Nutrition chief leads the whey

Siobhán Talbot has enjoyed bulking up Glanbia. Her next step is to butter up dairy farmers

Normally around annual results time, Siobhán Talbot, the Glanbia managing director, is whisked from one investor meeting to another, ferried around investment houses in London and New York to face Armani-suited fund managers.

This year, having hosted an analyst conference call at the crack of dawn in Dublin city centre, Talbot, the country’s highest-ranking and best-paid women chief executive, travelled to Fermoy in north Cork to address farmers. Over the next few week she will meet a lot of farmers, so Wall Street can wait.

Talbot has a deal to sell. Glanbia Co-op Society, which is owned by farmers, is to buy a controlling 60% interest in Dairy Ireland, the consumer foods and agribusiness divisions of Glanbia, for €112m. Under the deal, the co-op will get control of the Gain Feeds and Avonmore milk brands.

Glanbia will no longer have to fret about the gyrations of milk prices. The public company will be free to concentrate on its fast-growing sports nutrition, US cheese and ingredients business, which has sales of more than €2bn, mostly in America.

The deal almost has the feel of an amicable separation, with the parents getting joint custody. Even after selling a slug of its Glanbia shares to pay for the Dairy Ireland stake, the co-op will still own more than 30% of the public company, valued at €1.6bn, and be its largest shareholder. Glanbia will still have 40% of the owner of Avonmore and Gain.

The parties have also had a successful trial separation. Glanbia Ingredients Ireland, a similar 60-40 joint venture between the co-op and Glanbia, took over the public company’s bulk milk-processing business in 2012. Processing 2bn litres of milk a year, the operation has merged snugly with Dairy Ireland to form Glanbia Ireland, a new company that will have a combined turnover of €1.5bn.

Following a planned investment programme of more than €250m, by Talbot’s estimation, sales should hit €2bn by 2020. That is real scale, she says.

Talbot is not fond of the separation analogy. “I think of it more as a strengthening of bonds. The farmers are getting control of ‘assets that are fundamental to their business’.”

The merger will create two “strong, commercially led and focused organisations, transparent about what we do, ambitious and with strong management”, says Talbot.

It is a landmark deal which, if passed, will be another notch on Talbot’s belt. Seven years ago her predecessor John Moloney proposed selling the whole of Dairy Ireland to the co-op. After an exhaustive campaign, farmer acceptance fell two percentage points short of the 75% needed in a two-stage vote. This time there will be one vote, with a two-thirds majority needed.

If anybody can sell the deal, it is Talbot. She grew up in Kilmoganny, a small village in south Kilkenny, and is “black and amber to the core”.

Talbot’s father was a farmer and supplier to Avonmore Co-op, while her mother was a national school teacher. Her father died when she was young, and her mother took care of five children while still teaching.

Siobhán Hickey, as she was then, flirted with the idea of following her mother into teaching. A love of numbers pointed her to a BComm, which led to a job with PwC. In 1987 she married Billy Talbot, a garda she met when they were studying for the Leaving Cert.

That year, Talbot got a posting to PwC in Sydney. Her husband took a career break and the couple spent two years in Australia, then moved back to Dublin.

A hankering to return to the southeast was sated by a job in internal audit at Waterford Foods. Talbot worked on Waterford’s protracted and difficult merger negotiations with local rival Avonmore Foods. On completion of the deal in 1997, Talbot became company secretary of Avonmore Waterford Group, which was rebranded as Glanbia two years later. Stints as deputy finance director and finance director followed.

In 2010 Talbot was diagnosed with breast cancer, and successfully treated. The experience instilled a need to grasp life’s opportunities, she says. Three years later she was appointed Glanbia group managing director, the first woman to lead a top-10 quoted Irish public company.

Insiders say Talbot has an in-depth knowledge of every part of the group, and she says: “It feels like I have worked in four different organistions. Every chief executive had a different style and vision.”

Yet the Holy Grail for each boss was the same: to diversify away from the commodity nature of liquid milk processing, a low-margin activity curbed further up to 2015 by the ceiling on production enforced by EU quotas.

“Within the organisation, the phrase we used was we needed to earn the right to grow,” says Talbot.

The right was earned in America. Avonmore Foods had purchased a dairy processor in Idaho in 1990, which it expanded. A decade or so later Glanbia invested in a $200m (€190m) cheese operation in New Mexico, a joint venture with a local farmers group.

The investment turned Glanbia into one of America’s biggest producers of cheddar. Pick up a Big Mac in the US and it is likely to contain a slice of Glanbia cheese.

The joint venture also turned Glanbia into a large producer of whey. Long considered a problem byproduct, whey “was land spread or fed to pigs” in Ireland, says Talbot.

In America, however, whey had another use: bulking up bodybuilders. The liquid would become the foundation of Glanbia’s ingredients business. The company bolted on a vitamin-mixing business in Germany and targeted the health-food sector.

