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Kerry Group Case Analysis

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The Kerry Group began over thirty years ago in the south west region of Ireland. Beginning as a dairy and ingredients plant the company has now flourished into a global leader in the food ingredients and flavor products area. Kerry Group is headquartered in Tralee, Ireland and through its manufacturing, sales, and technical centers around the world, employs over 20,000 people. The company supplies over 10,000 food, food ingredients and other flavor products to customers in over 140 countries. Kerry Group also has manufacturing and sales facilities in over 20 countries.

When Ireland joined the EEC or European Economic Community in 1973 many small dairies began to merge in order to compete with the larger dairy producing companies. Kerry also participated in the mergers with help from the milk suppliers of the County. Kerry acquired the State owned milk processing company along with its creameries. The Group also held a 42.5% stake in the NKMP Company for a total of 1.5 million Euros. At the same time, six of the eight independent Co-ops, which owned the other 42.5% stake, were acquired and became a new subsidiary of the Kerry Co-operative Creameries Ltd, which began trading in 1974. Kerry began as the smallest of six agricultural co-ops, a position that was soon to change.

As Kerry began growing they developed some key values in the SWOT (strengths, weaknesses, opportunities, and threats) analysis that are the backbone for the success of the Kerry Group. The major strength of the Kerry Group is procurement. Procurement allows Kerry to use available global resources in specialty ingredients, seasonings, coating systems, sweet ingredients, nutritional systems, and specialty proteins; by doing this they are able to acquire the highest-quality raw materials. Another strength of Kerry is technological development. Through technological development Kerry is able to develop flavors and gain an advantage over the competition. Kerry gains this technological advantage through research and development and acquisitions. The weaknesses of Kerry Group include the firm infrastructure. The Group's debt-to-equity ratio is inordinately high for a company of Kerry's size. Another weakness is in Kerry's Human Resource Management division. Management encourages the employees to think "Kerry" or in sense be "Kerryized," if employees do not follow this style of thinking they are let go. This type of HRM does not promote a high sense of creativity. The opportunities of the Kerry Group include rivalry and suppliers. Rivalry is low for the company. Kerry does not compete with one particular firm head-to-head across their entire product line. Also, Kerry owns most of their suppliers which allows the company to control cost and production; this in turn creates a huge opportunity for Kerry. And finally there are the threats for Kerry Group, which also include rivalry, as well as new entrants and substitution. We believed that rivalry was also a threat for the Kerry Group because many of Kerry's competitors are actual buyers. Reverse integration could occur, which means that buyers begin making the product themselves. Another threat for Kerry Group is new entrants. The barriers to enter this kind of industry are very low. And the final threat for Kerry Group is substitution. Unfortunately, there are many alternatives to the products that Kerry offers. Kerry has to keep evaluating there SWOT analysis in order to stay abreast of the situation and remain a competitive force.

Over the years Kerry Group began expanding its business, not only in the dairy industry but into the food ingredients and flavor areas. In order for the business to grow successfully the company had to implement a strategy. So, in the early 1980's the company began a five-year corporate plan. The company decided they wanted to be a leader in the food business. In order for this to be a success a management structure was put into place along with a top-rate research and development sector.

Kerry's strategy was simple. The company developed and equation for growth which was, strategy x capability x capital=sustained profitable growth. The organization believed then and still today that if one of the elements of the equation is missing that the end result will be zero profit growth.

With the strategy the company developed in the early 1980's the company began acquiring new businesses and entering new global markets. With these new business ventures came success and the company decided to go public in 1986. With this move the Kerry Group acquired a first mover advantage by becoming the first co-operative corporation to become a publicly

limited company. Kerry Group plc is listed on the Dublin and London stock exchanges. The company has a current market capitalization of over 3.4 billion euros.

As stated, in the early 1980's Kerry Group began acquiring new businesses. By acquiring new businesses this allowed Kerry to diversify and reduce risk. In 1987-88 the Group acquired the first overseas firm, Beatreme Food Ingredients, a division of Beatrice Corporation located in Jackson, Wisconsin. This began the move to Kerry's first food ingredients manufacturing plant. The Kerry Group initially developed its European food ingredients business in the dairy, confectionary, and convenience food center from the Listowel plant in Ireland and the Wadersloh plant in Germany. With the acquisitions of Eastleigh Flavors and Tingles Ltd. in 1993, the Kerry Group became a leading supplier to the greater Europe snack food and food processing industries.

In 1994, Kerry Group acquired DCA, a company that specialized in the manufacturing of food ingredients for the baking, food processing, and food services industry. Because DCA had operations in five countries it made Kerry Group a world leader in the food ingredients business.

Even though Kerry Group continues to acquire many new businesses and



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