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    • Manufacture Dairy Products South Africa

    The Manufacture of Dairy Products in South Africa 2021

    Natalie Bryden | South Africa | 25 January 2021

    The Manufacture of Dairy Products in South Africa 2019

    Marc Bosman | South Africa | 10 April 2019

    The Manufacture of Dairy Products in South Africa 2017

    Marc Bosman | South Africa | 20 October 2017

    The Manufacture of Dairy Products in South Africa 2016

    Marc Bosman | South Africa | 11 March 2016

    The Manufacture of Dairy Products in South Africa 2014

    Brenda Young | South Africa | 21 October 2014

    Report Info

    Report Summary Table of Contents
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    Report Coverage

    This report focuses on the manufacture of dairy products in South Africa and includes information on the volume of products sold and market share per product, developments, trends and corporate actions, regulation and other influencing factors. There are profiles of 32 companies including dominant companies such as Clover, Woodlands and Lactalis and relatively small dairy processors that distribute regionally such as Douglasdale and Coega Dairy.

    Introduction

    This report focuses on the South African manufacture of dairy products, where there has been considerable consolidation at production level over the last 20 years and large farms account for 80% of South Africa’s total milk production. Rising production costs, imports, contraction in producer numbers, increasingly scarce natural resources due to climate change, changing consumer dietary preferences, increased regulation, and competition from international companies have caused challenges, especially for small producers.

    Strengths

    • An organised industry, with majority of the dairy players belonging to the Milk Producers Organisation and the South African Milk Processors’ Organisation.
    • Growing middle class adopting western diets.
    • High demand for dairy products, especially value-added products such as sour milk, yoghurt and cheese.

    Weaknesses

    • Low producer pricing squeezes farmers’ profits and forces many to exit the industry.
    • No protection from global players.
    • Political uncertainty and security of tenure related to the land reform process.
    • Poor rural road infrastructure makes transport expensive.
    • South Africa is a net importer of dairy products.

    Opportunities

    • Demand for flavoured milk.
    • Expansion into African markets, especially for processed products that do not require refrigeration.
    • Increased urbanisation leads to more demand for dairy products.
    • Increasing demand for products with a long shelf life.
    • Niche products such as artisanal cheese.

    Threats

    • Changing consumer preferences.
    • Cheap imports from the EU.
    • Climate change.
    • Increasing input costs.
    • Weak economy.

    Outlook

    Difficulties in the dairy farming sector are expected to continue due to the effect of rising input costs, weak economic growth, job losses and reduced consumer spending on dairy product demand in addition to competition from international players. The number of milk producers is likely to continue to decrease, and increased market consolidation is likely given the current economic conditions.\r\n\r\nConcerns over climate change and animal welfare are giving rise to long term trends and are driving the development of plant-based alternatives. Dairy companies have to respond to consumer demands and adapt to changing consumer demographics, behaviours and lifestyles. Product diversification, innovation and brand differentiation will be critical success factors to survival in an increasingly competitive global marketplace.

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    The Manufacture of Dairy Products in South Africa 2021

