000 tons in 1973. The sector also benefited

from the expansion of milk powder production, with the major infant formula companies locating operations in

Ireland.

The expansion in milk output was quite remarkable, growing from 2,182 million litres in 1960 to 3,364 million litres in

1973 up to 5,800 million litres in 1984. This expansion was underpinned by significant technological advancement

at both farm and processing level. The introduction of automatic milking machines and bulk tank cooling at farm

level facilitated the transition from daily delivery to the creamery, to bulk collection off the farm. At the same time

processors invested in plant capacity with a huge focus on improving milk quality. Major advances were also made

in cheese technology during these years.

Intense competition between the main co-operatives drove the technology advances with some notable

developments such as achieving a shelf-stable cream liqueur and the emergence of dairy spreads, which for the first

time offered the consumer a spreadable dairy product from the fridge.

In addition to the strong technological competency, the sector quickly acquired an expertise in consumer

marketing and brand building. The consumer marketing base was further enhanced with product introductions

such as yogurt, fromage frais and cream cheeses, which were underpinned by fermentation technologies.

1984 saw the introduction of milk quotas, which halted the expansion of milk production in Europe. The

introduction of quotas proved yet another milestone and prompted some Irish co-operatives to diversify

internationally into multinational companies. This required an innovative approach, with the adoption of new

business models. In addition, there followed a new wave of rationalisation with a number of mergers, driven

by a strategy to achieve scale and efficiency in a business environment where increasingly buying power was

concentrated amongst a few.

S E C T I O N 2

Overview o the Irish Dairy Industry


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2.2 The Economic Signicance o the Irish Dairy Sector

Today Ireland boasts a substantial dairy industry which provides employment for approximately 22,000 farmers with afurther 9,000 employees in the processing industry and an additional 4,500 employees in support and ancillary services.

Approximately 85% of Irish dairy products, valued at 2.36 billion, are exported annually representing 27% of all food

and drink exports.

It is notable that the value of dairy exports has risen despite the volume constraint imposed by the milk quota regime.

This continual value growth reflects the innovative capacity within the dairy sector and the progression towards

increasingly adopting value-added processing and products.

2.3 Dairy Sector Composition and Output

Over the years, the Irish dairy sector has evolved from a narrow product portfolio position dominated by butter to a

more diversified range which reflects the technology depth within the sector. The dairy sectors business model has

evolved from that of a cost plus food processing operator to encompass the value-added margin driven by effective

brand management strategies as is demonstrated in Table 2.1.

Million

Year

2,600

2,400

2,200

2,000

1,800

1,600

1,400

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Figure 2.1: Dairy Food Exports (1998-2007) Source: CSO

1960 1973 1997 2000 2005 2006

Milk Production

(Litres - million)2,182 3,364 5,073 5,160 5,060 5,235

Cheese (Tons) 5,000 45,000 86,000 96,000 118,000 135,000

No. o

Dairy Farms33,300 26,300 22,386 22,042

Table 2.1: The Irish Dairy Sector (19602006) Source: CSO


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Ireland produces approx. 5,235 million litres per annum and in summary allocates the milk fat and protein into four

product streams of butter, cheese, milk powders (including casein) or liquid milk consumption. This product mix

represents a combination of consumer products and dairy ingredients as shown in Figure 2.2.

2.4 Overview o Dairy Farming

At farm level, there has been a structural shift with significant numbers choosing to exit the industry resulting in

a degree of consolidation. The number of dairy farmers has declined from 68,000 in 1984 to the current figure of

22,042. This decline in numbers has been accompanied by a shift towards larger farm sizes with the average quota

rising from 76,000 litres (16,717 gallons) in 1984 to the current average of 231,000 litres (50,800 gallons).

Figure 2.2: The Utilisation o Milk in Ireland Source: IDF/NMA

LiquidMilk539millionlitres

0%exported

Cheese135,000tons

1,472millionlitres

milkequivalents

81.5%exported

WholeMilkPowder

43,650tons338millionlitres

milkequivalents

100%exported

Butter

143,000tons

2,886millionlitres

milkequivalents

91.6%exported

SkimMilk

2,597millionlitres

Casein48,000tons

1,571millionlitresSkimmilkequivalents

85%exported

SkimMilkPowder

68,000tons

716millionlitres

Skimmilkequivalents

70%exported

MilkProduction5,235millionlitres

Figure 2.3: The Distribution o Dairy Farms by Size 2006 Source: Department o Agriculture, Fisheries & Food

%

Farm size in Litres of milk

30

2520

15

10

5

0

50K50K

-100K

100K-200K

200K-250K

250K-300K

300K-350K

350K-400K

400K-450K

450K


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Introduction

From the establishment of the National Dairy Council in

1964, dairy farming has presided over many changes but

still is recognised and valued as a way of life in modern

Ireland. This case study provides an example of what it

was like to be a dairy farmer in the 1960s and how that

compares today through the eyes of a father and son on

their particular farm.