Glanbia “became the R&D arm of a lot of smaller sports-nutrition companies”, says Talbot. As an ingredients supplier, it could see how fast these businesses were growing, and how markets were developing. Glanbia was developing new applications for the problem byproduct. “As our customers evolved, we evolved with them,” says Talbot.

In 2008, the company took the bold step of purchasing Optimum Nutrition, a maker of whey-based supplements, for $315m. Buying a consumer brand was a big “jump up the value chain”, says Talbot. “A lot of capital market folk were asking, what are you doing? Yet we knew what it was to own and manage consumer brands, and we know the sector.”

A decade on, Glanbia has not quite bet the farm on performance nutrition, yet it has acquired or established nine brands. From a standing start a decade ago, the company is a billion-euro business, with margins of more than three times what it makes in dairy.

“We are playing into a number of strong trends that touch into the areas of health and convenience, food that supports an active lifestyle. As an ingredient and brand owner, it’s the core of the strategy,” says Talbot.

Acquisitions follow a simple model. “We like technologies or brands that increase our relevance to the consumer or our [ingredient] customers.”

The market segment has burst out of the gym and specialty health-food shops. ThinkThin, a brand of protein snacks, was bought for $217m in 2015 because it “resonated with female consumers”, says Talbot. The deal brought Glanbia deeper into the mass-market “channel”, supermarkets and the “bars and bites” format.

We’re attracting lifestyle consumers — the people who run marathons, or want to

Glanbia recently bought Amazing Grass, a US company that sells plant protein “superfoods”. The deal opened up the vast vegan market and again increased Glanbia’s shelf space in supermarkets. Health food stores still account for 50% of all sales, yet that was almost 100% a decade ago.

Talbot also recently snapped up Body & Fit, a Dutch company that sells directly over the internet, mostly to athletes.

“We are attracting lifestyle consumers — the people who run marathons, or want to run marathons, and want to engage with food that will support that lifestyle. At the same time, we want to stay true to core, sports athletes,” says Talbot.

Glanbia has a market-leading 13% share in branded performance nutrition globally. Talbot says the company has the “killer brand” in Optimum Nutrition, which was founded 30 years ago by two brothers in Michigan. “Optimum Nutrition is a super-brand. It has a longevity that resonates across everything it does. It has an authenticity and trustworthiness.”

It is the nature of the businesses that founders and managers tend to be “passionate advocates” for healthy food. While Talbot admits the multiple of profits Glanbia pays in acquisitions is rising to double digits, clear targets exist: they must achieve a 12% return on investment within three years. The group recently told analysts it had the capacity to spend €350m on acquisitions.

“We are financially disciplined. We don’t suffer from deal fever,” says Talbot.

With such attractive margins, powerful competitors are sizing up the sector. Hormel Foods, a Fortune 500 maker of deli meats, with annual sales of $8bn, paid $450m for Cytosport, a performance-nutrition company, in 2014. Other deals will undoubtedly follow.

Glanbia’s best defence is its “knowledge of the totality of the sector”, according to Talbot. “We know dairy and whey and the efficacy of proteins. We can talk to the consumer space — we understand primary production.”

The company also knows how to do deals with farmers. In January it announced plans for a third large cheese factory in Michigan, a joint venture with Dairy Farmers of America, Michigan Milk Producers Association and Foremost Farms. When completed in 2019, the deal will bring Glanbia’s share of the US natural cheese market to 25%, and its slice of natural whey production to 10%.

The US deal is also further evidence of Glanbia’s comfort around joint ventures, as the company operates in “a phenomenally dynamic” sector, not only in the US, says Talbot.

Freed from the shackles of the quota system in 2015, Glanbia suppliers increased production by 30%, and are now looking to boost it by a further 30%. These ambitions will be supported by the co-op and its large holding in the plc. The co-op has spun out Glanbia shares to individual members and sold others to fund cash dividends. It has also guaranteed milk prices in three-year supply deals.

A analyst at Exane BNP recently mused that, with its Irish dairy business now at one remove, Glanbia could be a target for Ajinomoto, a large and deal-hungry Japanese conglomerate. Any bidder would have to pay a lot to convince its largest Glanbia farmer-shareholders to give up a growing investment.

For Talbot, the past decade has been a “fantastic journey” for her and the group. There is no sense that it is at an end.

Vital statistics

Age: 53
Lives: South Kilkenny
Family: Married to Billy, with one son and a daughter
Education: Scoil Mhuire, Carrick-on-Suir; UCD
Favourite film: Inception
Current book: The Little Red Chairs, by Edna O’Brien
Working day
Well, it starts early and ends late, but other than that there’s little routine. In fact, it’s the variety that keeps me interested. I spend about 65% of my time travelling, which can be tough, but you get used to it. Direct flights help. We say here it feels as if you can fly to Chicago and, with the time difference, get there two hours before you leave. It’s actually two hours later, but it’s still a very efficient use of time.
Following Kilkenny hurling and the sporting exploits of my son and daughter with Piltown GAA club.