Merger of dairy companies involves major rationalisation

A major rationalisation programme is underway in late 1997 after the merger of two of Ireland's largest dairy companies, Avonmore and Waterford, with over 750 jobs to be shed on a voluntary basis as plants and depots are closed or reduced in size.

The merger of two of Ireland's largest dairy companies, Avonmore and Waterford, to form the new Avonmore Waterford Group (AWG), which was approved during the summer of 1997 by shareholders, is to involve a major rationalisation programme, details of which were announced on 24 November. The company is looking for at least 750 job cuts from a total workforce of 6,500 in Ireland. It is now the fourth largest dairy company in Europe and the fourth largest in terms of worldwide cheese production.

Meanwhile, 550 jobs are to be cut in the firm's UK-based operations although AWG has not decided where it will rationalise its operations there. Stockmarket analysts in Dublin expect AWG to aim for dominance in the midlands and in the south, which could see it swapping its Durham and Manchester plants with Northern Foods for some of Northern's assets in the south of England.

While officials from the two main trade unions involved in AWG in Ireland, SIPTU and ATGWU, condemned the level of job cuts, they approved the severance terms on offer. Members are, therefore, free to volunteer for terms which have been "capped" at IEP 100,000 per person. In conjunction with the state's job creation agency, Forbairt, the company has set up an IEP 7.5 million fund and a special task force to help find alternative employment for the areas affected.

The voluntary severance package, one of the largest in Ireland for some time, provides for a compensation formula based on six weeks' pay for each year of service, an additional IEP 6,000 lump sum and payment of the legal statutory minimum in such cases. A spokesperson for AWG explained that a worker with 20 years' service would be entitled to around IEP 57,000 under the formula. It is expected that the average severance pay-out will be around IEP 55,000, with the total cost of the severance package to AWG expected to amount to IEP 57 million. The overall cost of the rationalisation as a whole has been put at IEP 159 million.

The reason behind the measures include the need to trim excess capacity and end the duplication of resources. AWG will retain only about 50% of its Irish-based liquid milk and milk processing plants and is expected to achieve cost savings of around IEP 60 million by 1999.