View from Dublin: Customers the only winners in beef battle
As farmers blockade beef processing plants around the country, the ramifications are starting to move along the food chain, as it were. Beef processors are worried they will lose important retail contracts and may have to start letting staff go. The whole situation is an unfortunate, sorry mess.
Farmers say they are not getting a fair price for their beef.
Processors say they work in a low-margin business and they are at the mercy of highly competitive retail giants. Farmers don't really believe the processors. Who is telling the truth?
Beef farming, by and large, is not profitable for many of its participants. It is a tough business which can prove very lucrative if companies are large, nimble, innovative and are prepared to be dictated to by large retail chains.
The multiples often use the sale of cheap beef as a loss-leader to attract people into the stores. How can you determine who is making all of the money from the beef industry?
None of the three largest beef processors in Ireland (ABP, Dawn and Kepak) publish accounts. They are all unlimited liability businesses, mainly owned through investment holding companies on the Isle of Man and Jersey.
Of the three largest retail giants in the Irish market (SuperValu, Dunnes Stores and Tesco), only SuperValu publishes accounts.
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Neither Aldi nor Lidl publish detailed accounts for their Irish operations either.
Dunnes Stores is owned by an unlimited liability company and Tesco Ireland is actually owned by a Luxembourg partnership and a Dutch-registered company. Tesco's ultimate parent group does publish accounts as a plc. But you won't find anything meaningful about profits from the sale of meat in Ireland.
Farm income surveys do show that many beef farm operations in Ireland are unprofitable. That may be about to get a lot worse because of Brexit, the Mercosur trade deal and the climate change-inspired drive away from meat. Even the UN is now encouraging people to eat less meat.
Aldi was selling a Father's Day 18oz steak in its UK stores this year for just £7.99. It was just a promotion, but beef is not really a branded product and so the retailers ultimately call the shots. Perhaps the real problem here is that beef is simply undervalued and sold too cheaply.
Consumers are the big winners in all of this. But surely this isn't sustainable if the people who produce the product continue to be the big losers.
n Speaking of beef barons, Larry Goodman looks set to expand one of his other business empires beyond meat. Goodman has been linked with buying out the shareholding in the Hermitage Medical Clinic owned by Sean Mulryan.
Goodman is already a substantial shareholder in the Hermitage. He is also a major shareholder in the Blackrock Clinic and the Galway Clinic.
He is clearly a big believer in the long-term profitability of private medicine, given our ageing population and the obvious failings in the public health system.
Yet, of the three, Blackrock is the only one that has really delivered consistent, stellar profitability. Between 2010 and 2016, it racked up profits of €90m. Profits at the Galway Clinic fell in 2017, by 44% to €5.15m.
Accounts for Torcross Ltd, the parent group of the Hermitage clinic, show that at the end of 2017, it had outstanding debt of €77m, including loans from shareholders of €39.2m. The shareholder loans don't even pay any interest.
The accounts said it faced challenges generating the returns required to pay down its significant outstanding debt. These include inflation pressures in people costs and the medical supply chain and pricing pressures with health insurers.
Pre-tax profits were down from €4.5m to €2.6m in 2017. One of the issues highlighted in the accounts is the fees paid by health insurers. Insurers are playing it a bit tougher with private hospitals on what they pay.
Perhaps Goodman sees a clear advantage in collective bargaining by controlling three of the biggest private hospitals in the country.