Clover Cites Tougher Competition in Milk Market Business Watch
While milk prices shoot up, Clover chief executive Johann Vorster says that milk producers are better off than fuel retailers because people use more petrol than they drink milk.
Agreed. But what about other factors, such as the fierce competition between popular dairy brands, retailers' house brand and other independent milk brands?
A dairy shelf at a normal supermarket houses more than six major brands of milk, yoghurt, cream and cheese.
Apparently it is the regional milk producers that give the big companies such as Clover, Parmalat and DairyBelle the most headaches.
Vorster says regional producers are more of a threat than national producers.
"Regional milk producers are in close proximity to their market and it is easier to get milk onto retailers' shelves," he says.
The hard-pressed consumer has more choice when it comes to milk, as house brand milk remains reasonably low-priced.
The drinking milk market in South Africa continues to be marked by very aggressive pricing by retailers' house brands, resulting in the long-life or ultra-high-temperature processed milk market significantly growing at the expense of fresh milk, Clover notes.
In the six months to December last year, Clover increased long-life milk volumes by 4.7 percent, while fresh milk volumes declined by 6.6 percent.
Vorster says this was not as a result of market share loss but rather of some disputes between retailers on price points.
While declining to elaborate, he adds that this has affected fresh milk volumes as more people buy long-life milk.
Like many popular brands, Clover can always fall back on its brand power, which analysts believe is still one of the main factors in buying decisions.
Vunani Securities analyst Anthony Clark agrees, saying that any consumer goods with popular brands tend to survive the storm.
We can praise the brand, but fuel price increases will definitely put a dent in how much an individual spends on a litre of milk. Consumers may consume the same amount but many will go for the cheapest brand. …