Kerry Group Plc Business Information, Profile, and History

Company Perspectives:

Kerry is committed to being a leader in its selected markets through technological creativity, total quality and superior customer service. The Group is focused on contintuing to expand its presence in global food ingredients markets and on the further development of its consumer foods businesses in Europe.

History of Kerry Group Plc

Kerry Group plc is fast becoming one of the world's leading food ingredients suppliers. Based in Ireland, the Kerry Group has expanded its operations worldwide, with a strong presence throughout Europe and the United States, and a growing presence in the Pacific Rim region. Kerry operates manufacturing plants in 14 countries, with sales of its more than 7,000 products reaching more than 70 countries. Kerry continues to expand rapidly, primarily through a strong program of acquisitions. After acquiring the U.S.' DCA Food Industries in 1994--giving Kerry a prominent position in the North American ingredients market--the company went after bigger fish in 1998, acquiring the ingredients operations of fellow U.K. producer Dalgety PLC. That acquisition is expected to boost Kerry's 1998 revenues past IR£ 2 billion.

Kerry's operations are separated along three primary market targets. The first and most important for the company's annual sales is its Food Ingredients division, which accounts for more than half of Kerry's sales and nearly three-quarters of its annual operating profits. Supplying primarily multinational and other food processors, Kerry Ingredients produces more than 6,000 individual products for categories including seasonings and coatings; dehydrates; dairy; fruit preparation; bakery goods, including a leading share of the U.S. donut mix market; and specialty ingredients. The company's ingredients include flavoring agents, functional ingredients--such as those required for processing yogurt or ice cream, and the many consistency and flavor enhancers and additives found in processed foods. A primary market for this division is the seasonings and coatings market segment, including crumb and batter systems for meat, poultry, fish, and convenience foods.

Through subsidiaries Lucas Ingredients, Produits Jaeger, PAC, Morton Foods, and ABC, Kerry has captured the European leadership for these products. Kerry's Ingredients division also produces pre-packed flour and baked goods mixes for the private label market and for the company's own Homepride and Greens labels, themselves leaders in many European and other global markets. Other Kerry ingredients brands include Kerry PSF, Aptunion, and Ravifruit, which have captured leading positions in the fruit processing market; and the company's Trumato line of enhanced powdered tomato products, developed in the company's "greenseed" Irapuato, Mexico facility.

In the United States, Kerry's DCA and other subsidiaries have enabled the company to take a leading share of the processed cheese and dairy products categories. Kerry has also targeted the South American market for growth, with a production facility in Brazil serving that country and the Argentinean and Chilean food production markets. Kerry is also making moves to expand its presence in the Asia-Pacific region. In addition to a manufacturing facility in Sydney, Australia, Kerry has purchased a second production plant in Johor Bahru, Malaysia, from which to serve the booming population of the region.

Representing approximately one-third of the Kerry Group's annual revenues, the Kerry Foods division is one of the United Kingdom's leading manufacturers of refrigerated food products for the company's own Richmond, Wall's, Denny, Ballyfree, and Mattessons brands, as well as for private label and other third-party brands. Kerry Foods specializes in five product categories, with an emphasis on pork and other meat products, cold cuts, poultry, dairy, and convenience foods products. Kerry Foods focuses primarily on the Irish and U.K. markets, in which the company has built up an extensive distribution network, while continuing a steady expansion in the European Community markets. All of the division's manufacturing facilities are located in the United Kingdom and Ireland, including the company's Shillelagh, Ireland pork processing facility, commissioned in 1994, which remains one of Europe's most technologically advanced food processing plants.

In addition to meat products, which account for approximately 80 percent of Kerry Foods production, this division also manufactures and distributes dairy products, yellow fat products, including the company's popular "Move Over Butter" and Kerrymaid brands, and fruit juices and bottled waters.

