Gabriel D’Arcy has not taken the normal path through Irish corporate life.

Instead of an apprenticeship with a big-four accountancy or law firm, his was in Lebanon as a peacekeeper in the early 1980s. He joined the army straight out of secondary school, and served for 12 years.

“The army was a great starting point”, says D’Arcy. “It inculcates certain values that stick with you for the rest of your life.

“You understand the power of camaraderie, loyalty and dependability. And you learn how important it is for you to be dependable.”

Whatever it is D’Arcy learned in the army, it seems to apply to all kinds of industries and situations. 

He’s led a €600 million business for Kerry Group, served as managing director of Bord na Móna, and through multiple mergers helped create Ireland’s second-biggest dairy co-op. Now he’s chairman of a virtual reality startup, a lecturer at DCU, a Brexit strategy consultant, and sits on the board of a Sri Lankan tea exporter.

He’s worked in the food industry, natural resources and technology. And he’s managed acquisitions, early-stage growth companies, and strategic pivots. 

D’Arcy was fortunate that his first job out of the army, at the age of 30, was with Kerry Group. Kerry is of course one of Ireland’s most dynamic companies. 

Kerry is known for the quality of its management, particularly around acquisitions. Most acquisitions fail, but Kerry seems to have the knack of making them work. Since its first acquisition in 1982, Kerry has bootstrapped itself to the top of the global food industry. 

When D’Arcy joined in 1988, Kerry was on a run of big, aggressive acquisitions in businesses outside its traditional dairy base. D’Arcy found himself managing some of these new businesses.

By the age of 50, D’Arcy had two full careers under his belt — one with the army and one with Kerry. They set him up for his third, fourth and fifth acts with Bord na Móna, LacPatrick co-op and VRAI. 

I caught up with D’Arcy over Zoom to talk about what he’s learned through his career, and the opportunity in front of VRAI, his latest venture. 

We discuss:

• His hardest career transition
• Why “culture eats strategy for breakfast”
• How to acquire a company well
• Turning a big organisation ninety degrees
• One of his great legacies: a spraying tower in Tyrone
• Why Coillte should merge with Bord na Móna
• Why a good Brexit deal for the EU isn’t necessarily a good deal for Ireland
• How his virtual reality startup VRAI will quadruple its valuation by 2022.

The Kerry Way

Sean Keyes (SK): You had 12 years in the Army – a full career in itself – before you worked in the food industry in different ways with Kerry Group and later on, the co-ops. Then you led semi-state companies. Now you’re in technology and academia. So there have been a number of career transitions. What was the most difficult career transition you ever made?

Gabriel D’Arcy (GD): The biggest transition was probably from Kerry to Bord na Móna. 

I was in Kerry for many, many years. I wasn’t at the same job for more than six months at any time in Kerry. It was in this massively dynamic period. 

When I got the job, little did I realise at the time that Kerry was the unique organisation that it is. It was going through a massive transition under Denis Brosnan. Brosnan correctly recognised that for Kerry to grow at a time of dairy quotas, it had to move out of its core competency. 

So guys like myself and others started off in dairy, and then wound up moving, following acquisitions, into other non dairy-related businesses. Beatreme was the first big acquisition. At that time, Kerry was maybe a £200-300 million company. And that acquisition effectively doubled Kerry’s size. And if you think about it, Kerry is the youngest dairy co-op in Ireland. It was only formed in 1972. It was the very first co-op globally that innovatively came up with a way to go public. It sold 20 to 25 per cent of itself to the public market while still maintaining the farmers’ controlling interest.

Obviously Kerry has grown dramatically, and it’s a multi-billion euro organisation today. When I started, 90 per cent of 85 per cent of its revenue came from dairy. And today, less than two or three per cent of total revenue comes from dairy.

It was a very, very rapidly changing organisation. It was an organisation with an appreciation of change, an understanding of change and understanding the need for change. That was my real learning coming out of Kerry. That, and performance. In Kerry, you had to perform both as individuals and business units and so forth. It was very demanding. But it was also very exciting.

At the time I was living in Dublin. I was gone on a Monday morning and I was back very late on a Friday evening, maybe having gone to three or four countries. I was commercial director for our food ingredients in Europe at the time, and I had lived for most of that preceding 20 years in London. And by 2007, our fourth child had been born. And, of course, I hadn’t been around for any of the births. And I hadn’t seen the older guys, who were then eight or nine. I was spending just too much time away. I needed to get back to Ireland. So I learned about the role as managing director of Bord na Móna. And I went for the job.