The Murphys

Profile of a four-generation dairy farm family.

The Farm

53-acre dairy, 40 cow herd, all year milk supply, two calving

seasons

Time Line

1959Dans parents offered farm by Land Commission

1961 Dan and Hannah move on to farm with Dans parents

1964 Dan and Hannah take over the farm

1993 Dan takes early retirement scheme, passes farm

to son, John and family

Background

The Murphy family commenced farming on this farm in the

early 1960s. Beneficiaries of a Land Commission scheme

that broke up a larger estate into family-farming units,

they took 53 acres of what were, Dan Murphy remembers,

unpromising land for dairying - largely scrubland.

My father had his name in with the Land Commission for a

long time, Dan recalls. In 1959, they approached him to seeif he was still interested and he told them he was. In 1961,

we moved in.

Early Days

Dan was already married to Hannah so it was essentially

two couples who were moving into the farm together.

The poor condition of the land was matched by the low

productivity of the times. The farm could only support nine

cows where there are, today, 40 and Dan recalls the milk

went to the now defunct dairy where the contract was

to supply one gallon per day. For this, the Murphys were

paid eight old pence and got additional money for any

surplus they supplied. The milk would be dropped down for

collection at the local village where it was collected by lorry.

Conditions throughout were primitive, Hannah remembers.

For the first two years there was no running water (except,

strangely, at night). It took two years for the situation to

be rectified. However, the 60s were a time of change for

the family, farming and for Ireland. In 1964, the Murphys

took over the farm from Dans parents and, with a young

family of their own, the new technology and advances in

productivity were more than welcome. Tractors eased a lot

of the drudgery of farm work while better housing for the

cows meant the herd could grow. Hannah took an active

part in farm life over the years, driving the tractor, setting

potatoes and doing the farm chores.

Dan believes the most obvious sign of improved conditions

could be seen in the milk itself. It became a much cleaner

and more controlled product. The milk produced is of a

much better quality now, Dan says. The cow is washed

down and the milk goes straight into the bulk tank where

it is cooled immediately. In the old days it was cooled by

water. It wasnt as reliable.

Distribution

Joining the EEC was the landmark event of the early 1970s

and Dan believes it was a good move for dairy farmers,

even if they didnt benefit to the extent that other farming

sectors did. Dan believes that consumers often take milk for

granted and do not necessarily appreciate the value, paying

higher prices for bottled water, for example.

Of course, the distribution of milk also changed radically

over this time. In the 1960s, it was delivered door-to-door

and very little went to supermarkets. Dan remembers that

the first major shift in the 1970s came, in fact, with the

emergence of Baileys Irish Cream Liqueur as an important

new client. Today, the supermarkets dominate milk

distribution in Ireland and Dan believes that they dontwork particularly hard to market or sell the value of milk to

consumers.

Though not sentimental about the old days (Dan regrets, for

example, that a lack of resources delayed the expansion of

the herd size) he notes that modern dairy cows are not as

hardy as the breeds that came before them. Cows now take

a lot more care, he says.

Case Study: The Story o Irish Dairy Farming 1961-2008


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New Generation

Like the rest of the family, Dans son John was closely

involved in the farm from his youngest days. From

the age of 15, he would take over the running of the

business while his parents took a weeks holidays in

Kerry. He helped us to get away and so now were

happy to help them when they need a break, Hanna

says of her son.

Availing of the early retirement scheme, Dan retired

in 1993, passing ownership of the farm to his son,

then aged 34. John had spent some years working

as a carpenter so was sure that farming was what hewanted to do. When I got married, I felt that I was

travelling too much, he says. And I liked farming as a

way of life. You feel you are your own boss. When you

get up in the morning youre at work, not stuck in traffic

for an hour.

New generations bring new ideas and John now

manages the dairy farm with a grassland management

system far more sophisticated than his father would

have operated. Electric fencing keeps the herd grazing

in confined paddocks. Less moving around means

less damage to the land while a rota system means

the cows are always grazing on fresh grass, increasing

productivity and the overall quality of the milk. (Like hisfather, John points to the improved quality of milk as

one of the major gains of decades of advance.)

The herd winters inside for about 100 days of the year,

when there is no grass growth and are fed on a silage-

based diet. To keep milk supply going all year round,

calving takes place in two seasons from September

to October and from late February to April. The cows

are dried off between 40 and 60 days before calving,

moved to different sheds and fed on a suitable diet.

John typically works a twelve-hour day up at 7am in

the morning and finishing late in the evening, when

the second milking of the day is done. Its a full timejob but a lifestyle he likes, one closely governed by the

seasons and one where local community matters a

great deal.

