Clover Says No “Job Losses” From Restructure as Shifts Focus to Higher-Margin Products
08 Dec 2016 ---South Africa’s dairy group Clover says it expects “no job losses” as a result of its restructure which will see it shift focus towards higher-margin dairy and food products and away from low-margin milk.
Clover is setting up a new unit called Dairy Farmers of South Africa Proprietary Limited (“DFSA”), which will produce its low-margin dairy products, such as ultra-high temperature milk (UHT) and ultra-pastured (UP) milk under license of the Clover brand. DFSA, which will initially be a wholly owned subsidiary of Clover, will sell directly to trade and consumers.
Commenting on the restructure, Clover chief executive John Vorster said: “It will provide Clover with the opportunity to give effect to its stated objective of -developing higher margin, value-added products in dairy and other related food categories and to eliminate its exposure to the cyclicality of its low-margin business in future.”
“DFSA will become the preferred supplier of all raw milk to Clover and Clover will purchase its raw milk directly from DFSA using a predetermined pricing formula.”
Clover, which is competing in an industry in South Africa which has an oversupply of raw milk, has looked to launch a number of higher-margin products recently, such, as Clover Classic yogurt and custard range, in an effort to diversify away from volatility in the raw milk market.
Jacques van Heerden, executive at Clover, explains to FoodIngredientsFirst the reasons behind the restructure.
1. The new entity, called Dairy Farmers of South Africa Proprietary- Who is heading this up? When will it be up and running?
“We have identified a management team and discussions are currently ongoing in this regard. It will be premature at this stage to disclose any individual names but a formal announcement will follow as soon as the negotiations are concluded.”
2. Are you expecting the restructure to impact jobs? If so how many and where in the organization?
“We do not foresee any job losses as a result of the restructuring. Clover will continue to provide the majority of support services to DFSA, including manufacturing, warehousing, distribution and merchandising for an extensive period of time in exchange for the payment of various service fees. Further, a selected number of employees will transfer from Clover to DFSA.”
3. How much of a shareholding in DFSA is Clover expected to take?
“As mentioned in the regulatory announcement, DFSA will be a wholly-owned subsidiary of Clover until June 2017, following which dairy farmers will take up the majority stake and Clover will retain a strategic minority interest.”
4. How confident are you that you will receive support from raw milk suppliers to the changes?
“South Africa has some of the best dairy farmers in the world. This, on a continent where the majority of countries are net importers of dairy. We firmly believe that this structure will support our dairy farmers’ volume growth strategy and our initial discussions with key role-players prior to the announcement have been encouraging.”
5. Why are you undertaking the restructure now?
“It will provide Clover with the opportunity to pursue its long-term strategy of developing higher margin, value added products in dairy and other related food categories and to eliminate its exposure to the cyclicality of its low margin business in future. At the same time the restructure will support the ambitions of our raw milk producers to pursue a volume growth strategy.”
By John Reynolds