So, anyway, that was a big change coming from this uber-dynamic, rapidly changing, growth-oriented organisation and coming into a company – Bord na Móna – that was somewhat averse to change. 

It was beginning to show an appetite to grow, but didn’t have the same appetite for change as its shareholder. But yet, the business was facing massive challenges, as have subsequently played out. So that was the biggest change. 

“The likes of a Bord na Móna that are looking to repair wind turbines with a 100 meter-tall hub, another 50 meters to the blade tip, and they need to do some repairs. So how do you train an engineer?” 

Gabriel D’Arcy

SK: A theme that comes up through your career is acquisitions, and the challenge of bringing together different cultures. You’re experienced in that both as somebody who was integrating companies for Kerry, and was involved in various co-op mergers. And then there was a culture shock moving from Kerry to Bord na Móna. Did you try to change the culture at Bord na Móna, and shake things up? And did you find the organisation was resistant to change? How did you go about changing things there? 

GD: You’re right that it was a culture shock, but it wasn’t I that was suffering a culture shock. It was the organisation. I literally came through the roof into Bord na Móna. I didn’t know anybody. I didn’t know much about their businesses. I think from the minute I arrived, things began changing.

For instance, on my first day, I was met by the company secretary and taken down to my predecessor’s office that was now going to be my office. I went upstairs into a kind of a deep-pile carpet. 

Now remember, I was running a €650 million business in Kerry, using only a laptop, and hot desking. I had an office in Bristol at the European headquarters of Kerry Ingredients Europe, but I spent maybe one day or half a day a week there.

So I arrive in Bord na Móna anyway and in the five or 10 minutes that I was walking down to the office, the company secretary told me the number of meeting rooms they were renting from hotels on a daily basis, because they didn’t have enough space at the office. 

I saw my new office was quite palatial. The painters were in, and it was an en-suite. I remember just kind of laughing and saying I wouldn’t be moving there. It wasn’t me. We converted the office into a meeting room and we converted the en-suite into another meeting room. 

I wouldn’t have been used to spending time in offices, so, I think that was the first culture shock – not for me, but for the organisation. And it’s funny, the culture of the organisation comes from the top. Suddenly, nobody at Bord na Móna wanted an office.

“The bottom line here is that Britain is still a food deficit country. And before it cuts off the hand that feeds it, it would need to have another hand ready.”

Gabriel D’Arcy

So I started from there. We developed a canteen because, in Kerry, there was a very strong informal structure where people would meet from different divisions, different parts of the organisation over coffee at the coffee break or lunch. And actually it was a very powerful communication system. So, we did that at Bord na Móna as well.

At the time, there’s about 2,500, 2,700 people in Bord na Móna. It needed to change. Because of the environmental scenario, because of the carbon emissions, because of a whole variety of different issues. And so we went through what I would term an appreciative inquiry. We pulled in maybe 120 managers and we had a number of workshops about what was going on in the world. We pulled in some of the key stakeholders, and had a very open and honest discussion about the future of peat harvesting, the environmental consequences of it. And not alone that, we asked what are the new opportunities we should be engaging in where we do have some unique strengths. And that brought us into the renewable energy space. And I think that’s probably my biggest legacy at Bord na Móna, leaving the largest renewable player in the island of Ireland.

SK: Most mergers fail, and culture clashes often get the blame. Kerry, on the other hand, has a great record for acquiring and integrating companies, and when you were with Kerry you were personally involved in integrating a few of their acquisitions. How did Kerry do it? Why do acquisitions fail?

GD: I am a great believer that culture eats strategy for breakfast. Culture is everything. The behaviour, the way people interact, the norms within organisations. So, a lot of the acquisitions that I was involved with at Kerry involved companies that were badly invested, poorly invested, badly motivated – very little training or development of staff – but actually had some technology or some customer listing that made it very attractive to Kerry ingredients. So a lot of what I did then was slowly but surely integrating in the Kerry culture of performance, perseverance, understanding what the expectations of Kerry are and actually investing in staff.

Because, in actual fact, most people that I come across are open to actually having these conversations. Everybody has got potential, and, you know, a lot of the conversations that I would have gotten involved in, my role is really to unlock those people’s potential. To kind of maximise their own performance. To try to help them learn, and provide them with the tools and the vision, rather than trying to teach them. I think that’s a great way that Kerry has developed. It tends not to get too much involved in argy-bargy, hammering, a dictatorial sense of “this is what you need to do now” – when it’s clear that the company that has been acquired that just does not have that capability right now. I think the Kerry way is more to, you know, advise and to assist those people to uncover their own knowledge and skills and facilitate those people.

SK: I’ve seen, up close, acquisitions in which the acquiring company tried to force the acquired company to change. It didn’t go well.

