SOUTH AFRICA – South Africa’s leading dairy companies, Dairy Farmers of South Africa (DFSA) and Coega Dairy have merged operations creating a new agribusiness venture in the region known as Dairy Group.
Under the 50:50 partnership DFSA brings its over a century long experience as a market leader in the procurement of raw milk and supplying premium brands such as Clover, combining with Coega Dairy’s low-cost efficiency and house-brand knowledge.
“The creation of Dairy Group means the industry as a whole has a better, clearer future growth path, which is crucial for all stakeholders.”Dairy Group’s CEO – Drikus Lubbe
DFSA was initially a full subsidiary of Clover SA. Later its milk producers acquired 74% ownership of the company with Clover finally disposing of its remaining investment to the Milk Producers Trust in May 2020.
Despite the change in ownership, DFSA still supplies Clover’s full raw milk requirements, including its own products which are predominantly UHT under the Clover, retailer-owned and Ultra Milk brands.
Coega Dairy on the other hand, is owned by Coega Food Group and commenced operations in September 2011, producing UHT and butter products under the Coastal View and Crystal Valley brands for private labels.
In September 2019, Dawson Dairy was brought into the Coega Dairy family, and Amasi brand was introduced into Coega Dairy’s product line.
The new joint venture brings together offerings from both companies thus venturing into high value and house brand business creating a powerhouse dairy brand with the potential to significantly strengthen the local dairy sector.
“Fewer and fewer dairy farmers are able to go at it alone, and collective action is often the key to long-term viability. The creation of Dairy Group means the industry as a whole has a better, clearer future growth path, which is crucial for all stakeholders,” said Drikus Lubbe, Dairy Group’s CEO.
The partnership also positions the company to compete effectively against sophisticated international players within a volatile local economy, increase market share in the export market and expand its footprint into sub-Saharan Africa.
South Africa Dairy industry is currently a net importer of products despite having the scale of producing raw milk and processing thereof to be world class exporters.
This is partly due to factors such as rising input costs such as electricity, fuel, fertiliser, feed costs, machinery and equipment and packaging are affecting producers in the sector.
As indicated by Dairy Group, to stay competitive, dairy brands have to achieve better efficiencies and economies of scale, with capital-intensive process technologies key to transforming high volumes into better margins and sustainable business.
DFSA and Coega Dairy’s combined infrastructure and experience rise to these challenges, creating a highly efficient, optimised value chain for members’ raw milk produce.
“The new formation immediately positions Dairy Group as the leading Ultra High Temperature (UHT) milk supplier to consumers in South Africa. It also has the ability to expand its footprint into Africa by facilitating mergers and acquisitions in competitive dairy categories across its infrastructure network,” added Lubbe.
Dairy Group’s ability to expand into Africa – which features 500 million consumers with low exposure to South African dairy brands – is an important part of the logic behind its creation.
Success in African markets will, in turn, strengthen the dairy value chain within South Africa. New business opportunities will be created for hard pressed South African dairy farmers, including emerging black-owned farmers, who are central to Dairy Group’s future growth plans.
‘We take a broad view of sustainability, which we see as being as much about achieving viable business growth as maintaining excellent environmental standards. In South Africa, commercial growth has to include a strong focus on black empowerment,” highlights Lubbe.
“This is especially true in the agri-sector, where we need to bring new players in to augment the strength of established entities. Consequently, nurturing new entrants is a central part of Dairy Group’s growth strategy. We’re looking forward to taking advantage of our new scale and structure to bring that vision to life,” he concluded.
Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. SUBSCRIBE HERE