Kenya – Employees of Buzeki Dairy Ltd, owners of the popular Molo Milk brand, have been asked to re-apply for their jobs with the new employer – Brookside Dairies Ltd.
This follows a takeover bid placed by Brookside Dairies of Buzeki for undisclosed sums of cash. Molo milk has been the leading brand in the market, ahead of its closest competitors New KCC and Brookside.
Industry insiders disclose that Buzeki, which was previously owned by a senior political bigwig in Kericho, has already sold off 50 per cent of its shareholding to Brookside.
A full acquisition is to be completed by August this year. As dominant players in the milk industry consolidate, at stake is some Sh2.6 billion allocated in the 2013/14 to fund free milk programme and expansion of school feeding program.
Also exposed is state-owned New KCC, which is slotted for sale through privatization but has been faced with bitter protests from farmers. Buzeki Dairy, a locally owned milk processor was established in May 2008, the parent company being Buzeki Enterprises that had specialised in providing distribution services to Spin Knit Dairy Ltd. It later terminated its contract with Spin Knit to venture into mainstream milk processing.
Buzeki Dairy Ltd currently has two milk plants one in Kilifi District and a much bigger one in Mau Summit in Molo. It was not possible to confirm the Buzeki-Brookside deal when The Standard Business spoke to Brookside, with officials remaining tight lipped.
In its acquisition spree, Brookside has managed to buy out all its close competitors including Ilara, Delamare and Spin Knit, which was selling the Tuzo brand.
This leaves out Fresha, owned by Githunguri Dairies and New KCC as the only other big processors in the market. A consumer study carried out in December last year shows that Molo Milk, manufactured by Buzeki Dairy, commands 18 per cent of the processed milk market followed by Brookside Dairy’s Tuzo and Ilara brands with 15 per cent each.
Three Brookside Dairy brands — Tuzo, Ilara and Brookside enjoy a combined market share of 42 per cent, according to the Consumer Insight survey
State-owned New KCC are placed at position five with a 10 per cent market share, ahead of Githunguri Dairy’s Fresha brand which controls nine per cent of Kenya’s fresh milk market.
Speculation is doing the rounds that New KCC could be the next processor to be bought out. In its rescue plan, the Government bought out directors of KCC 2000, who had bought the milk co-operative for a sum of Sh500 million.
“The deal was that once the co-operative is back on its feet, the ownership of New KCC should revert to farmers,” said Peter Lelei-chairman of Livestock producers Association and a dairy farmer in Uasin Gishu.
“We are suspicious that this privatisation plan is a sure way of selling off this company and kicking out local dairy farmers who have built it over the years.”
There is fear within the dairy industry that emergence of a dominant player in the dairy sector, will deny the ability to bargain for better prices while consumers will suffer price hikes.