Iaws Group Plc Business Information, Profile, and History

Company Perspectives:

Since the early days the "Quest for Quality" has been uppermost at all times. It is a quest that will continue into the future. IAWS can look back to its first hundred years with pride in the role it played in the development of an industry and a nation. It can look forward to the new century with strength and confidence.

History of Iaws Group Plc

From its late 19th-century origins in Ireland's cooperative movement, IAWS Group plc has grown into a leading food group. IAWS has bakery, confectionary, and other food operations in Ireland, the United Kingdom, continental Europe, and the United States. It is the largest fishmeal producer and largest blended fertilizer producer in the British Isles. The group's relatively new packaged foods business, built largely through a series of acquisitions, has been its fastest growing area.

Origins

According to the official centennial history of IAWS, the cooperative movement in Ireland began in the late 1880s with dairy farms, whose products were being displaced by new European methods of making butter. At the same time, the short shelf life of dairy products gave farmers little leverage with commercial creameries. There soon evolved federations of individual cooperatives, which were concerned with both obtaining the best prices for their members' wares and with securing adequate supplies.

Horace Plunkett, considered the founder of the co-op movement, and others created an administrative body in 1894 called The Irish Agricultural Organisation Society (IAOC; renamed the Irish Co-Operative Organisational Society in 1979). The IAOC convinced the Irish Co-Operative Agency Society Ltd. (IACSL), founded in 1893, to focus on marketing butter and dairy equipment. A new organization, the Irish Co-Operative Agricultural Agency Society Ltd. (ICAAS), was formed in Dublin on January 15, 1897, to address the problem of procuring quality supplies, particularly seeds and fertilizers. Plunkett was chairman for its first two years. He was assisted, at first, by three employees. Lieutenant Colonel Loftus A. Bryan succeeded Plunkett in 1899.

ICAAS was renamed the Irish Agricultural Wholesale Society Ltd. (IAWS) in December 1897. Turnover was £14,500 in the first year, and the agency showed a modest profit. Soon, IAWS had expanded its offerings to include hardware, flour, and insecticides, much to the ire of existing local traders. IAWS opened two additional stores, in Galway and Thurles, in 1899. An early venture into cattle trading proved disastrous, and by December 1900 IAWS was insolvent. Plunkett personally bailed out the agency with £2,000. An anonymous donor provided another £3,500 in 1903. By 1905, IAWS was again posting a profit.

In 1907, IAWS allowed its member societies to sell groceries. Irish Producers Ltd., an association of egg and honey producers, joined with IAWS in 1908. The group soon established facilities in Sligo and Enniskillen to package eggs under the brand name "Karka." IAWS established a banking department in November 1910 to give the co-ops access to credit. The group also bought an interest in a ship to transport goods in late 1909, though the venture closed three years later.

A 1913 libel case against the head of the Department of Agriculture, T.W. Russell, who had claimed IAWS was insolvent, won the group no damages but garnered much positive press coverage. During World War I, IAWS worked to ensure a stable supply of food and kept bread prices in its stores at prewar levels. Otherwise, the group's business activities continued to grow, and IAWS set up a number of new departments. Harold Barbour, chairman between 1910 and 1922, helped guarantee the group's finances during this period of unrest and provided funds for a new warehouse. Turnover exceeded £1 million in 1919.

The 1920 creation of Northern Ireland necessitated the formation of separate organizations in Ulster for both IAWS and its sister society, IAOS. In 1922, Barbour resigned IAWS to lead the newly created Ulster Agricultural Organisation Society (UAOS); his place as chairman was taken by Dermod O'Brien, who was also designing the Irish Free State's new currency. By this time, IAWS was losing money as turnover slipped to £700,000. Refinancing was obtained, pay cuts were instituted at all levels of the organization, and preference shareholders agreed to waive interest payments due them in 1924 and 1925. Alongside these setbacks, IAWS benefited from two government initiatives in the late 1920s: new regulation of the creamery industry and the establishment of a factory to make sugar from beets, for which IAWS supplied the seed.

Striving for Self-Reliance: 1930-70

In the 1930s, the Great Depression and the Economic War with Britain curtailed the business of IAWS, its member co-ops, and their individual member farms. After coming to power in 1932, the Fianna Fáil party suspended annuity payments to the British throne, resulting in the Crown hammering Irish agricultural imports with huge duties. Fianna Fáil also placed a high priority on making Ireland self-sufficient, which tended to benefit IAWS. In 1934, IAWS was able to post a tiny profit for the first time in 14 years. In 1939, IAWS began importing Swedish wheat for growing and milling, replacing that previously imported from Canada.

