New joint-venture supports emerging dairy farmers

Famous Brands has entered into a joint-venture partnership with the Coega Dairy Company- an existing dairy manufacturing business in Port Elizabeth, South Africa owned by local farmers, factory and farm employees – to supply mozzarella, cheese slices and cheese spread to the Group.

Famous Brands will control 51% of the Famous Brands Cheese Manufacturing Company’s shares, while shareholders of Coega Dairy will hold the balance of 49%. In terms of the agreement, a new state-of-the-art cheese manufacturing plant will be constructed adjacent to Coega Dairy’s existing dairy facility (whose primary business is the production of UHT long-life milk and butter).
Latest-technology equipment, budgeted at R35m ($4.06m), will be imported from Italy for the customdesigned
plant and will be funded by the joint-venture partners in direct proportion to their shareholding in the business. The day-to-day operations of the cheese manufacturing business will be managed by Coega Dairy for an agreed management fee. In terms of the agreement, the Coega Development Corporation will fund construction of the 2,600 sq metre facility and lease the premises to the new company. Construction is planned to commence in November, and is expected to cost R20m ($2.23m).
Famous Brands Cheese Manufacturing Co is anticipated to commence supply and distribution of mozzarella cheese to the Debonairs Pizza franchise network in May 2013. The business’s first-year annualised turnover
is expected to be in the order of R180m ($20.89m).
Famous Brands’ CEO, Kevin Hedderwick, says: “This partnership is compelling for two reasons: the transaction comprises a straightforward greenfield investment with significant earnings potential and a short payback period; and equally importantly, it is an enterprise which will deliver tremendous benefits for those black farmers who partner with us via Coega Dairy, whereby they gain an instant, robust market for their milk, and the potential to grow that market over time.”
“This transaction is anticipated to create 49 jobs in the new cheese manufacturing company, as well as a further five jobs in the existing Coega Dairy business,” notes Hedderwick.
Coega Dairy CEO, Dr Hennie Kleynhans, adds: “This transaction is a fantastic coup for the farmers who own
Coega Dairy; it guarantees a market for at least 38m litres of milk per annum and will in time establish the dairy as one of the biggest in SA.”