GD: Ramming change down a company’s throat rarely works. In fact, Kerry is great at adopting from other cultures. If Kerry sees something that works, they will adopt it for themselves.

SK: At the time you left Bord na Móna there was talk of merging it with Coillte. It never happened. Would you be in favour?

GD: What people need to understand with Bord na Móna is that this isn’t something that has come out of the blue. This was the background to what we called “our new our new contract with nature”. This was something that was instituted in Bord na Móna in 2008. In the height of the decline in 2009-2010, led by myself, and indeed Michael Barry, our CFO, we raised $350 million from US pension funds. We brought it back and we used that to build out what are the largest wind farms in the country. This has been a hugely profitable enterprise, though it is not a labour-intensive one.

For sure, the era of peat harvesting is coming to an end. It used to be an incredibly labour-intensive industry. Bord na Móna was the main employer in the Midlands at a time when Ireland had little or nothing else going for it. Now Ireland has a lot more going for it. And actually, those boglands are being rehabilitated and actually are more valuable to Ireland in their intact state. 

Monaghan Town Co-op to Brexit deals

After Bord na Móna, D’Arcy took over as CEO of Monaghan Town Co-op. The trend in the industry was towards bigger and more efficient operations. So D’Arcy engineered a merger with the Co Derry-based Ballyrashane Co-op to form LacPatrick. Three years later, LacPatrick merged with the Cavan-based Lakeland Dairies to form the second biggest dairy co-op group on the island.

One of Lacpatrick’s biggest investments is a processing plant in Co Tyrone — the only one of its type in Northern Ireland.

SK: Not far from Strabane in County Tyrone is a €33 million dairy processing plant. As LacPatrick CEO, why did you think it was an investment worth making?

GD: That evaporation and spraying tower is one of my legacies, I would like to think. 

And it’s never easy bringing different stakeholders on a road, but they needed to be brought on a road of consolidation and investment. More importantly, that plant largely mitigates the Ulster dairy sector from whatever type of Brexit emerges. The Strabane plant matters because it has the ability to process a very significant quantity of milk, and a facility like that was never in the northern part of the country before.

From an economic point of view, Brexit is probably as challenging as Covid. I think it’s kind of lost a bit of focus, I guess because of all the difficulties surrounding the pandemic, but it hasn’t gone away. And it’s lurking there in the background. But I just think that it needs to be brought back into focus. Because it seems as if there’s a government in the United Kingdom that is hell-bent on making this happen. And it’s not particularly worried about the consequences for Northern Ireland or the Republic.

“Kerry is great at adopting from other cultures. If Kerry sees something that works, they will adopt it for themselves.”

Gabriel D’Arcy

SK: Will there be a deal?

GD: I think that after a lot of bravado, a few harsh realities now have emerged. Number one, recently the US Secretary of Trade said that they will not be in a position to do a trade deal with the UK by the end of this year. That is a critical weakening of the UK’s negotiating position. Everybody wants to get a sensible deal. But the British side needs to understand that there are two sides to this problem. To paraphrase Mr Johnson, you cannot have your cake and eat it. And the consequences and the negative consequences for Europe, they have totally underestimated.

I sincerely believe it’s in nobody’s interest, least of all Britain’s, to crash out the EU without a deal and revert to WTO rules. It would be a hammer blow to Irish interests. Particularly the food industry. Such a huge quantity of our output – dairy, beef, fish. Every sector of Irish agriculture would be negatively affected by this. Now, I mentioned the chances of this happening, I believe have reduced somewhat by virtue of the fact that America has now been very clear that they would not conclude a trade deal. 

The bottom line here is that Britain is still a food deficit country. And before it cuts off the hand that feeds it, it would need to have another hand ready. America was certainly one of those. So, the fact that the Americans just come out and said this so clearly puts more pressure now on the British negotiation position. So my feeling is that actually the chances have ever so slightly increased of getting a deal. 

Sometimes from an Irish perspective, we think that a good deal for the EU would be a good deal for Ireland. We just have to be careful. In fairness to Barnier, and with a lot of significant input from Phil Hogan and others, he is trying to negotiate this path. But he has to balance the need to get a deal, because obviously nobody wants to revert to WTO, he needs to balance that with actually not diluting a deal so much on the European side that it lets Britain have its cake and eat it. In other words, having relatively unfettered access for its key exports, unfettered access to the single market, while at the same time, as they call it themselves, “bringing back control” over various different elements that they want to control. Because if Britain is seen to have done well, it would incentivise other countries to go the same way.

