11 Oct 2012 Famous Brands, Coega Dairy in cheese-making joint venture
Famous Brands has entered a joint venture with the Coega Dairy Company to supply cheese products to the group, in a transaction that will boost the income of dairy farmers in the Eastern Cape district, the restaurant franchise group reports.
Coega Dairy is a dairy manufacturing business in Port Elizabeth owned by local farmers, as well as factory and farm employees.
It was set up at a cost of R90m in 2010 and uses UHT milk technology. The technology heats milk to a high temperature to keep it fresh for longer in a sealed container, and the design of Coega Dairy’s plant is reported to be significantly more efficient than conventional UHT milk-processing solutions.
Kevin Hedderwick, CEO of Famous Brands, says that the Famous Brands Cheese Manufacturing Company would be a completely new joint venture, independent of the existing dairy business.
Famous Brands will control 51% of the company’s shares, with shareholders of Coega Dairy holding the balance.
A new state-of-the-art cheese manufacturing plant will be constructed next to Coega Dairy’s existing dairy facility, where the primary business is the production of UHT long-life milk and butter.
Hedderwick says Coega Dairy would supply milk to the new company, which in turn would produce mozzarella, cheese slices and cheese spread for the group.
“In the immediate term, Debonairs Pizza will be the company’s single biggest customer, with the intention to expand supply over time to the group’s other brands,” he notes.
New equipment, budgeted at R35m, will be imported from Italy for the custom-designed plant and will be funded by the joint-venture partners in direct proportion to their shareholdings.
The day-to-day operations of the cheese business will be managed by Coega Dairy for an agreed management fee.
Coega Dairy’s owners are 19 producer shareholder farms, of which six are community- and black-owned. The 225 farm employees employed by the shareholder farms are all historically disadvantaged individuals, as are Coega Dairy’s factory employees.
Hedderwick says the investment was in line with the group’s goal “to grow the back end of the business by enhancing our manufacturing capability and capacity”.
“This transaction comprises a straightforward greenfield investment with significant earnings potential and a short payback period,” he says.
“Equally importantly, it is an enterprise that will deliver tremendous benefits for those black farmers who partner with us via Coega Dairy, whereby they gain an instant, robust market for their product and the potential to grow that market over time,” Hedderwick says.
Hennie Kleynhans, CEO of Coega Dairy, says the transaction was “a fantastic coup for the farmers who own Coega Dairy”.
“It guarantees a market for at least 38-million litres of milk a year and will in time establish the dairy as one of the biggest in South Africa,” he says.