26 November 2012

South Africa: Coega Dairy 'Coup' for Emerging Farmers

South African franchise restaurant group Famous Brands has entered into a joint venture partnership with the Coega Dairy Company, a dairy manufacturing business owned by local farmers, factory and farm employees, to supply mozzarella, cheese slices and cheese spread to the Group.

The agreement will see R55-million being invested in a new state-of-the-art cheese manufacturing plant next to Coega Dairy's existing facility at the Coega industrial development zone outside Port Elizabeth in the Eastern Cape.

At the same time, it will create new jobs and provide black farmer supplying the Coega Dairy with a new and growing market for their produce.

According to the Coega Development Corporation (CDC), Famous Brands will control 51% of the shares of the joint venture company, the Famous Brands Cheese Manufacturing Company, with Coega Dairy shareholders holding the balance of 49%.

State-of-the-art cheese manufacturing plant

"In terms of the agreement, a new state-of-the-art cheese manufacturing plant will be constructed adjacent to Coega Dairy's existing dairy facility (whose primary business is the production of UHT longlife milk and butter)," the CDC said in a statement on Monday.

Latest-technology equipment, budgeted at R35-million, will be imported from Italy for the custom-designed plant, to be funded by the joint venture partners in direct proportion to their shareholding in the business, the CDC said.

The CDC will fund the R20-million construction of the 2 600 square metre facility and lease the premises to the new company, while Coega Diary will manage the day-to-day operations of the cheese manufacturing business for an agreed management fee.

"Famous Brands Cheese Manufacturing Co is anticipated to commence supply and distribution of mozzarella cheese to the Debonairs Pizza franchise network in May 2013," the CDC said, adding that the business's first-year annualised turnover was expected to be in the order of R180-million.

'Fantastic coup for the farmers'

Famous Brands CEO Kevin Hedderwick said in a statement that the partnership was "compelling for two reasons: the transaction comprises a straightforward greenfield investment with significant earnings potential and a short payback period.

"And equally importantly, it is an enterprise which will deliver tremendous benefits for those black farmers who partner with us via Coega Dairy, whereby they gain an instant, robust market for their milk, and the potential to grow that market over time."

Hedderwick added that the partnership was expected to create 49 jobs in the new cheese manufacturing company, as well as a further five jobs in the existing Coega Dairy business.

Coega Dairy CEO Hennie Kleynhans said described the transaction as "a fantastic coup for the farmers who own Coega Dairy. It guarantees a market for at least 38-million litres of milk per annum, and will in time establish the dairy as one of the biggest in South Africa."

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