The milk cheque paid for everything – Edmond Scanlon – from Kerry farm to Kerry Group
That transition is now at an end. Scanlon officially took up his role on October 1 and McCarthy stepped down from the board on December 31.
“Savage pressure,” Scanlon says of walking into his first board meetings as chief executive at the company’s headquarters in Tralee. But he says it in the way a Kerry footballer might say it while lining up in front of Hill 16 in September.
Scanlon says he has held off doing interviews until now so that he “can get a few wins on the board first”, although quite what those wins have been he keeps to himself.
“There is a huge scale and breadth in this role that is exciting, but it’s a challenge as well,” he says. “It was great to have Stan as an umbrella. He is available to me but the transition period is over. I’ve been in Kerry all my life, so I know the business.”
In his previous role, as regional CEO of Kerry’s Asia/Pacific region, Scanlon was very operationally focussed. The first thing he has noticed is the vast number of stakeholders demanding a moment of his time.
“I’d be lying if I said I was comfortable from day one. You mentally prepare yourself and you have to make choices about what to focus on – and in recent months, I focussed on reconnecting with a lot of the business globally.”
That has meant lots of travel to North America, Europe and in particular Latin America, where Scanlon had little direct involvement in his various previous roles with Kerry Group.
“One of the first things I did was to travel to Brazil, Costa Rica and Mexico to make sure people know who I am and that I understand what they’re trying to do – their strategy, the types of investments they’re looking for.”
Another key priority was the unveiling of a new five-year plan for Kerry to the capital markets. It targets 10pc growth in earnings per share on average each year over the next five years and a continued focus on new acquisitions across the food sector is likely.
“I was part of that whole process (of developing the five-year plan) for the last 18 months and was exposed to everything that’s happening in each region. So being part of it, you have ownership of it. Of course, the timing of it was set in such a way that as the new CEO I was the one presenting that next picture, rather than Stan.”
Scanlon says that Kerry is well positioned to deliver on its targets.
“Our game is long term, it’s not big bang, next week, next month. This organisation has continuously performed well and that’s something that is not going to change under my watch.”
Scanlon may have been virtually unknown to the outside world before his appointment, but in its own way his story embodies the Kerry story, how he moved from humble beginnings on a dairy farm near the village of Brosna to become a globe-trotting company executive.
“The area would be known for musicians and my dad and my granddad were great musicians and storytellers. That passed me by, I’m afraid.”
But what was passed on to him was a deep appreciation of a company born out of community initiative in the early 1970s.
The Milk Cheque Paid for Everything
“Kerry was important in my life from as far back as I can remember. It would have been discussed in our house most days. The [milk] truck turned up every day, thank God. It was a very important part of our lives growing up and that milk cheque paid for everything.
“I had the good fortune on the back of Kerry dividends or shares or milk price or whatever to be able to be sent away to boarding school and that was a very important thing.”
Before he went off to Sacred Heart College in Carrignavar in Cork, farming seemed the obvious route for young Scanlon.
“As a kid, that was definitely more likely than becoming the CEO of Kerry Group,” he says. “My mother and father made a big sacrifice by sending me as the eldest to boarding school.
“That was a big deal and I think that sacrifice definitely does drive you to do things. In that part of the country, on a small farm I think you’re working against the odds a little bit and that’s part of the story of Kerry – very humble beginnings. A ‘can do, will do, have to do’ attitude would be instilled in you at a fairly early age.”
Every farmer in the region – including his own father and grandfather – who had played their part in the founding of the co-op that would later spawn the global food giant Kerry Group felt a tremendous pride and ownership, says Scanlon.
“It was a big reason why I went working for Kerry straight after college. I mean my parents would have been very proud of the fact. My grandfather would have died happy, knowing I had decided to go down the accounting path in college because that meant, of course, that I was going to go on to Kerry.”
It was therefore no great surprise in 1996 when Scanlon joined Kerry’s dairy business as part of the graduate programme. He moved around the business, serving time in the corporate office in Tralee and then in the huge ingredients plant in Listowel. His progress coincided with Kerry’s global expansion and when it decided to move its global head office for its taste business to New Jersey, Scanlon was deployed.
“My wife had our second child in New Jersey and we spent four years there before moving to Beloit, Wisconsin in 2008, when it became our Americas HQ.
“I was all in,” he says. “We lived in Rockton, Illinois and we were Americans and we absolutely loved it. We had great friends there.”
Heading to China
But by 2012, with Kerry truly globalising, it was time for the Scanlons to move again. The opportunity to head up the company’s operation in China arose. Despite the family’s comfortable American lifestyle, Scanlon stuck up his hand.
“There’s no doubt that had I not gone to Asia it’s highly unlikely I’d be in this role. I’ve been very lucky with the opportunities I have gotten. I didn’t know anything about China but the company was willing to take a chance. Giving people a chance is part of our history, part of who we are.
“And I trusted the organisation that if I did a good job in China, good things were going to happen. I wouldn’t like you to think that Kerry is so organised that there’s a five-year plan for everything but the organisation does appreciate guys that do those types of things.”
Looking back, Scanlon says his first day in China felt much more challenging than his first day as overall CEO.
“That’s no disrespect to the job I’m doing today but I’m probably more prepared for this one than I was for that one to be honest,” he says.
“My first day in China was a humbling experience. I didn’t know anything about the market. My kids now speak Mandarin but I wasn’t sent to China to learn Mandarin.”