Running a Business

John believes joining the EEC was positive even if, in

real terms, the farmers take home from the retail price

of milk has declined from 50% in the 1970s to about

30% now. The price increases of 2007 were, he says,

long overdue.

The quota system of the 1980s may have had its

imperfections but it also helped to keep smaller

farmers in business as it protected their output.

We would probably have been swamped by larger

producers without it, John reflects. Looking to the

possible abolition of the quotas in 2015, he says: weve

all progressed but anyone that stays in dairying will

have to be careful. Costs have escalated and have to be

managed very carefully.

Both John and Dan agree that farming has become

more and more like other businesses there is a heavy

bureaucracy that has to be managed and many cost

factors outside the farmers control. Over all, however,John is positive about this regulatory regime. Farmers

are a lot more confident about the food they produce

and are far more environmentally aware too.

Community

Looking to the future, it is hard to know if small farmers

can survive, John says. His wife Caroline agrees. Dairy

farmers are an endangered species, she jokes. Farming

has given them a great quality of life and their children

are independent and self-motivated with a great

work ethic. Their two boys Sean (20) and Kenny (16)

combine study, farm work and off-farm employment.Theres never time to be idle on a farm, she says. The

community is one of real people doing real work. The

traditions of time gone by are still very much alive in

this farming community. Farmers help each other out

when there is work to be done hay or silage to be

saved for example and the only reward expected

is the communal dinner in the host familys kitchen.

Caroline recalls what happened when Johns uncle

died a few years ago. Spontaneously, all the neighbours

came together and saved the hay for them.

Of course, times are changing. People have off-farm

jobs now and less time on their hands but John recalls

an incident only a few weeks ago when he had tocheck on a cow having a difficult calving late one night.

No sooner was he up and about, but two neighbours

called down to the sheds to see if they could help.

In spite of the pressures of change, old k inships and

loyalties are important. As Caroline puts it People have

a special bond growing up here, and special memories.

Everyone works together.


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2.5 Outlook or Dairy Sector

A key driver in this structural shift and consolidation at farm level, is the threat of falling or unstable milk prices

anticipated from EU CAP Reform and market support adjustments. The market dynamics, emerging from policy reform,

provides a range of scenarios for decision-making with consideration around the trade-off on the impact of unit price/

value and volume movements.

The buoyant world markets in 2007 took all commentators by surprise with dairy commodity prices doubling within

twelve months on the back of a decline in global stocks and strong demand in developing markets.

Key Factors Aecting World Dairy Prices

The developments led to a reassessment of the global outlook for dairy product prices and supply based on the

following factors:

globalpopulationgrowthindevelopingeconomies

thesustainedsurgeinworldenergyprices

theincreaseddemandforfuelintheever-expandingChineseandIndianeconomies anoverallconcernthatsuppliesoffossilfuelsaredissipatingatafasterratethanpreviously

believed because of the surge in demand

sustainedclimaticeffectsworldwideofglobalwarminglinkedtooveruseofcarbon-basedfuels

significantincreaseinGovernmentfundingsupportsforthedevelopmentofrenewableenergyresources

theabsence/rundownofgrainanddairystocks

theincreaseddemandforgrainasbiofuel

theemergenceoffoodmilesasanissueforconsumers

theimpactofhighergrainpricesonanimalproductioncosts

thesurgeindemandinChineseandIndianeconomiesfordairyproducts

EUproposalstoincreasequotasin2008andbeyond

theresponseatproducerlevelsacrosstheEUtotheprospectofquotaabolition

thedangerofvolati lepricing

US$perton

Butter Chedder SMP

5,800

5,300

4,800

4,300

3,800

3,300

2,800

2,300

1,800

2006 2006 2006 2006 2006 2006 2007 2007 2007 2007 2007 2007

Figure 2.4: World Dairy Prices (2006 & 2007) Source: ZMP


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In addition to the new production cost related issues affecting dairy product prices, the absence of public stocks

particularly in the EU, is also a key feature. According to the International Dairy Federation (IDF), the current surgein demand is not just current and has been present over a number of years, but a significant amount of new

demand had been met from intervention stocks which have now disappeared.

The new price paradigm deriving from the changed supply and demand profile set out above is in sharp contrast

to both the intent and expectation of the reform of the EU dairy market support system which began in 2005.

While supply from Australia is reduced due to problems with drought, supplies from Europe continue to decline in

response to EU policy reform. However, despite the supply contractions in specific geographic regions, overall there

has been a global expansion in milk production. Global supply has risen from 470 billion litres in 1997 to 553 billion

litres in 2007, a growth of 18%. In the short to medium term, it is expected that supply will lag demand as the global

population grows and consumption of milk and dairy increases in developing countries.

