Cheap imported butter threathening local butter brands
South Africa has been a net importer of butter for years. In 2018, 85% of those imports came from as far afield as New Zealand, Denmark, Ireland, and the Ukraine.
It’s cheaper to import than it is to make it locally. Imports in 2018 ranged from around R68 per kilogram to about R100 per kilogram. And with only a R5 per kilogram import duty, the imports are undercutting local suppliers.
All Woolworths-branded butter carries the “Product of South Africa” label, but Shoprite-owned Checkers has a far wider range from all four corners of the globe. There you will find “President of France”, which is priced at a premium to local butter, while American and Ukranian butter significantly undercuts the local market.
Retailers are increasingly receiving less butter from local producers and are forced to purchase on an international scale.
Local brands are not only fighting competition from outside the country. Increasingly, large dairy concerns are internationally owned. Ironically foreign players have been buying up local dairy businesses.
French dairy group Parmalat has a substantial presence in South Africa and has over the last two years gradually phased out the Simonsberg brand in favour of its own President brand. President is the worlds’ second biggest cheese brand and sells in 147 countries. It happens nowadays to make cheese in Stellenbosch too.
Clover, South Africa’s biggest dairy business is currently trading under cautionary and seems likely to be taken out by Israel’s Milco.
The deal has been mired in some controversy with JSE listed Brimstone recently withdrawing from the consortium doing the R4.8 billion buyout under pressure from activists. The offer though remains on the table at R25 a share, a 20% premium on the ruling price before the news of the offer broke. Investors have been disappointed in the market performance of Clover since its listing
Article by Bruce Whitfield