The need for self-reliance was increased by World War II, which cut off sources of many agricultural inputs, such as machinery, fertilizers, and twine. During the war, IAWS researched the domestic production of seeds for a variety of vegetables, and in 1941 formed Associated Seedgrowers Ltd. (ASG) with a consortium of seed companies. Dermott O'Brien died in 1945 and was succeeded as chairman by Thomas Westropp Bennett.

IAWS achieved total sales of £2.25 million in 1950, though it represented just a quarter of the total business of its member co-ops. There were a number of interesting new ventures launched during the decade. In 1956, IAWS began importing sugar into Northern Ireland for Comhlucht Siucre Eireann Teo (the Irish Sugar Company). This venture was broken up in the early 1970s after the latter company took a share in a competing distributor. After the introduction of a 50 percent import duty on stainless steel churns in 1959, IAWS began manufacturing its own. IAWS began operating a fishmeal factory in 1967. The group also started marketing a series of new high nitrogen compound fertilizers for Richardsons of Belfast, which soon proved successful. Beginning in the late 1970s, IAWS produced its own blended fertilizers.

In 1962, IAWS Chairman Thomas Westropp Bennett died. His successor, Owen Binchy, died three years later and was replaced by Ned Wall. Patrick I. Meagher was chairman from 1971 to 1991.

New Challenges in the 1970s and 1980s

The 1970s saw many changes, some good, some not. The Troubles, of course, made living and working dangerous at times. Ireland's entry into the European Economic Community (EEC) in 1973 opened up new markets for the country's agriculture and eventually resulted in IAWS receiving grants to develop, for example, grain handling facilities.

A new competitor, Co-Operative Agricultural Purchases Ltd., had been set up in 1966. However, in 1974 it collapsed under the pressure of a global oil crisis and a bad year for cattle. IAWS turnover was about £25 million at the time, and, thanks largely to rampant inflation, reached £60 million in 1979. However, the organization was losing money again. To help rectify the situation, the board appointed Philip Lynch, formerly of R. & H. Hall, as managing director. The management structure was also streamlined. These changes were led by Philip Lynch, former managing director of Power Seeds, who became CEO of IAWS in mid-1983. IAWS returned to profitability during the year.

Flour producer Boland Mills and the business of Townsend Flahavan, both in receivership, were acquired in 1984. IAWS also started a new venture to trade and export barley. The next year, IAWS bolstered its fertilizer manufacturing base by acquiring a 30 percent holding in Gouldings. It acquired the remaining shares in 1986. Boland Mills was merged with three similar firms--Dock Milling Company, Davis Mosse, and Howard Brothers--in 1987. IAWS was divided into three divisions: Fertilisers, Food Products, and IAWS-Agri Ltd., which focused on producing and sourcing agricultural inputs.

Going Public in 1988

In the fall of 1988, a subsidiary company, IAWS Group plc, was created for listing on the Dublin Stock Exchange. The recapitalized entity continued to acquire companies. The group bought a 90 percent share in Sheriff & Sons Ltd., an English trader of grain, fertilizer, and chemicals. Shamrock Foods, a market leader in cooking and baking supplies in Ireland, was acquired in 1989. A subsequent investment in the First National Bakery Company (FNCB) involved IAWS in all phases of wheat production and consumption. FNBC launched its Irish Pride brand in 1990.

In the same year, 1990, IAWS took over the R & H Hall Group plc, a leading importer of ingredients for animal feed and a major producer of wheat. Acquiring Hall, which had been publicly traded since 1967, doubled IAWS' size. The purchase was worth IR£42 million. Other acquisitions followed soon after. The group bought another English fertilizer producer, Independent Fertilisers, and later acquired three other makers: John Parsons, Pertwee, and Malton. IAWS diversified by buying Suttons Ltd. and Suttons Oil Ltd., distributors of coal and oil. In May 1990, IAWS made a hostile takeover bid for rival R&H Hall. However, the offer, worth IR£42.5 million, had to surmount regulatory scrutiny, since the combined company would have controlled 62 percent of Ireland's imported livestock grain and feed ingredients.

IAWS Group continued to grow. It acquired the Pertwee and Parson fertilizer business in 1992, and the Nordos fishmeal company in early 1994. The Malting Company of Ireland was added in July. Pretax profits rose from IR£10.1 million to IR£12.8 million (£12.6 million) in fiscal 1994. In 1995, IAWS acquired Scotland's United Fish Products for about IR£12 million. It also completed some important domestic acquisitions: the Malting Company of Ireland, Unifood, and Premier Proteins.