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    Table of Contents

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    PAGE
    1. INTRODUCTION 1
    2. DESCRIPTION OF THE INDUSTRY 1
    2.1. Industry Value Chain 2
    2.2. Geographic Position 3
    3. SIZE OF THE INDUSTRY 3
    4. STATE OF THE INDUSTRY 8
    4.1. Local 8
    4.1.1. Trends 11
    4.1.2. Developments 12
    4.1.3. Corporate Actions 13
    4.1.4. Regulations 13
    4.1.5. Enterprise Development and Social Economic Development 16
    4.2. Continental 17
    4.3. International 21
    5. INFLUENCING FACTORS 25
    5.1. Coronavirus 25
    5.2. Government Intervention 26
    5.3. Economic Environment 28
    5.4. Rising Operating Costs 29
    5.5. Utilisation 29
    5.6. Labour 30
    5.7. Technology, Research and Development (R&D) and Innovation 32
    5.8. Cyclicality 33
    5.9. Environmental Concerns 34
    6. COMPETITION 36
    6.1. Barriers to Entry 36
    7. SWOT ANALYSIS 37
    8. OUTLOOK 38
    9. INDUSTRY ASSOCIATIONS 38
    10. REFERENCES 39
    10.1. Publications 39
    10.2. Websites 39
    APPENDIX 1 41
    Summary of Notable Players 41
    COMPANY PROFILES 45
    BANDINI CHEESE (PTY) LTD 45
    CLOVER SA (PTY) LTD 47
    COEGA DAIRY (PTY) LTD 52
    DANONE SOUTHERN AFRICA (PTY) LTD 54
    DARLING ROMERY (PTY) LTD 56
    DENMAR ESTATES (PTY) LTD 58
    DEWFRESH (PTY) LTD 60
    DOUGLASDALE DAIRY (PTY) LTD 62
    DWR HERTZOG 65
    FAIR CAPE DAIRIES (PTY) LTD 67
    FAIRFIELD DAIRY (PTY) LTD 70
    FAR END DAIRY (PTY) LTD 72
    FARMGATE DAIRY (PTY) LTD 74
    FRONERI SOUTH AFRICA (PTY) LTD 76
    GATTIS ICE CREAM (PTY) LTD 78
    LA MONTANARA MELKERY (PTY) LTD 80
    LACTALIS SOUTH AFRICA (PTY) LTD 82
    LADISMITH CHEESE COMPANY (PTY) LTD 85
    LIBSTAR OPERATIONS (PTY) LTD 87
    MOOIVALLEI SUIWEL (PTY) LTD 92
    MOUNTAINVIEW DAIRY CC 94
    NESTLE (SOUTH AFRICA) (PTY) LTD 96
    ORANGE GROVE DAIRY (PTY) LTD 100
    POLAR ICE CREAM COMPANY (PTY) LTD 102
    RHODES FOOD GROUP (PTY) LTD 104
    SUNDALE FREE RANGE DAIRY (PTY) LTD 109
    TRADEMODEL SEVEN (PTY) LTD 111
    TRANSEM (PTY) LTD 113
    UNILEVER SOUTH AFRICA (PTY) LTD 115
    UNIQUE DAIRY PRODUCTS (PTY) LTD 118
    WOODLANDS DAIRY (PTY) LTD 121
    WYNN-WITH MILK FARM (PTY) LTD 125

    Introduction

    This report focuses on the South African manufacture of dairy products. The industry has experienced a return to growth in volumes of raw milk and other dairy products since 2017 after five years of challenges. These included continuous decline in demand, contraction in producer numbers and concentration of production, lower producer prices, shrinking margins, growing competition from within the sector and other beverage industries, and changing local industry dynamics which continue to cause economic hardship for many, especially small producers. \r\n\r\nRaw milk production increased by 2.7% in 2017 and almost 4% in 2018. UHT (long-life) milk, fermented milk product maas, or amasi, and packaged cheese sales grew strongly, but sales of butter and yoghurt declined due to high prices. High milk production and reduced demand resulted in increased exports and reduced imports. However in February 2019, Milk Producers’ Organisation (MPO) chief economist Bertus van Heerden reported that December 2018 and January 2019 milk production figures were lower than the year prior, indicating that low producer prices are starting to restrict milk production, which may lead to supply shortages and increased producer prices if supply tightens sufficiently. \r\nRising UHT milk imports are a concern to the industry which is investigating the matter with a view to possibly approaching the International Trade Administration Commission (Itac) for trade protection and tariff dispensation. \r\n\r\nThe industry expects better balance in supply and demand, locally and globally, in 2019, and the MPO advises that supply may tighten and producer prices may improve. The Department of Agriculture, Forestry and Fisheries (DAFF) estimated that fresh milk sales totalled R16.46bn in 2016/2017. The annual market for dairy-based products is estimated at approximately R40bn.

    Strengths

    • An organised industry, with majority of the dairy players belonging to the Milk Producers Organisation and the South African Milk Processors\' Organisation.
    • There is a high demand for dairy products, especially value-added products such as sour milk, yoghurt and cheese.

    Weaknesses

    • Low producer pricing squeezes farmers’ profits and forces many to exit the industry.
    • No protection from global players. Free market principles have led to many players exiting the industry.
    • Political uncertainty and security of tenure related to the land reform process.
    • The poor state of the country’s infrastructure makes it costly for farmers to transport their products.

    Opportunities

    • Expansion into African markets, especially for ambient products.
    • Increased urbanisation leads to more demand for dairy products.
    • Increasing demand for long-life milk which has a shelf life of up to nine months.
    • Market growth and improved profitability from the introduction of new products such as flavoured milk.