The last of the three Kerry divisions is Kerry Agribusiness, which represents the company's founding focus. Kerry Agribusiness is responsible for the coordination of the company's 4,000-strong contingent of raw milk and other dairy suppliers. Kerry Agribusiness provides services to its network of dairy farm suppliers to assist them in maintaining the nutritional quality of their milk products while maximizing their production and cost efficiency. Kerry Agribusiness provides technical services, including breeding technology, services, and research, as well as a fleet of milk delivery vehicles and feed products to complement traditional grazing methods.

These three divisions enable Kerry to provide a vertically integrated food production, processing, and distribution system that has grown to take a leading role in the United Kingdom and European markets. The chief architect of the company's growth has been Denis Brosnan, managing director, who has overseen the company since its public listing in the mid-1980s.

Dairy Co-Op in the 1970s

The Kerry Group was formally established as Kerry Co-operative Creameries Limited in 1974, in Kerry County, Ireland. The Cooperative combined the dairy and dairy processing interests of a number of the region's dairy farms, including a dairy and dairy ingredients processing plant opened in Listowel, Ireland, in 1972. In less than 30 years, the company would grow from this small provincial creamery to one of the world's leading specialist food ingredients producers and distributors. The introduction of the company on the Dublin and London stock exchanges in the mid-1980s made millionaires out of many of the co-op's founding members.

A primary component in Kerry growth was its steady expansion through acquisition, as well as a willingness to invest in new production and other facilities. Through the 1970s, Kerry grew to include a large number of dairy farms and processing plants in the counties of Cork, Killarney, Galway, and Limerick, supplying to the company's Dairy Disposal Company, established in 1974 as the originator of the later Kerry Foods division. By the mid-1980s, the Kerry Co-op counted several thousand members.

In the early 1980s, Kerry began branching out from its dairy core into other food product categories. An early addition was the pork products category, which the company entered with the acquisitions of two prominent Irish pork products producers, Duffy Meats and Henry Denny & Sons, both acquired in 1982. The move into food processing raised Kerry to a prominent position in Ireland's food industry. By the middle of the decade, Kerry's annual sales topped IR£200 million.

By then the little dairy co-op had expanded to include a number of manufacturing and other food processing facilities, located throughout Ireland and Northern Ireland. In 1986, the co-op made the decision to transform into a full-fledged corporation, listing its shares on the Irish stock exchange. Leading this transformation was Denis Brosnan, who also served as the chief executive of the founding Kerry Co-Op. The newly public company reported strong growth after its first full year of operations, with revenues nearing IR£ 300 million, and net profits of nearly IR£ 6.3 million.

Brosnan led Kerry on an accelerated drive to build the business into a vertically integrated food production conglomerate, doubling the company's revenues before the end of the decade. The company continued its expansion in Ireland with the 1986 acquisition of Snowcream Dairies Moate, and the formation of a Convenience Foods division, bringing the company into this increasingly prominent market--particularly with the steady adoption of this food trend among European consumers. Parallel to this move was the stepping up of Kerry's specialty ingredients business. At the same time, Kerry also established a presence in the United States, opening a dairy processing facility in Jackson, Wisconsin in 1987. Kerry continued to build its U.S. presence, adding additional facilities in Wisconsin and Illinois especially. Part of the company's U.S. growth came from the acquisition of existing businesses, including the 1988 acquisition of Beatreme Food Ingredients.

Rounding out the 1980s, Kerry's acquisitions included Grove and Ballytree, adding turkey products to the company's food production division. These companies were added in 1988, as was S.W.M. Chard, which gave Kerry a presence in the English market. At the end of 1989, Kerry, which had reached revenues of IR£ 584 million, began looking to expand onto the European continent. This was achieved the following year when the company purchased Milac, of Germany.