“Kerry tends not to get involved in argy-bargy, hammering, a dictatorial sense of ‘this is what you need to do now’. The Kerry Way is more to advise and to assist those people to uncover their own knowledge and skills and facilitate those people.”

Gabriel D’Arcy

SK: It seems like Brexit negotiations are constricted. How much leeway does Barnier have at this point?

GD: There have been two outstanding leaders, in my opinion, that have really shown their mark in the recent past. Number one is Tony Holohan, the senior medical advisor who has guided us through Covid. He’s an outstanding individual with strong negotiation and communication skills that have been in evidence lately. And he has displayed awesome leadership.

The second person that I would highlight in terms of leadership in terms of clarity, efficiency and being totally transparent is Michel Barnier. He now is going getting through his third or fourth negotiating secretary from Britain. And the one thing that confounds them is Barnier’s consistency. He has said more or less the same from the get-go as he’s saying now. He hasn’t changed his tune. He’s been very open, very transparent. And I think he has displayed great courage and leadership in representing the European side.

Risky, rare and dangerous

SK: Tell me about VRAI.

GD: VRAI a virtual training environment, where you can recreate whatever that environment is. And then combine that with data capture and analytics, which gives you a lot of information about the quality of the learning by the student. So it’s a much higher-quality form of learning and it’s much more interesting and much more fun than traditional learning techniques.

SK: Where does AI come into it? 

GD: Artificial intelligence is being used to analyze and collect data and provide useful information. And also it can be used to predict outcomes. 

For example, we just did some work with a very large international airline at Heathrow airport where their main cargo base is located. At this main cargo warehouse, they’ve got a massive building, five storeys high, maybe the size of three football fields. So traditionally they’ve had relatively high staff turnover. Yet the efficient functioning of staff is critical. And so, when they onboard with our VR tools, they have cut that time from about 90 minutes at normal lecture and tour to about 15 minutes.  

There’s no need for a manager to explain the whole setup and how they interact in a safe manner. And we’ve got the data showing that whereas in traditional learning settings, knowledge retention traditionally would be maybe 50 per cent; using virtual reality increases knowledge retention to 95 per cent. And training time goes down by 75 per cent. So it’s a much more powerful, much more effective training tool, particularly in this risky and rare environment.

“It was an organisation with an appreciation of change, an understanding of change and understanding the need for change. That was my real learning coming out of Kerry.”

Gabriel D’Arcy

SK: VRAI is for risky and rare environments. So does VRAI design a bespoke experience for every customer?

GD: Yes, it does. It has some generic programs, but in the main, it designs bespoke experiences for clients. The type of clients we would have would actually be the sort of companies that I used to work for. Old world companies using this very new world technology. Companies like for example the ESB, or indeed the likes of a Bord na Móna that are looking to repair wind turbines with a 100 meter-tall hub, another 50 meters to the blade tip, and they need to do some repairs. So how do you train an engineer? You might train an engineer at the actual control box, replacing the fuse or circuit board. But how do you train them to do this at 100 meters height with a storm blowing?

Similarly, we’ve done some very interesting work with the United Nations in Somalia, doing virtual reality training of UN civilians that are learning how to how to look out for explosive devices. We’ve done work with Google, with Pfizer, Samsung. A lot of manufacturing companies. Energy companies would be a key area. So any company that is actually got a training need in a hazardous environment like the Defence Forces, or an armaments company that wants to demonstrate or wants to train people. To do this virtually is a much more powerful and more memorable way than to do it in the traditional sense.

SK: VRAI isn’t Ireland’s only promising AI startup. There’s Immersive VR Education in Waterford and Warducks on Pearse St.

GD: The total virtual reality market is very wide and it’s very, very deep. In total, the VR market is expected to reach maybe €50 billion in five years time. 

VRAI’s two founders – one of them used to do a lot of work for RTÉ, Niall Campion. He’s the guy that does a lot of the film work. The other co-founder, Pat O’Connor, has come out of an army background. 

The army showed him the value of virtual reality experiences. For example, training a gunnery crew would require class lectures followed by firing ten rounds at maybe ten grand a pop. Could that be done virtually? Where you’ve got a real battlefield scenario playing out in front of you, including the enemy, including the friendly forces, and where you can actually zero in on the target and fire. And if you miss, you can make amendments to adjust for the wind or adjust for elevation, and fire again to get on target. You can do that virtually without the need to go on to the firing ranges. They’re the sort of opportunities that there are in bringing risky scenarios into a virtual world.  