    Threats

    • Cheaper imports from countries that receive subsidies.
    • Climate change and ongoing drought conditions in the Eastern and Western Cape.
    • Declining numbers of milk producers.
    • The negative effect of increasing production and input costs and thus lower margins on farmers’ profits.
    • Weakening economy with high food inflation and decreasing disposable income.

    Outlook

    The dairy industry is in transformation, facing challenges and opportunities arising from seasonal factors and changing consumer preferences. Stakeholders believe dairy companies have to respond to consumer demands and adapt to changing consumer demographics, behaviours and lifestyles. Product diversification, innovation and brand differentiation will be critical success factors. Difficulties in the dairy farming sector in the Eastern and Western Cape are expected because of the ongoing severe drought conditions. The number of milk producers is likely to continue to decrease and increased market consolidation is forecast given the current economic conditions. \r\n\r\nThe industry expects its performance in 2019 to be influenced by: \r\n
    • Declining producer prices, affecting the supply of raw milk and other dairy products; \r\n
    • Climatic conditions in the summer rainfall areas; \r\n
    • The effect of weak economic growth on dairy product demand;\r\n
    • The effect of the exchange rate on imports, international prices and anticipated local production of raw milk and dairy products; \r\n
    • Trade protection and tariff dispensation against UHT milk imports.\r\n

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    The Manufacture of Dairy Products in South Africa 2019

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    Table of Contents

    [ Close ]
    PAGE
    1. INTRODUCTION 1
    2. DESCRIPTION OF THE INDUSTRY 1
    2.1. Industry Value Chain 3
    2.2. Geographic Position 4
    3. SIZE OF THE INDUSTRY 5
    4. STATE OF THE INDUSTRY 11
    4.1. Local 11
    4.1.1. Corporate Actions 13
    4.1.2. Regulations 14
    4.1.3. Enterprise Development and Social Economic Development 17
    4.2. Continental 19
    4.3. International 23
    5. INFLUENCING FACTORS 27
    5.1. Government Intervention 27
    5.2. Economic Environment 28
    5.3. Rising Operating Costs 28
    5.4. Consumer Trends 30
    5.5. Labour 31
    5.6. Technology, Research and Development (R&D) and Innovation 34
    5.7. Cyclicality 37
    5.8. Environmental Concerns 39
    6. COMPETITION 41
    6.1. Barriers to Entry 43
    7. SWOT ANALYSIS 43
    8. OUTLOOK 44
    9. INDUSTRY ASSOCIATIONS 45
    10. REFERENCES 45
    10.1. Publications 45
    10.2. Websites 46
    APPENDIX 1 48
    Summary of Notable Players 48
    COMPANY PROFILES 52
    BANDINI CHEESE (PTY) LTD 52
    CLOVER SA (PTY) LTD 54
    COEGA DAIRY (PTY) LTD 59
    DANONE SOUTHERN AFRICA (PTY) LTD 61
    DARLING ROMERY (PTY) LTD 63
    DENMAR ESTATES (PTY) LTD 65
    DEWFRESH (PTY) LTD 67
    DOUGLASDALE DAIRY (PTY) LTD 69
    DWR HERTZOG 72
    FAIR CAPE DAIRIES (PTY) LTD 74
    FAIRFIELD DAIRY (PTY) LTD 77
    FAR END DAIRY (PTY) LTD 79
    FARMGATE DAIRY (PTY) LTD 81
    FRONERI SOUTH AFRICA (PTY) LTD 83
    GATTIS ICE CREAM (PTY) LTD 85
    LA MONTANARA MELKERY (PTY) LTD 87
    LADISMITH CHEESE COMPANY (PTY) LTD 89
    LIBSTAR OPERATIONS (PTY) LTD 91
    MOOIVALLEI SUIWEL (PTY) LTD 97
    MOUNTAINVIEW DAIRY CC 99
    NESTLE (SOUTH AFRICA) (PTY) LTD 101
    ORANGE GROVE DAIRY (PTY) LTD 105
    PARMALAT SOUTH AFRICA (PTY) LTD 107
    POLAR ICE CREAM COMPANY (PTY) LTD 109
    RHODES FOOD GROUP (PTY) LTD 111
    SUNDALE FREE RANGE DAIRY (PTY) LTD 116
    TRADEMODEL SEVEN (PTY) LTD 118
    TRANSEM (PTY) LTD 120
    UNILEVER SOUTH AFRICA (PTY) LTD 122
    UNIQUE DAIRY PRODUCTS (PTY) LTD 125
    WESMELK MELKERY (PTY) LTD 127
    WJ KHOURIE 129
    WOODLANDS DAIRY (PTY) LTD 130
    WYNN-WITH MILK FARM (PTY) LTD 134

