KENYA – Ice cream manufacturer Razco Limited has been cleared to buy out its rival Alpha Dairy Limited, adding to the growing list of acquisitions in the dairy industry.
Razco Limited is the producer of the popular Lyons Maid brand of ice cream while Alpha Dairy produces Ooh! ice cream.
Competition Authority of Kenya director-general Wang’ombe Kariuki said the proposed deal meets the legal threshold and approved its completion.
“The merger will not affect competition negatively,” Mr Kariuki said without disclosing the value of the transaction.
Razco Limited’s turnover in 2014 was about Sh457.5 million while Alpha Dairy Limited’s turnover stood at an estimated Sh207.8 million.
“The combined turnover was Sh665,402,512 and therefore below the minimum threshold for mandatory notification as contained in the Merger Threshold Guidelines.”
The deal adds to a string of others that have recently been registered in the local dairy industry.
Only last year French food group Danone announced it had bought a 40 per cent stake in Brookside, East Africa’s top dairy producer, as part of plans to expand in new markets amid weak growth in Europe and a slowing economy in China.
Founded in 1993, Brookside has a distribution network of more than 200,000 outlets. It manages the largest milk collection network in East Africa, dealing with 140,000 farmers in the region. Its product portfolio includes yoghurt, butter, fresh and powdered milk.
Danone, which generates 60 per cent of its turnover in emerging countries, has in the past few years invested more than €1 billion (Sh110 billion) in Africa.
The maker of yoghurt brands such as Activia and Actimel in 2013 bought a 49 per cent stake in Fan Milk International, a frozen dairy products and juices maker in West Africa with sales of €120 million (Sh13.1 billion).
String of acquisitions
Danone also paid €550 million (Sh60.3 billion) to take control of Morocco’s top dairy firm, Centrale Laitiere.
Prior to the deal with Danone, Brookside had made a string of acquisitions locally in a move that boosted its market leadership.
Brookside that is associated with the Kenyatta’s family in 2013 acquired Buzeki — the producer of Molo Milk and Kilifi Gold — at a cost of Sh1.1 billion. Its other buyouts include that of Ilara, Delamere and SpinKnit (producers of Tuzo milk brand).
Competition in the dairy sector has over the years mainly been between Brookside and State-owned New Kenya Co-operative Creameries even though smaller players such as Githunguri Dairy Farmers Co-operative, processor of the Fresha milk brand, have fast gained ground.
Kenya Dairy Board data for the first half of the year to June shows Brookside Dairy is still Kenya’s biggest milk processor by market share, but the top three companies are increasingly ceding their market dominance to smaller firms which together controlled 31 per cent of the pie as at June.
According to the Economic Survey 2015, the value of marketed dairy produce increased 11.9 per cent from Sh16.8 billion in 2013 to Sh18.8 billion in 2014, as a result of higher quantities of marketed raw milk and better prices of milk.