The Irish Agricultural Wholesale Society owned 64 percent of IAWS Group plc in the mid-1990s. Turnover in 1995 exceeded IR£510 million; nearly a third of revenues were coming from the United Kingdom. In the spring of 1996, the Society reduced its ownership in the Group to less than 51 percent, giving the Group better access to capital markets.

IAWS Group bought Master Foods, a distributor of Mars candy bars, in September 1996. The next January, it acquired a stake in its first European producer, buying Groupe Ikem, a French fertilizer company with a 15 percent market share in France. At the time of its centenary in 1997, IAWS had 1,850 employees and continued to grow. Turnover for the fiscal year ending July 31 was £581 million, producing a pretax profit of £21 million. In October 1997, the group made its largest purchase yet, acquiring the specialty bread maker Cuisine de France, which had 2,300 retail stores in the United Kingdom and Ireland, for IR£51 million. IAWS soon announced plans to increase its milling capacity to supply dough for its new acquisition, which was contracting out between 60 and 70 percent of its bread making.

Beyond 2000

Catering food company Delice de France was bought for £35 million in 1999. The investments in convenience foods were paying off; IAWS Group's food division accounted for 40 percent of revenues (EUR 982.2 million) and 50 percent of profits (£30.2 million or EUR 49.8 million) in 2000. The Cuisine de France line was developing a presence in North America, starting with 200 outlets in Chicago. To supply its Cuisine de France line, IAWS formed a bakery joint venture with Tim Horton's, a Canadian doughnut shop chain (and a subsidiary of Wendy's International) that also had a large par-baked bagels business. IAWS hoped the new bakery, built in Brantford, Ontario, would generate IR£108 million in sales in its first year. In July 2000, IAWS bought Pierre, the Irish specialty baking operations of its rival Northern Foods plc.

IAWS' expansion into the United States accelerated with the acquisition of 80 percent of La Brea Bakery, a $20 million Los Angeles specialty baker, in the last half of 2001. The $55 million purchase gave La Brea the means to expand to the U.S. East Coast. Construction soon began on a $50 million plant near Philadelphia.

Managing Director Philip Lynch described 2001 as "a superb year, our best." Turnover rose 12 percent to EUR 1.10 billion while pretax profits (excluding exceptionals) of EUR 59.8 million were 20 percent higher than in 2000.

Principal Subsidiaries: Alba Proteins Ltd. (U.K.; 82%); Boland Mills Ltd.; Coppermore Ltd.; Cuisine de France Ltd.; Cuisine de France Ltd. (U.K.); Delice de France plc (U.K.); Goulding Chemicals Ltd.; Hall Silos Ltd. (U.K.); IAWS Fertilisers (UK) Limited; IAWS Management Services Ltd.; IAWS-Agri Society Ltd.; Irish Pride Bakeries; La Brea Bakery (U.S.A.; 80%); P.B. Kent & Co. Ltd. (U.K.); Pierre's Foodservice Limited; Power Seeds Ltd.; Premier Proteins Ltd.; R&H Hall Ltd.; R & H (Holdings) Ltd. (U.K.); Roma Foods; Shamrock Foods Ltd.; Shamrock Distribution Ltd.; SFP (Shetland Fish Products) Ltd. (50%); Soil Fertility Dunns (U.K.); Unifood Ltd.; United Fish Products Ltd. (U.K.); United Fish Industries Ltd.; United Fish Industries (UK) Ltd.

Principal Divisions: Agri-Business; Food; Proteins and Oils.

Principal Competitors: Associated British Foods plc; Cargill, Incorporated; Kerry Group plc; Northern Foods plc.

Chronology

• Key Dates:
• 1897: Irish Co-Operative Agricultural Agency Society Ltd. is founded in Dublin.
• 1907: Member societies are allowed to sell groceries.
• 1908: Egg and honey producers society joins IAWS.
• 1919: The company's revenues exceed £1 million.
• 1934: IAWS posts first profit in 14 years.
• 1941: Associated Seedgrowers consortium is formed.
• 1956: IAWS begins importing sugar into Northern Ireland.
• 1967: First IAWS fishmeal factory opens.
• 1984: Flour producer Boland Mills is acquired.
• 1988: IAWS Group plc goes public.
• 1989: Shamrock Foods is acquired.
• 1990: IAWS acquires R&H Hall.
• 1997: Groupe Ikem and Cuisine de France are acquired.
• 1999: Catering food company Delice de France is bought.
• 2001: U.S.-based La Brea Bakery is acquired.