    Report Coverage

    The Manufacture of Dairy Products describes current conditions and the actions taken by role players to ensure sustainability in their operations. Detailed statistics regarding the size of the sector and profiles for 40 companies are provided. These include large dairy processor, Clover which has altered the low margin volume driven milk business through the creation of Dairy Farmers South Africa (DFSA), and Unilever South Africa (Pty) Ltd, which has had to deal with the impact of the global consumer move from margarine to butter. Also profiled are three dairies based in the Eastern Cape, which has become the top milk-producing province with 30.6% market share: Coega Dairy (Pty) Ltd; Sundale Free Range Dairy (Pty) Ltd; and Woodlands Dairy (Pty) Ltd. Between them these three dairies employ more than 2,000 people.

    Introduction

    The dairy market is divided into 63% liquid, that is milk in all its various forms and flavours, and 37% concentrated products produced by the secondary industry. The South African dairy sector has experienced a decline in most segments of the value chain over the last two years. Milk Producers earned R14bn in 2015/2016, which is 6.6% less than the previous year, and their numbers decreased from 1,683 in January 2016 to 1,593 in January 2017.

    Strengths

    • An organised industry, with majority of the dairy players belonging to the Producers’ Organisation and the Milk Processors’ Association.
    • There is a high demand for dairy products, especially value-added products such as sour milk, yoghurt and cheese

    Weaknesses

    • Low producer pricing in the dairy industry squeezes farmers’ profits and forces many to exit the industry.
    • No protection from global players. Free market principles have led to many players exiting the industry.
    • Political uncertainty and security of tenure related to the land reform process.
    • The poor state of the country’s infrastructure makes it costly for farmers, who are price-takers, to transport their products.

    Opportunities

    • Expansion into African markets, especially for ambient products.
    • Increased urbanisation leads to more demand for dairy products.
    • Increasing demand for UHT milk which has a shelf life of up to nine months.
    • Market growth and improved profitability from the introduction of new products such as flavoured milk.

    Threats

    • Cheaper imports from countries that receive subsidies.
    • Climate change and ongoing drought conditions in the Eastern and Western Cape.
    • Declining numbers of milk producers.
    • The negative effect of increasing production and input costs and thus lower margins on farmers’ profits.
    • Weakening economy with high food inflation and decreasing disposable income.

    Outlook

    The dairy industry is in transformation, facing challenges and opportunities arising from increasing globalisation and changing consumer preferences. Stakeholders believe dairy companies have to respond to consumer demands and adapt to changing consumer demographics, behaviours and lifestyles. Product diversification, innovation and brand differentiation will be critical success factors. Difficulties in the dairy farming sector in the Eastern and Western Cape are expected because of the ongoing severe drought conditions, the number of Milk Producers is likely to continue to decrease and increased market consolidation is forecast given the current economic conditions.

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    The Manufacture of Dairy Products in South Africa
    The Manufacture of Dairy Products in South Africa 2017

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    The Manufacture of Dairy Products in South Africa 2019-04-10

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    The Manufacture of Dairy Products in South Africa 2016-03-11

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    The Manufacture of Dairy Products in South Africa 2014-10-21

