Clover targets 'regional and niche players'

| Thursday December 16, 2010 00:00

Clover is unlikely to try to buy a large competitor such as Parmalat, Dairy Belle or Woodlands, but would look to expand where it does not have a strong presence, Vorster said.

'I don't know that from a dominance point of view, it would be feasible' to buy any of the three large players, he said. 'But we certainly see regional and niche players.' He also said, contrary to comments last week, that Clover would not look to buy wine and spirits maker KWV, the subject of a takeover bid by Pioneer Foods Group.

KWV's wine portfolio offered a range of products that could easily form part of Clover's existing supermarket distribution business, but spirits, which last year made up just more than 38% of the company's revenue, would require a distribution to a different range of outlets, such as bottle stores, he said.

Clover, which raised R575m in last week's placement to institutions, is on the lookout to expand its income from services such as logistics and merchandising, a role it already plays for companies such as French group Danone.

It is also looking to expand its own portfolio of branded food products, which include Clover, Tropika and Ultra Mel.

One likely area to look for acquisitions was in the Western and Eastern Cape provinces, where Clover has an '8 percent-10 percent' market share compared with the '30 percent-40 percent' it has in a northern province such as Gauteng, Vorster said.

Under the pre-1994 regime that saw the milk market officially divided up by region among different producers, the co-operative that has evolved into Clover was given northern regions while companies such as Towerkop and Bonnita, bought by Italian milk company Parmalat in 1998, were given southern territories. In the southern Cape area around Knysna and George, Parmalat, Nestl and Woodlands all have a stronger presence than Clover.

While the four largest milk companies account for about 1,6- billion of the national total of 2,6- billion litres, the rest of the market is fragmented, Vorster said. For now, Clover will use the proceeds of the share offering to invest in plant and make changes such as the relocation of milk-processing plants from inland regions closer to its milk farmers in KwaZulu-Natal and the Eastern Cape, to do away with having to ship tankers of fresh milk inland. (BusinessDay)