Acquisition of DairyBelle units to give Clover more muscle

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Johannesburg - Clover’s acquisition of DairyBelle’s yoghurt and long-life milk manufacturing, marketing and distribution businesses would open doors to Clover’s strategy to enter the yoghurt and custard markets, the dairy group said yesterday.

Clover, which produces brands including Tropika, Super M and Aquartz, announced in March that it intended to enter the yoghurt and custard markets next year.

After the acquisition Clover believes it will have a market share of about 10 percent in yoghurt and 19 percent in long-life milk.

Yesterday’s announcement was in line with its strategy to expand its portfolio of value-added and branded consumer products. Clover said this deal had provided the dairy maker with significant access to the yoghurt market in which DairyBelle already enjoyed a meaningful presence and strong brand equity.

It bought DairyBelle’s yoghurt and long-life milk manufacturing, marketing and distribution businesses for R125 million and R30m, respectively. DairyBelle will now focus on its core business competencies of cheese and niche butter products.

Clover chief executive Johann Vorster said: “The acquisition of the DairyBelle assets provides Clover with an entry into the highly attractive and profitable yoghurt market, which is one of the major opportunities arising from the expiration of the Danone Southern Africa contracts later this year.”

He added that combining these assets with Clover’s sales and distribution capabilities would enable Clover to develop the current DairyBelle brands and also provide capacity to launch branded products in the yoghurt and long-life markets.

Clover also stated that the location of DairyBelle’s ultra-high-temperature production facilities in the Western Cape would allow it to improve efficiencies through more effective utilisation of its raw milk supply in the region.

DairyBelle’s chief executive, Pedro Viudez, said: “The transaction is a step forward for DairyBelle, allowing the company to focus on its core business, which is cheese and butter products.

“It was a sentimental decision to dispose of the yoghurt business, but this transaction will refocus our energies and resources in our core competence of cheese making.”

Each transaction is subject to certain conditions, including the approval of shareholders and the competition authorities, which are expected to be completed by the end of July.

Meanwhile, a poor trading update from Clover pushed the share price down by more than 8 percent yesterday. It advised its shareholders that it expected headline earnings a share and earnings a share for the year to June to be more than 20 percent lower than the previous year.

The dairy maker said the decreases in earnings were as a result of a very constrained trading environment in which it would not be able to fully recover raw milk price increases and strong overall inflationary cost pressures.

This also included the adverse effect of the further selling price increases on sales volumes and rising inflation, which was eroding sales, especially in the non-alcoholic beverages segment.

Clover shares fell 8.72 percent to R18.94 yesterday.


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