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    Table of Contents

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    PAGE
    1. INTRODUCTION 1
    2. DESCRIPTION OF THE INDUSTRY 1
    2.1. Industry Value Chain 2
    2.2. Geographic Position 3
    3. SIZE OF THE INDUSTRY 4
    4. STATE OF THE INDUSTRY 15
    4.1. Local 15
    4.1.1. Corporate Actions 17
    4.1.2. Regulations 19
    4.1.3. Enterprise Development and Social Economic Development 21
    4.2. Continental 22
    4.3. International 25
    5. INFLUENCING FACTORS 27
    5.1. Government Intervention 27
    5.2. Economic Environment 28
    5.3. Rising Operating Costs 28
    5.4. Consumer Trends 29
    5.5. Labour 30
    5.6. Technology, Research and Development (R&D) and Innovation 33
    5.7. Cyclicality 34
    5.8. Environmental Concerns 35
    6. COMPETITION 37
    6.1. Barriers to Entry 38
    7. SWOT ANALYSIS 38
    8. OUTLOOK 39
    9. INDUSTRY ASSOCIATIONS 39
    10. REFERENCES 40
    10.1. Publications 40
    10.2. Websites 41
    COMPANY PROFILES 43
    BANDINI CHEESE (PTY) LTD 43
    CLOVER MILKYWAY (PTY) LTD 45
    CLOVER SA (PTY) LTD 47
    COEGA DAIRY (PTY) LTD 51
    Dairy Day (Pty) Ltd 53
    DANONE SOUTHERN AFRICA (PTY) LTD 55
    DARLING ROMERY (PTY) LTD 57
    DENMAR ESTATES (PTY) LTD 59
    DEWFRESH (PTY) LTD 61
    DOUGLASDALE DAIRY (PTY) LTD 63
    DWR HERTZOG 66
    FAIR CAPE DAIRIES (PTY) LTD 68
    FAIRFIELD DAIRY (PTY) LTD 70
    FAR END DAIRY (PTY) LTD 72
    FARMGATE DAIRY (PTY) LTD 74
    FRONERI SOUTH AFRICA (PTY) LTD 76
    GATTIS ICE CREAM (PTY) LTD 78
    HOMSEK (PTY) LTD 80
    HONEYDEW DAIRIES (PTY) LTD 82
    LA MONTANARA MELKERY (PTY) LTD 84
    LADISMITH CHEESE COMPANY (PTY) LTD 86
    LAITCO DAIRIES (PTY) LTD 88
    LIBSTAR OPERATIONS (PTY) LTD 89
    MOOIVALLEI SUIWEL (PTY) LTD 94
    MOUNTAINVIEW DAIRY CC 96
    NESTLE (SOUTH AFRICA) (PTY) LTD 97
    ORANGE GROVE DAIRY (PTY) LTD 101
    PARMALAT SOUTH AFRICA (PTY) LTD 103
    POLAR ICE CREAM COMPANY (PTY) LTD 106
    RHODES FOOD GROUP (PTY) LTD 108
    SONNENDAL DAIRIES (PTY) LTD 112
    SUNDALE FREE RANGE DAIRY (PTY) LTD 114
    TRADEMODEL SEVEN (PTY) LTD 116
    TRANSEM (PTY) LTD 118
    UNILEVER SOUTH AFRICA (PTY) LTD 119
    UNIQUE DAIRY PRODUCTS (PTY) LTD 122
    WESMELK MELKERY (PTY) LTD 124
    WJ KHOURIE 126
    WOODLANDS DAIRY (PTY) LTD 127
    WYNN-WITH MILK FARM (PTY) LTD 131

    Introduction

    This report focuses on the manufacture of dairy products in South Africa. Annual fresh milk production generates revenue in excess of R10bn and the annual market for dairy-based products exceeds R40bn. The number of milk producers has decreased from 4,184 in 2006 to 1,728 in August 2015, a decline of 59% over nine years while at the same time output and efficiencies have improved. Milk producers employ about 30,000 farm workers and indirectly provide jobs to some 15,000 people.

    Strengths

    • An organised industry, with majority of the dairy players belonging to the Producers’ Organisation and the Milk Processors’ Association.
    • There is a high demand for dairy products, especially value-added products such as sour milk, yoghurt and cheese.

    Weaknesses

    • Low producer pricing in the dairy industry squeezes farmers’ profits and forces many to exit the industry
    • No protection from global players. Free market principles have led to many players exiting the industry.
    • Political uncertainty and security of tenure related to the land reform process.
    • The poor state of the country’s infrastructure makes it costly for farmers, who are price takers, to transport their products.

    Opportunities

    • Expansion into African markets, especially for ambient products.
    • Increased urbanisation leads to more demand for dairy products.
    • Increasing demand for UHT milk which has a shelf life of up to nine months.
    • Market growth and improved profitability from the introduction of new products such as flavoured milk.

    Threats

    • Cheaper imports from countries that receive subsidies.
    • Climate change and the worsening of drought conditions.
    • The negative effect of increasing production and input costs and thus lower margins on farmers’ profits.
    • Weakening economy with high food inflation and decreasing disposable income.