Leading the Ingredients Market in the 1990s

At the end of 1991, Kerry's annual sales surged to IR£ 755 million. The company had continued to invest in its British expansion, acquiring Eastleigh Flavors for its ingredients business in 1990, as well as food processors A.E. Button and Sons and Miller-Robirch. The company added several more U.K.-based businesses in the early 1990s, including the foods division acquisitions of Buxted Duckling, and Kantoher Food Products, and the food ingredients producer Tingles Ltd. At the same time, Kerry increased its market focus with the formation of Kerry Spring Water in Ireland. Between 1990 and 1993, Kerry also added Dairyland Products and Northlands to its ingredients division, both in the United States. These were joined by the company's move into Canada, with the 1993 acquisitions of Malcolm Foods and Research Foods, in Ontario and Vancouver. In 1994, Kerry added to its North American presence with the commissioning of a state-of-the-art dairy processing facility in Irapuato. In Ireland, the company began construction on one of the pork processing industry's most advanced plants, in Shillelagh.

Kerry's acquisition drive continued into the late 1990s, bringing the company into France and Italy, with the purchases of Ciprial S.A. and its Aptunion, Ravifruit, Gasparini, and Gial subsidiaries in 1996; into Poland, with the acquisition of U.K.-based Margetts in 1994; to Malaysia, in 1997, with the purchase of SDF Foods; and Brazil, with the acquisition of Star & Arty in 1998. In the United Kingdom, Kerry added both Mattessons and Walls to its list of brands.

Two important acquisitions highlighted Kerry's expansion. The first came in 1994, when the company acquired the food processing business of DCA, elevating the company to a major position among North America's specialty ingredients producers, especially among the coatings and bakery market segments. The DCA purchase, which cost the company some IR£ 250 million, also introduced it to the Australian and New Zealand markets. After digesting this purchase, including restructuring its U.S. holdings into the new subsidiary, Kerry Inc., the Kerry Group once again began eyeing a new large-scale acquisition.

The opportunity for renewed expansion came in February 1998, when the Kerry Group announced its agreement to purchase the food ingredients businesses of the U.K.'s Dalgety PLC. For a price of IR£ 384 million, Kerry acquired Dalgety Food Ingredients' plants in the United Kingdom and in Hungary and the Netherlands--new markets for Kerry&mdash well as plants in France, Italy, and Germany. The Dalgety acquisition firmly established Kerry as the top specialty ingredients producer in Europe, and one of the world's leaders in its specific categories.

With the Dalgety acquisition expected to boost Kerry's revenues beyond IR£ 2 billion for its 1998 fiscal year, Kerry was already turning its attention to two new markets: the Far East and South America. Both of these markets represented a huge pool of potential customers, both for the company's own food products and brands, and for its ingredients products. The company's initial forays into these markets included plant acquisitions in Malaysia and Brazil, while the company forecasted that these markets would reach some 25 percent of the company's revenues early in the next century.

Principal Subsidiaries: Castleisland Cattle Breeding Society Ltd.; Dawn Dairies Ltd.; Duffy Meats Ltd.; Glenealy Farms (Turkeys) Ltd.; Grove Turkeys Ltd.; Henry Denny & Sons Ltd.; Kerry Holdings Ltd.; Kerry Ingredients Ltd.; Kerry Agribusiness Holdings Ltd.; Kerry Creameries Ltd.; Kerry Farm Supplies Ltd.; Kerrykreem Ltd.; Snowcream (Midlands) Ltd.; A.E. Button & Sons Ltd. (U.K.); G.R. Spinks & Co. Ltd. (U.K.); Kerry Foods Ltd. (U.K.); South West Meat Ltd. (U.K.); Henry Denny & Sons (NI) Ltd. (Northern Ireland); Kerry Group BV (Netherlands); Pegromar Sp.z. O.O. (Poland); Ciprial S.A. (France); Kerry Ingredients France S.A.; G.I.A.L. S.r.l (Italy); Gasparini S.r.l (Italy); Kerry Ingredients GmbH (Germany); Kerry Ingredients Australia Pty. Ltd.; Kerry Ingredients (New Zealand) Ltd.; Kerry Inc. (U.S.A.); Kerry (Canada) Inc.; Kerry Ingredients S.A. de C.V. (Mexico); Kerry Ingredients (S) Pte. Ltd. (Singapore).