BROOKSIDE FINALIZES 1.1BILLION MOLO MILK ACQUISITION

 

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Milk processor Brookside Dairies has completed the acquisition of Buzeki Dairy — the maker of Molo Milk and Kilifi Gold — in a deal that consolidates its grip on Kenya’s formal milk market. (check out their website on http://molomilk.co.ke/about-us)

People familiar with the deal said it was priced at Sh1.1 billion and has since received the approval from the Competition Authority of Kenya (CAK), the market regulator.

The acquisition pushes the Ruiru-based Brookside’s market share up to 44 per cent and cements the company’s market leadership position.

Buzeki’s is fourth in a series of takeovers that Brookside has completed in the past six years starting with Ilara in 2007, Delamere and SpinKnit (makers of Tuzo milk brand). Brookside, which is owned by President Kenyatta’s family, has recently cast its eyes beyond the Kenyan borders with the announcement in September of plans to acquire a 20 per cent stake in Ethiopia’s Elemtu Dairy.

The Kenyan firm is also said to be eyeing the Nigerian market where it plans to set up a milk processing plant next year.

The buyout raises Brookside’s installed milk processing capacity by a third to one million litres per day from the current 750,000 litres daily, firming its stranglehold on the dairy market.

“In the next few days, we expect an increase in our daily milk intake with the acquisition of Buzeki,” said John Gethi, the general manager of Brookside in a telephone interview withBusiness Daily from Marakwet County where he was launching a new milk cooling plant.

The CAK approved the takeover last Thursday, saying Brookside was yet to reach a dominant position in the dairy sector and that informal players account for 88.8 per cent of the milk market.

“The informal sector offers a competitive push to the milk processors making it impossible to dictate prices,” said Wang’ombe Kariuki, director-general of CAK.

“Most processors are county monopolies so there is need to have nationwide players to enhance competition.”

Brookside’s bid to acquire Buzeki has been in the news since June this year but it was only yesterday that Kiprotich Bundotich, the brain behind Buzeki, admitted that he had sold his firm.

“I want to give full attention to my logistics firm in the coming years. I intend to double the number of trucks that I am operating now; that’s why I bowed out of the milk industry,” said Mr Bundotich.

Asked whether he was still a shareholder, he said that the number of shares he currently holds at Buzeki are ‘negligible,’ meaning Brookside has acquired a controlling interest in the dairy firm.

Mr Bundotich turned to Brookside after an earlier deal to sell a 40 per cent stake of Buzeki to the county governments of Nakuru, Baringo, Uasin Gishu, Keiyo Marakwet and Trans Nzoia at Sh500 million collapsed.

Under the proposed sale agreement, each of the counties was to contribute Sh100 million for an eight per cent shareholding, valuing Buzeki Dairy at Sh1.25 billion.

Brookside, founded in 1993, is run by President Kenyatta’s younger brother Muhoho and has operations Uganda and Tanzania.

The company exports its products to the Common Market for Eastern and Southern Africa (Comesa) and the Middle East.

Buzeki Dairy, established in 2008, has two milk processing plants; one in Kilifi — which produces Kilifi Gold Milk — and another in Mau Summit where it makes Molo Milk. Buzeki Enterprises started off in 2000 as a transport and logistics company and currently owns about 100 trucks.

It was Spin Knit’s sole milk distributor in the coastal region before Mr Bundotich diversified into dairy processing after Brookside acquired his major supplier. Buzeki was previously ranked Kenya’s fourth largest dairy processor with seven per cent of the processed milk market.

Molo Milk is Kenya’s most preferred milk brand according to a Consumer Insight survey in 2012, making it a prime target for Brookside.

It was followed by Tuzo, Ilara and Brookside Milk brands — a pointer to the fact that the acquisition of Buzeki’s two brands are key to solidifying the Ruiru-based company’s market leadership. The Buzeki deal means Brookside has more than doubled its lead against closest rival New KCC, which commands 20.8 per cent of the processed milk market.

Githunguri Dairy Farmers Co-operative, producers of Fresha brand, is ranked third with 17 per cent followed by Sameer — producers of Daima Milk — with six per cent.

The competition watchdog said the growth of Sameer’s Daima brand, which entered the market in 2011, is evidence that there is room for new players and that Kenya’s dairy market has opportunities for growth.

Statistics from the Kenya Dairy Board show that of the 4.1 billion litres of milk produced in Kenya last year, about half or two billion litres was consumed at the household level.

Dairy firms processed 495.2 million litres of milk last year, giving processors 12 per cent of Kenya’s total milk market. This means that informal players such as hawkers, milk cafes and dairy farmers — who directly sell their produce to schools, hotels and restaurants —control 88 per cent of the market.

The Buzeki deal gives Brookside a geographical advantage over its competitors as it will now exploit former’s milk collection centres, cooling plants, processing facilities and distribution channels to grow its market share.

Brookside has a network of milk collection and cooling centres in Eldoret, Kiganjo, Eldama Ravine, Ol Kalou, North Kinangop and Nyeri.
The company has three milk processing plants in Ruiru, Eldoret and Kiganjo.

COURTESY:

gandae@ke.nationmedia.com
hdavid@ke.nationmedia.com

 

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