    Outlook

    Industry commentators and players concur the industry will remain volatile and under pressure until 2017, due to local and global industry factors. These include an unpredictable climate, the removal of production quotas in Europe, the slowdown in China and the Russian sanctions. Industry body the MPO, financial services company ABSA through its AGRI Trends research and the major global and local industry producers and processors concur that the dairy industry is in transformation, facing challenges and opportunities arising from increasing globalisation. Responding to the increase in demand for milk will be an unprecedented challenge given the population growth and environmental challenges. \r\n\r\nStakeholders believe that dairy companies have to respond to consumer demands and adapt to changing consumer demographics, behaviours and lifestyles. Product diversification, innovation and brand differentiation will be critical success factors. In developing markets securing a sustainable high quality milk supply is paramount as is investing in domestic dairy farming and securing reliable and dependable partners. Increased market consolidation can be expected given the prevailing conditions and a decline in the number of Milk Producers is expected.\r\n\r\nAgriculture remains profitable from an investment and operational perspective despite lower commodity prices, driven by productivity improvements gained through the adoption of new technologies. The agricultural sector is the only sector which has seen sustained growth over the last ten years and which continues to attract investment. The sector is therefore forecast to continue to deliver good returns despite the drought.

    The Manufacture of Dairy Products in South Africa
    The Manufacture of Dairy Products in South Africa 2016

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    The Manufacture of Dairy Products in South Africa 2019-04-10

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    The Manufacture of Dairy Products in South Africa 2017-10-20

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    Table of Contents

    [ Close ]
    PAGE
    1. INTRODUCTION 1
    2. DESCRIPTION OF THE INDUSTRY 1
    2.1. Industry Value Chain 2
    2.2. Geographic Position 3
    3. SIZE OF THE INDUSTRY 4
    4. STATE OF THE INDUSTRY 12
    4.1. Local 12
    4.1.1. Corporate Actions 16
    4.1.2. Regulations 17
    4.1.3. Enterprise Development and Social Economic Development 18
    4.2. Continental 19
    4.3. International 24
    5. INFLUENCING FACTORS 26
    5.1. Government Intervention 26
    5.2. Labour 27
    5.3. Economic Environment 29
    5.4. Rising Input Costs 30
    5.5. Cyclicality 32
    5.6. Consumer Trends 33
    5.7. Technology, Research and Development (R&D) and Innovation 33
    5.8. Environmental Concerns 35
    6. COMPETITION 36
    6.1. Barriers to Entry 38
    7. SWOT ANALYSIS 38
    8. OUTLOOK 39
    9. INDUSTRY ASSOCIATIONS 40
    10. REFERENCES 40
    10.1. Publications 40
    10.2. Websites 42
    COMPANY PROFILES 44
    Bandini Cheese (Pty) Ltd 44
    Clover Milkyway (Pty) Ltd 46
    Clover SA (Pty) Ltd 48
    Coega Dairy (Pty) Ltd 52
    DairyBelle (Pty) Ltd 54
    Danone Southern Africa (Pty) Ltd 56
    Darling Romery (Pty) Ltd 59
    Denmar Estates (Pty) Ltd 61
    Dewfresh (Pty) Ltd 63
    Douglasdale Dairy (Pty) Ltd 65
    DWR Hertzog 67
    Fair Cape Dairies (Pty) Ltd 69
    Fairfield Dairy (Pty) Ltd 71
    Farmgate Dairy (Pty) Ltd 73
    Gattis Ice Cream (Pty) Ltd 75
    Homsek (Pty) Ltd 77
    Homsek Ultra (Pty) Ltd 79
    Honeydew Dairies (Pty) Ltd 81
    La Montanara Melkery (Pty) Ltd 83
    Ladismith Cheese Company (Pty) Ltd 85
    Laitco Dairies (Pty) Ltd 87
    Libstar Operations (Pty) Ltd 89
    Montic Dairy (Pty) Ltd 92
    Mooivallei Suiwel (Pty) Ltd 94
    Mountainview Dairy CC 96
    Nestle (South Africa) (Pty) Ltd 98
    Orange Grove Dairy (Pty) Ltd 101
    Parmalat South Africa (Pty) Ltd 103
    Polar Ice Cream Company (Pty) Ltd 106
    Rhodes Food Group (Pty) Ltd 108
    Sonnendal Dairies (Pty) Ltd 111
    Sundale Free Range Dairy (Pty) Ltd 113
    Trademodel Seven (Pty) Ltd 115
    Transem (Pty) Ltd 117
    Unilever South Africa (Pty) Ltd 119
    Unique Dairy Products (Pty) Ltd 122
    Wesmelk Melkery (Pty) Ltd 124
    Woodlands Dairy (Pty) Ltd 125
    Wynn-With Milk Farm (Pty) Ltd 128