In most developing markets, current consumption levels are well below the WHO per capita consumption target

of 185 litres per annum. The trend in the developing world is for a shift in diet from starch-based to protein-based

products. This scenario provides a positive outlook in the long term for both milk production and consumption of

dairy products globally.

Ireland with its temperate climate and extended grass growing season has a natural advantage for milk production.

In addition, Irelands reliance on grass as the primary animal feed source is expected to further accentuate the

competitive position with respect to milk production over those regions, where grain is the principle feed. Grain

based livestock production enterprises will have to deal with inflationary costs sparked by expansion in biofuel

production. The impact of biofuels will enhance the competitiveness of Irish milk production and thus provides for

an encourageing future.

As already mentioned, in recent years there has been an exodus from dairy farming with the small units

disappearing and being absorbed into larger farm units. The exit from milk has been facilitated by the permitted

trading of milk quota through a quota exchange whereby sellers and buyers determine the market price within

a co-op region. The quota exchange auctions have seen two trends: firstly high prices have been set at these

exchanges in the southern half of Ireland where the number of buyers exceeds the sellers. However in the northern

and western regions the reverse seems to be the case with sellers exceeding buyers resulting in a low price offered.

In summary, there has been a greater demand for milk quota in the southern regions than in the northern and

western areas.

Region 2007 2050 %Change

World 6,671 9,191 +38%

High Income 1,223 1,245 +2%

Low Income 5,448 7,946 +46%

Arica 965 1,998 +107%

Asia 4,030 5,266 +31%

Latin America 572 769 +34%

North America 339 445 +31%

Europe 731 664 -9%

Table 2.2: Projected Population Growth (2007-2050) Source: University o Illinois


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The concentration of dairy farming is in the southern half of the country with more than 15,000 dairy farms. In the

border, western and midlands there are less than 5,700 dairy farms. This trend in concentration in the southern part of

the country is emphasised even more when milk production levels are compared.

There has also been a consolidation at processing level and currently the six largest processors control 70% of the

national milk volume. In the liquid milk sector there are just fifteen processors.

Figure 2.5: Geographic Distribution o Dairy Farms Source: CSO

SOUTH-WEST

7,400 Farms

SOUTH-EAST

3,700 Farms

DUBLIN &

MID-EAST

1,080 Farms

MID-WEST

3,600 Farms

WEST

1,800 Farms

BORDER

2,900 Farms

MIDLANDS

1,500 Farms

28% o

all dairy arms

72% o

all dairy arms


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2.6 Conclusion

As a commitment towards increasing the efficiency within the processing sector the Department of Agricultureawarded 114 million in grant assistance towards capital projects in 2007. This grant assistance is aimed at

supporting the innovation, increased productivity and new product development to enhance the competitiveness

of the Irish dairy sector so as to enable the sector to compete into the future.

This grant assistance is in line with the strategic objective of Agri Vision 2015 to ensure the sustainable

competitiveness of the dairy sector. The grant package recognises the need for the State to engage with the

processing sector in order to achieve the most favourable conditions such as increasing scale and efficiency for long

term success.

The State is also committed to building a knowledge base in the food sector and has committed 8 billion in

the National Development Plan 2007-2013, towards food research and a major input of this fund will generate

nutritional knowledge centred in the dairy science/biotechnology interface.

Given the positive international demand trends and outlook, a growing and more prosperous home market, therelative competitive position of the Irish dairy sector augers well for future prosperity. The key challenge for the

sector is how to take advantage of these positive trends and particularly, in the case of the NDC, the potential

opportunities that exist to grow and develop the domestic market.


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Section 3

The Changing Market Landscape

or Irish Dairy Products


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3.1 Domestic Market Overview or Milk and Dairy Products

The Irish dairy market remains one of the most significant markets in Ireland with the majority of homes having

some form of dairy products in the fridge. However, this high level of market penetration has been challenged

in recent years particularly from dairy alternatives and substitute products. In addition, population growth, while

being a key driver of demand, has not impacted on the dairy sector to the extent that would have been imaginedgiven the high proportion of non-nationals accounting for this growth and the lack of tradition in some cases of

consuming milk and dairy products.

Table 3.1(a) below highlights the performance of the Irish dairy market over the 2001-2006 period and Table 3.1(b)

the projected growth up to 2012. As is illustrated, the market grew by 17% to 957 million over the 2001-2006

period and is projected to grow by 11% up to 1.115 billion from 2008 to 2012.

In examining the published statistics on the Irish dairy market, a number of discrepancies are apparent in the

breakdown of the market value within the category. The figures contained in this report are based on the following

sources: CSO, Mintel, TNS and NMA. However, despite this, the overall growth forecasts and trends are not too

dissimilar with Datamonitor for example, projecting an increase in value up to 1.03 billion or 10% according t

ndc strategy report

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