SK: I can see how VR would be a good fit for these risky, rare and dangerous edge cases. Like fixing a wind turbine. But is there a question of whether risky and rare is bad from a business perspective? Because you’ve got to create a new bespoke product for each client, and then the work has got to be done over and over again. So is there a plan to build a standardised product, which VRAI could charge for repeatedly?

GD: A lot of our customers are sharing sensitive data, and bringing us confidentially into their operating environment. So they are very, very, careful about protecting their intellectual property. And we’re developing systems that build on their actual specific environment. So, we have to be very, very careful and we pride ourselves in our confidentiality in this regard.  

That’s on one hand. On the other hand, there are a lot of areas of standardisation. So for instance, once you do one of these offshore wind turbines, you can take a lot of that material and standardise it. And then do the final bit of specialisation for each client.

SK: So over time, projects for clients can turn into products. 

GD: Yes, but first and foremost, it’s important to stress that we respect confidentiality. For instance, the data that we collect, in many cases that data is co-owned. A lot of these projects are very core to the operating environment of the particular target company. So, confidentiality is key. And we are very focused on ensuring that there is no slippage or seepage in that regard.

But our aim here is to help large organisations whose activities are risky, remote and rare to get their training in an authentic, memorable and measurable way. In one line, that’s our role. That’s our mission. Our main focus areas would be as I outlined in security, defence. Logistics is a big area of growth. The energy sector is an area of great interest. And the pharmaceutical biopharma manufacturing sector. And we’re a company is going through quite a bit of growth at the minute.

SK: You’ve just raised money from investors. Was it difficult to make the deal during Covid?

GD: The appetite for innovative technology that combines probably a lot of old-world bread and butter issues and challenges with new world technology such as VR. That appetite has actually increased, as you can see in some of the public markets with the likes of Zoom and other relatively new technologies being embraced and adopted much more rapidly as a result of Covid. That is also cascading down into VR. So we’ve got a huge amount of inquiries coming in now, for a lot of companies that are looking to do more and more of their training remotely. And VR is is absolutely prescient, and is on the verge now of making remote learning and development an actual reality. So that’s driving a lot of the demand. 

And of course, from an investor’s point of view, the interest is there, as can be seen on the public markets, but also in private markets and venture capital and so forth. So I’m happy to say that we succeeded in getting this investment. It’s our second investment in total. We raised about maybe one and a half million. And the probability is that actually the growth is coming a little bit ahead. We’re playing a bit of catch up, I guess, because there are a lot of enquiries coming in. Companies want to know here and now what can we do for them to assist in some of their training needs, even the most simple of things that you very much take for granted. So for instance, take getting a driving lesson in a driving school. How can that be brought into a VR application? Because clearly, there’s a challenge there with social distancing. So you can appreciate the actual volume of stuff coming in is quite significant. 

What are we going to do with this money? Well, look, we’re after hiring a data engineer. We’re bringing in some more people into our production. So we’ve gone from – last year we started with six or seven on the team. We were using an outsourcing model, pulling in people as we needed. We now have 14 people and that’s going to increase.

SK: And you’ve just completed a funding round. Did you find it difficult to do the deal given Covid?

GD: To be honest with you, it’s hasn’t been a huge challenge. I thought that it might be, trying to do this in the midst of a pandemic. Because in normal times, you would have had to go through quite a few meetings and explain to people and do a lot of information sharing, person to person, and meeting to meeting. Actually, none of that was done. It was all done online. And it all went very smoothly. 

People are now getting more comfortable with the technology. I think the biggest challenge is actually trying to look at the credibility of the counterparty. That’s why it’s useful to have people on board who already have some recognition, or credibility. If you look at the key elements here, it’s all about integrity, dependability, confidence. And I think that sometimes it’s hard to convey those characteristics virtually, if we’re meeting people for the first time. I actually do have a bit of a background.

SK: What’s the vision for VRAI? What sort of products will it offer? How big could it get?

GD: It’s currently valued at about five million euros. I would like to see us quadruple that over the next few years. The good thing about this model is that it can grow exponentially. Obviously, there’ll be certain amounts of standardisation, but some of the projects that we’re involved in are very, very significant. NGO projects with large global players. Once we develop the project on one of their key customers, they will then be able to roll it out to all their other global customers. So that’s a very exciting way of scaling the business. And that’s one we’re focused on just right now, with one or two of these customers.

Covid-19 is going to give it an extra kick in terms of making it easier for conservative organisations to adopt this technology. So the technology and virtual reality and augmented reality as deployable technology is very rapidly becoming mainstream. And the really interesting part then is the analytics that can be put on it using artificial intelligence.

So the sky is the limit really. In Kerry, we doubled in size every five years. I think in VRAI we can quadruple in every two-year period.