    Introduction

    This report focuses on the manufacture of dairy products. The production of fresh milk generates R10bn in revenue each year and the annual market for dairy-based products is approximately R40bn. Over the years the number of milk producers in South Africa has\ndecreased by 53% from 4,184 in 2006 to 1,961 in 2014. At the same time efficiencies have improved, with South African national dairy production for 2013 at 2.817 billion litres, up 2.2% on 2012. Demand for dairy products shows positive growth with the\nexception being fresh milk where there is a shift to UHT milk. Milk producers employ about 30,000 farm workers and indirectly provide jobs to some 15,000 people.

    Strengths

    • An organised industry, with majority of the dairy players\nbelonging to the Producers’ Organisation and the Milk\nProcessors’ Association.
    • There is a high demand for dairy products, especially value\nadded products such as sour milk, yoghurt and cheese.

    Weaknesses

    • Low producer pricing in the dairy industry squeezes farmer’s profits and forces many to exit the industry.
    • No protection from global players. Free market principles have led to many players exiting the industry.
    • Political uncertainty and security of tenure related to the land reform process.
    • The poor state of the country’s infrastructure makes it costly for farmers to transport their products.

    Opportunities

    • Expansion into African markets, especially for ambient\nproducts
    • Increased urbanisation leads to more demand for dairy\nproducts.
    • Increasing demand for UHT milk which has a shelf life of\nup to nine months.
    • Market growth and improved profitability from the\nintroduction of new products such as flavoured milk.

    Threats

    • Cheaper imports from countries that receive subsidies.
    • The negative effect of increasing production and input costs and thus lower margins on farmers’ profits.
    • Weakening economy with high food inflation and decreasing disposable income.

    Outlook

    Consumer demand for dairy continues to grow at about 4% per year and higher dairy product consumption is expected as a result of increased urbanisation and electrification. However, the number of farmers producing dairy is expected to continue its downward trend due to the lack of protection measures for farmers who struggle with low margins. Low milk producer prices will not sufficiently cover cost price increases and will not be enough to encourage growth in production which has slowed.\r\n\r\nThe dominance of the three major processors is expected to continue and African markets hold promise. Emerging markets have fast rates of urbanisation, rising incomes, population growth changes in diet and economic growth and this leads to higher global dairy demand. Africa is expected to see an increase in liquid dairy product (LDP) consumption of more than 50%, climbing to almost 25 billion litres in 2020. The Tetra Pak Dairy Index 2014 says that Africa will see the biggest change in the flavoured milk category, with 7.1% growth across the continent. However, investments will need to be made in infrastructure to promote the sale of ambient products because of the current lack of refrigeration in most African countries.

    The Manufacture of Dairy Products in South Africa
    The Manufacture of Dairy Products in South Africa 2014

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    Table of Contents

    [ Close ]
    PAGE
    1. INTRODUCTION 1
    2. DESCRIPTION OF THE INDUSTRY 1
    2.1. Industry Supply Chain 2
    2.2. Geographic Position 3
    3. SIZE OF THE INDUSTRY 4
    4. STATE OF THE INDUSTRY 7
    4.1. Local 7
    4.1.1. Corporate Actions 10
    4.1.2. Regulations & Government Trade Agreements 11
    4.1.3. Enterprise Development and Social Economic Development 12
    4.2. Continental 14
    4.3. International 15
    5. INFLUENCING FACTORS 16
    5.1. Economic Environment 16
    5.2. Rising Input Costs 17
    5.3. Supply Chain Optimisation 17
    5.4. Consumer Trends 17
    5.5. Labour 18
    5.6. Land Reform Policy 19
    5.7. Cyclicality 19
    5.8. Information Technology 19
    5.9. Technology 20
    5.10. Environmental Concerns 20
    6. COMPETITION 21
    6.1. Barriers to Entry 21
    6.2. Research and Development (R&D) and Innovation 22
    7. SWOT ANALYSIS 22
    8. OUTLOOK 23
    9. INDUSTRY ASSOCIATIONS 23
    10. REFERENCES 24
    10.1. Publications 24
    10.2. Websites 24
    APPENDIX 1 26
    Summary of Major Players in the Industry 26

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