Clover industries South Africa will embark on an African expansion plan that will see the dairy heavyweight develop facilities in Nigeria, Mozambique and Angola, the firm said at its results presentation recently.
The Economist Intelligence Unit predicts that by 2030‚ Africa’s top 18 cities could have a combined spending power of $1.3-trillion, making the continent’s fast-growing economies a target for companies. Along with retailers, consumer goods manufacturers such as Nestlé, Unilever and Mondelez are also growing their African businesses.
Although limited opportunities exist in most African countries for Clover’s fresh product range due to the lack of refrigeration and poor infrastructure, the company has a number of ambient or long-life products in its portfolio.
Speaking on the sidelines of the company’s year-end results on Tuesday, Clover CE Johann Vorster said that although the group’s export distribution model was gaining momentum in Africa, larger infrastructure development was identified as a key driver for long-term substantiality.
“In terms of land and securing sites, it’s far easier for manufacturers than it is for retailers.
“Fortunately there are a number of options — in Nigeria for example, there are industrial development areas where the government gives you land on a 99-year lease basis and they guarantee water and electricity. Exports are the easy way of getting to (Africa), but we’ve seen in many countries how they just close borders overnight after you’ve made inroads and then your volumes get cut back, it is very dangerous for us to rely just on export,” he said.
Clover, which is South Africa’s biggest dairy distributor, reported a 3.4% rise in profit for the 12 months to June 30.
“The full-year effect of the 2011-12 milk price increases together with costs relating to fuel, packaging, personnel and product investments could not be fully recovered through price increases. This was further compounded by the oversupply of UHT milk in the market.
“As a result, operating margin contracted from 5.1% to 4.9%,” the company said.
by Zeenat Moorad,