Nevertheless, China was a success for Scanlon, largely because he quickly recognised the need to hire local talent. Kerry now has five manufacturing plants in China.
“In five years’ time I don’t know how many plants we’ll have in China but it’ll be more than five,” he predicts.
With success in China came further promotion and another move for the Scanlons as Edmond became regional CEO of Asia/Pacific, based in Singapore.
China Vs Singapore
Tiny Singapore was very different to China. Instead of being immersed in one market, Scanlon was now travelling across Asia between very different markets: Indonesia, Philippines, Thailand, Malaysia, India. Kerry was expanding rapidly in the region, driven on by a growth in the middle classes in many Asian countries and a consequent change in diets.
Sales in Asia and other developing markets topped €1.2bn in 2016. Kerry’s business in developing markets is now growing at a rate of 10pc per annum, compared to 4pc in America and 3pc in Europe, he says.
Scanlon’s Asian experience has given him a deep insight into developing markets. “In developing markets, customers need more help,” he says.
“They don’t have a huge amount of internal R&D or regulatory capability. They’re very focussed on their distribution channels and on their brands, as opposed to product development. Our model is one of collaboration. We help them develop a product that we feel is going to be successful.
“Take the example of a biscuit producer in the Philippines who wants to introduce a product at the premium end of the market. We work with them to understand the right distribution model or perhaps to understand what premium means in their market. What kind of flavours or tastes or format would be regarded as premium? Is it a biscuit, is it a cake, is it a bar?
“Through collaboration with our marketing or customer insight people in one of our global innovation centres, we can work with them to come up with a finished product that we would then perhaps take to a focus group of different types of consumers.”
Kerry’s job, he says, is to sell ingredients into that business customer – a filling, a seasoning, a flavour, a fermented product, a protein – and it’s the customer’s job then to get the new product out into the consumer marketplace, he says.
“But in an innovation centre like this one here in Naas, or one of the other ones we have around the world, they can go from the idea phase all the way to a physical product concept with us at a speed that is probably unique in the industry.”
But as Kerry has globalised, there have been growing pains back home. Few in Co Kerry would deny that the company has been an amazing boon for the region. From humble beginnings, it created wealth right across the community – for farmers, shareholders and employees.
But these days, the relationship with the region is more complex. Shareholdings have been split and passed on and more and more now they are held by non-farming descendants of original co-op members with different priorities to the past.
Farmers, by contrast, remain as concerned as ever about the volatile milk price and fear their connection with and influence on the company is slowly eroding. Employees and local Kerry businesses also see the development of a key facility in Co Kildare, rather than the southwest, and wonder is Kerry leaving Kerry behind. From time to time, there have been accusations that the company is forgetting its roots.
“Look, we’re disappointed about that, I mean that’s not something we want,” says Scanlon about the fact that some feel this way. “We’re very, very proud of where we come from. We’re very proud of the dairy heritage, it’s very important to us. It’s who we are. Yes, of course it’s a much smaller part of our business, that’s a fact. In five or 10 years’ time it will even be a smaller part still, that’s a fact.
“I mean, isn’t that fantastic because it means we’re growing in other places? There’s lots of goodwill within Kerry about Kerry and there’s some people upset about Kerry and that’s unfortunate but I think the goodwill outweighs that.”
Milk Price is ‘Emotional’
Scanlon describes the milk price as “a very emotional issue”.
“I don’t see that changing, I don’t think there’s anything we can do that’s going to take the emotion out of it. We would all love if there was a very steady milk price. We would love it, our farmers would love it and our customers would love it, so yes that would be fantastic but I don’t think that’s going to happen. But I think just restoring a bit of trust that’s been lost for one reason or the other and I’m not going to dig back up all that stuff but I do think the goodwill can be brought back. But it’s going to take a little bit of time.”
The company’s consumer foods business, Kerry Foods, is centred on Ireland and the UK, with brands including Denny, Dairygold, Galtee and Charleville cheese. It contributes about 15pc of the group’s profitability today.
“It’s going to be less than that in five years’ time,” says Scanlon. “That’s just a fact. But there are parts of that business that will grow at 10pc to 15pc a year. The environment is tough but it will continue to grow.”
But could Kerry under Scanlon’s watch choose to offload the consumer food business and its brands? No, he says. There are benefits to the wider business of having a consumer-focused food arm. But, more importantly, it is still a growing business with lots of opportunity.
“The question comes up all the time because the business is not growing as fast as our global taste and nutrition business. But it has put together a very strong plan for the next five years and its performance in a very difficult environment in the last three years has been very solid.”
Of course, a bad Brexit could present new challenges to a business that exports a lot of product from Ireland to the UK. Scanlon says the overall company has only limited exposure to Brexit but is still “preparing for the worst and hoping for the best” because of concerns over “the robustness of the UK consumer”.
Irish plants that supply the UK market for Kerry Foods have been preparing for this for some time, he says.
“We’ve seen the currency impact already. The local management teams have worked away dealing with that. Right now, we’re driving as much efficiency as we possibly can in those facilities and that will continue. We have transferred some production, not significant to be honest, but we have moved some production out of some of these plants into the UK, again because of the currency situation.”
But, he points out, the UK market is not self-sufficient and Kerry is as likely to go head-to-head with a French or Dutch company in the UK market as a British company, meaning currency is irrelevant.
Scanlon answers each question about his wide new brief without pause, as if he is discussing the ins-and-outs of a family business. Because, of course, for Scanlon that’s exactly what it is.