Financial Gazette (Harare)
Munyaradzi Mugowo
13 November 2009
Harare — CLOVER Industries Limited, South Africa's largest maker of dairy products, is determined to end Dairibord Holdings Limited (DHL)'s local and regional dominance in milk products with plans to set up a milk processing plant in Zambia, which would be sub-Saharan Africa's processing and distribution hub.
DHL, Zimbabwe's prime dairy, foods and beverages manufacturer, is currently walking a tight rope after it failed to secure the US$50 million it urgently required to bail out its operations in Zimbabwe, Malawi and Uganda.
In the turbulence, it subsequently lost control of its Ugandan subsidiary to creditors in August.
The US$50 50 million had been earmarked for investment in plant and equipment, milk development and regional expansion.
Already Clover has wrested nearly 50 percent of local liquid milks market from Dairibord Zimbabwe (Private) Limited, DHL's main subsidiary currently grappling with crippling supply bottlenecks, particularly working capital constraints and depressed domestic supply of raw milk.
At the beginning of the year, national milk production had de-clined to about 24 million litres per annum, against an estimated market demand of 96 million litres, and from an all-time peak of 256 million litres per annum in 1990.
The output gap has opened the local market to external competition, undercutting margins, and also starved DHL's regional markets, where consumers have had to try products from Clover and other competitors.
Clover has struck a deal with Innscor Africa Limited to market and distribute its dairy products in Zambia through Spar Zambia and Distribution Zambia.
The South African company hopes to capture at least 20 percent of the Zambian dairy market next year before expanding to the Democratic Republic of Congo (DRC) and Malawi.
The deal threatens DHL's largest dairy markets outside Zimbabwe.
Earlier in the year group chief executive officer, Anthony Mandiwanza, stressed that competition was one of the largest "risks" threatening its operations.
During its heydays, the Zimbabwean operation had a tenacious hold on Angola, Botswana, DRC, Namibia, Malawi, Mozambique, Tanzania and Zambia.
Tanzania and Mozambique were later taken over by its subsidiary in Malawi, which now faces critical viability challenges. The collapse of Dairibord Uganda, which supplied dairy products to Burundi, DRC, Kenya, Rwanda and Sudan, has built a strong business case for diary competitors with expansion plans.
These are the markets where Clover targets capturing increased market share.
Information at hand shows that the diversified dairy, food and beverages company is preparing to open a distribution centre in Zambia this year at an initial cost of about US520,000 and a plant during the course of next year.
The plant would be based in Lusaka, where another foreign dairy company -- Parmalat Zambia -- is based.
The dairy giant transformed itself from being a cooperative into a private company in 2003 and currently processes about 30 percent of South Africa's milk into a wide range of butter and ghee products, yoghurts, fresh and sour milk and cheese brands such as Fox and Crow, Blaauwkrantz, and La Campania halloumi, mascarpone and ricotta.
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