Changes looming in dairy industry as French giant eyes stake in Brookside

By JACKSON OKOTH

KENYA: Plans are in advanced stages for French dairy giant Danone to acquire a minority stake in Brookside Dairies Limited. This comes a few months after the international dairy giant’s acquisition of 49 per cent of the West Africa’s Fan Milk group.

 In a bid to increase its presence in Sub-Saharan Africa, the French group is seeking to acquire minority shares owned by Abraaj (its partner) at Brookside Dairy.

“We are not ready yet to provide details on this transaction and will be making a statement later,” said John Gethi, the processor’s general manager in charge of milk procurement and extension services, when contacted by The Standard.

Kenya’s dairy industry has seen the exit of several players in recent years, with Mt Kenya Dairy, Githunguri, Aberdares and New KCC on the list of those still standing. The latest acquisition by Brookside is Buzeki Dairies, owners of the Molo Milk brand. While acquisitions are happening among milk processors, the dairy sector is still controlled by informal segments where 80 per cent of all raw milk is taken to.

Fixing of prices

“We are concerned that a monopoly situation in the industry will lead to fixing of prices for both farmers and consumers. This is not favourable to the dairy industry because market forces of demand and supply should determine,” said John Wachira, National Secretary-Dairy Traders Association (DTA). There are fears in the industry that emergence of a few dominant players in the milk industry will take it back to the old days when a single processor could dictate producer prices and how much retailers could pay for the product.

Healthy competition

“When there are many players, this is healthy competition with both farmers and consumers able to get value for their money,” said Wachira.Figures indicate that Brookside Dairy buys an average of 500,000 litres of milk per day from some 125,000 Kenyan farmers.

The East African diary giant also operates in Tanzania and Uganda and exports its products to several African countries.

Danone, the firm keen to get its foot in, is an international company that is present on five continents. The group holds top positions in healthy food through four businesses — fresh dairy products, waters, baby nutrition and medical nutrition.

The transnational firm has more than 190 production plants and around 102,000 employees. Abraaj is a long-time partner of Brookside Dairy, where it has had investments via Acacia Fund and Aureos Africa Fund since 1998.

In 2009, Abraaj injected about $18.7 million in Brookside through Aureos for a minority shareholding. Danone and others are coveting this shareholding, now up for grabs.  This is not the first time Danone and Abraaj have collaborated in Africa.