What are the challenges facing the new Tirlán CEO?

The board of Tirlán announced on Friday that Sean Molloy, the chief ingredients and agribusiness officer, is to step into the position of CEO when the incumbent Jim Bergin retires at the end of July 2024.

The decision to appoint Molloy as the new CEO has been rumoured for some time, so the appointment is not a shock but nonetheless significant.

As the largest co-operative in the country, the CEO of Tirlán is one of the most important roles in Irish agriculture.

Molloy will not only lead the 2,300 Tirlán employees whose pay packet is directly linked to the performance of the co-op, but also the 5,000 dairy and tillage farmers that rely on the co-op to purchase their produce.

It is this relationship with farmers that will ultimately determine the success or failure of Molloy’s tenure.

He is not running a plc, where the sole focus is shareholder return. A co-op is different and a co-op CEO needs to think differently.

A co-op CEO needs to think long term and always act in the best long-term interest of the society members, its farmers.

At the sharp edge of the membership knife is the 4,300 dairy suppliers who depend on a strong Tirlán to pay a leading milk price and be competitive on input costs.

Change

In many ways, the decision by the board to appoint Molloy is a signal that it doesn’t want change. Molloy is an internal appointment who has been the effective deputy to Bergin for the last 10 years.

He’s not a whipper-snapper outsider with radical plans to shake up the co-op. Whoever succeeds him might be that person, but for now the board wants to keep the ship steady.

A part-time farmer from Offaly, he has 30 years of strategic thinking under his belt. He qualified in agricultural economics from UCD in 1994 and immediately joined the then-Irish Dairy Board on the corporate planning team.

He moved to PWC as a strategy consultant after four years and then joined the Glanbia Ingredients Ireland leadership team in 2006 and became a director in 2012.

He’s well known to farmers and regularly speaks at shareholder information meetings.

Together, Molloy and Bergin have spearheaded a number of initiatives, not all of which have been well-received by suppliers.

Plus side

On the plus side, Tirlán has managed to process all the extra milk produced by its suppliers since quotas were removed, which is a significant achievement considering the milk pool expanded by 95%.

However, this plan almost came unstuck in 2021 when peak milk restrictions were introduced to much controversy, only to be later abandoned as milk supplies didn’t increase in line with expectations.

That saga caused huge anguish to suppliers and rattled confidence in the dairy sector, even though the leadership team and board acted in good faith.

Loyalty bonus payments based on the levels of inputs purchased at the milk processor was another issue that rankled farmers, particularly in the early years when the plc had full ownership of the agribusiness stores.

Other issues around fixed milk price, particularly during the height of input cost inflation in 2022, upset many affected farmers.

Like most issues, Molloy was at the centre of this, but will point to the fact that Tirlán did more to help affected farmers than other co-ops.

Legacy

The de-merger from the plc and the stewardship of Tirlán’s expansion will probably be Bergin’s lasting legacy.

In the coming days, the first loads of milk will be entering the new and long-awaited continental cheese plant in Belview.

It is apt that Bergin announces his retirement now, just as the plant which caused so many problems in getting built is finally commissioned.

Future

For Molloy, there are a number of immediate challenges, not least finding milk to fill the new cheese plant.

In recent commentary, Bergin said the co-op will bring back supplies currently processed by third parties, but is still very much open to new suppliers joining the co-op, so supply is clearly a concern for him.

Further changes to the nitrates derogation is a big risk to the co-op’s milk pool, with two billion litres or just under two-thirds of the milk supply produced on farms stocked over 170kg N/ha.

If the derogation is to be lowered again, it is difficult to see how the co-op can maintain its supply. Reduced volumes will reduce plant throughput, increase processing costs per litre and reduce turnover.

Threat

The threat of a Government-enforced cow cull scheme continues to hang over the dairy sector, which is paralysing decision-making at farm level and a threat for co-ops such as Tirlán.

As the chief executive, ultimate responsibility for how Tirlán responds to these challenges will lie with Molloy.

Speaking recently at the Positive Farmers Conference, Bergin said that nitrates and water quality was the number one item on his agenda for the last 12 months. It is difficult to see how a new CEO will be able to dedicate the same time to this issue.

Navigating the co-op through these murky waters while at the same time keeping farmers happy on milk and grain prices will be Molloy’s main task.

He also has opportunities - bank debt at the co-op is at the lowest level since 2014 and Molloy has a fund of up to 12 million Glanbia plc shares which can be offloaded for other investments, which was put together as part of the demerger.

Style

His corporate style of communication has come in for criticism in the past and it’ll be interesting to see if it changes as he takes the top job.

There’s no doubt he’s highly intelligent and well-read, traits he will have to put to good use as he navigates the challenges as a co-op boss in a changing climate for dairy.

Substance will always trump style and if Molloy delivers for farmers, communication style will be irrelevant.

Being appointed CEO is a great achievement for Molloy. It’s a big responsibility and all farmers will be wishing him every success in the role.