THE BANNING of Irish pork products is unlikely to have a significant impact on large food groups such as Kerry and Greencore, with analysts sanguine about its effect on profits.
John O'Reilly, food analyst with Davy Stockbrokers, said that the discovery of potentially dangerous dioxins in pigmeat "will cease to be major news next weekend", unless some additional information is released. Although he acknowledges that there will be a short-term hit to consumption of pork products such as ham and sausages, he doesn't believe that the immediate demand impact will be sustained.
Through its Denny brand, Kerry Group is the market leader in Ireland in the savoury products category, and the ban on pork products will impact sales of this brand, as well as to a lesser extent, its Rye Valley frozen ready-meals business. However, the company is not a primary processor of pigmeat and analysts say that it will seek to recover any arising loss from its suppliers.
Liam Igoe, an analyst at Goodbody Stockbrokers, said that the total value of product recalls at Kerry could be in the region of about €4 to €5 million per week in the run-up to Christmas, but that the issue is likely to be resolved quickly.
Although Greencore uses pigmeat products such as ham in its sandwich business, over 90 per cent of this is based in the UK and raw materials are sourced there. As a result, Bloxham Stockbrokers said that the direct impact should be limited while any "pigmeat-related weakness in demand should be offset by higher poultry and beef sandwich output".
Last March, Glanbia sold its pigmeat business in a management buy-out to Rosderra Meats.
Looking ahead, Mr Igoe said that normal demand levels will recover, "as has been the experience with previous food scares" and that the bigger brands, like Denny, are likely to be the first to benefit from demand recovery.
Trading across all the major food stocks was weak yesterday on the Irish Stock Exchange, with Kerry Group the hardest hit. It lost 80 cent, or 4.8 per cent, to close down at €15.90. Other food groups with less exposure to pigmeats performed better, with Greencore adding 5 cent, or 6.3 per cent, to climb to €0.85 and Glanbia climbing by 5 cent or 2.6 per cent to finish at €1.94.
