Clover cites tougher competition in milk market

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While milk prices shoot up, Clover chief executive Johann Vorster says that milk producers are better off than fuel retailers because people use more petrol than they drink milk.

Agreed. But what about other factors, such as the fierce competition between popular dairy brands, retailers’ house brand and other independent milk brands?

A dairy shelf at a normal supermarket houses more than six major brands of milk, yoghurt, cream and cheese.

Apparently it is the regional milk producers that give the big companies such as Clover, Parmalat and DairyBelle the most headaches.

Vorster says regional producers are more of a threat than national producers.

“Regional milk producers are in close proximity to their market and it is easier to get milk onto retailers’ shelves,” he says.

The hard-pressed consumer has more choice when it comes to milk, as house brand milk remains reasonably low-priced.

The drinking milk market in South Africa continues to be marked by very aggressive pricing by retailers’ house brands, resulting in the long-life or ultra-high-temperature processed milk market significantly growing at the expense of fresh milk, Clover notes.

In the six months to December last year, Clover increased long-life milk volumes by 4.7 percent, while fresh milk volumes declined by 6.6 percent.

Vorster says this was not as a result of market share loss but rather of some disputes between retailers on price points.

While declining to elaborate, he adds that this has affected fresh milk volumes as more people buy long-life milk.

Like many popular brands, Clover can always fall back on its brand power, which analysts believe is still one of the main factors in buying decisions.

Vunani Securities analyst Anthony Clark agrees, saying that any consumer goods with popular brands tend to survive the storm.

We can praise the brand, but fuel price increases will definitely put a dent in how much an individual spends on a litre of milk. Consumers may consume the same amount but many will go for the cheapest brand. page 19

SABMiller

Hope turned to disappointment for Boost Sports Africa, an Eastern Cape company that emerged as the loser yesterday in a case against SABMiller in the North Gauteng High Court.

The small company will have to pay security to prove that it can fight SABMiller in court over the alleged theft of the underdog’s sports marketing idea by the giant.

At the time SABMiller had sought the application it had requested security of R1 million, but the court ruled yesterday that the form, amount and manner of security were yet to be determined by the registrar of the court or by an application by the defendant to the registrar’s office.

Boost Sports Africa was also ordered to pay the costs of the two counsel.

One of the arguments that SABMiller had advanced was that Boost Sports Africa was not a trading entity, that it had not traded and it had no prospect of success.

The reasons for the court’s judgment are expected to be disclosed over the next two days.

The argument advanced by SABMiller is a reasonable position but it underscores that doing business in your own backyard can be as much of a minefield as venturing into the chaos that sometimes accompanies foreign operations in the greater African continent.

Boost Sports Africa has sought damages, claiming that SABMiller used information that was supposed to have remained confidential after the small company pitched its idea to the brewer.

The lawsuit was initiated three years ago.

The concept at the centre of the dispute is the successful Carling Black Label “Be the Coach” campaign, which was targeted at soccer lovers and launched by SABMiller without allegedly concluding an agreement with the creator.

Jed Webber, an East London businessman and a director of Boost Sports Africa, said that the company would apply for leave to appeal the judgment.

Edited by Peter DeIonno. With contributions from Nompumelelo Magwaza and Asha Speckman.


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