The entry of French firm Danone into Kenya through the acquisition of a 40 per cent stake in Brookside, the country’s biggest milk processor, is likely to cause a significant change in the local dairy sector landscape.
The firm, which deals in fresh dairy products, early life nutrition, water, and medical nutrition, announced on Friday it had entered into a deal to acquire shareholding in Brookside as it seeks to expand its operations in Africa.
The manner of its entry gives Danone control a major share of the growing local and regional market for dairy products without having to start from scratch.
The Paris-listed company has been actively exploring opportunities to extend its footprint on the continent, and the partnership with Brookside will be beneficial as it targets a share of the East African market.
Brookside already has a presence in Tanzania, Uganda and Ethiopia, and there has been talk of the company launching operations in Rwanda and Nigeria.
“This partnership will enhance the platform Danone is currently building in Africa,” the firm said in a statement.
Brookside spokesman Wilson Okong’o declined to disclose the value of the transaction.
Last year, Danone bought a 49 per cent stake in Fan Milk International, a frozen dairy products and juice maker in West Africa, as well as a controlling interest in Morocco’s top dairy firm, Centrale Laitiere.
The Kenyatta family, which previously held a 90 per cent stake in the milk processor, will now control 50 per cent, with the Dubai equity firm Abraaj Group retaining 10 per cent. Abraaj’s Africa Fund bought the stake in 2009 for Sh1.6 billion.
Locally, the deal will be a big boost to Brookside Dairy’s ongoing expansion and will help it tighten its grip on the Kenyan market. Experts expect that the processor will ride on the financial muscle and the extensive experience of Danone to increase production and execute growth strategies.
Brookside has been on an expansion drive over the past year that has seen it buy out rival processors, making it as the dominant player in the dairy products market.
Last year, Brookside acquired Buzeki Dairy, the producers of Molo Milk, in a deal estimated to be worth at Sh1.2 billion. It had previously acquired other local dairy brands including Ilara, Tuzo and Delamare.
The acquisition of Buzeki automatically gave Brookside a presence in South Sudan, thereby enlarging its regional reach. The processor currently controls over 44 per cent share of the dairy products in the Kenyan market.
PUT UP A POWDER PLANT
As part of its growth plan, Brookside has put up a Sh3 billion milk powder plant, expected to double the capacity of milk processed at the plant to 2.4 million litres daily.
“By uniting Danone’s international expertise in fresh dairy products with Brookside’s regional expertise and robust supply chain, the partnership will enable Brookside’s growth acceleration by expanding its product portfolio and strengthening its geographical presence in key markets in the East African region, including Uganda and Tanzania,” Danone said on Friday.
There are, however, concerns about the impact on the local dairy industry and Kenyan dairy farmers if Brookside entrenches its market dominance. By buying out its competitors, Brookside, whose CEO is President Uhuru Kenyatta’s brother, Muhoho, has limited farmers’ choice of where to sell their milk. Brookside’s biggest competitor is state-owned New KCC which lacks the financial muscle to battle it out in the market in terms of prices.
This could leave Brookside with the prerogative of setting milk prices, for both farmers and end consumers.
Danone joins a growing list of French firms that have ramped up investment in the Kenya over the years as more western companies eye a piece of the African consumer market.
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| PHOTO | FILE A worker offloads milk at the Brookside factory in Ruiru. The company has been carrying out an ambitious expansion plan, including putting up a milk powder plant |
The firm, which deals in fresh dairy products, early life nutrition, water, and medical nutrition, announced on Friday it had entered into a deal to acquire shareholding in Brookside as it seeks to expand its operations in Africa.
The manner of its entry gives Danone control a major share of the growing local and regional market for dairy products without having to start from scratch.
The Paris-listed company has been actively exploring opportunities to extend its footprint on the continent, and the partnership with Brookside will be beneficial as it targets a share of the East African market.
Brookside already has a presence in Tanzania, Uganda and Ethiopia, and there has been talk of the company launching operations in Rwanda and Nigeria.
“This partnership will enhance the platform Danone is currently building in Africa,” the firm said in a statement.
Brookside spokesman Wilson Okong’o declined to disclose the value of the transaction.
Last year, Danone bought a 49 per cent stake in Fan Milk International, a frozen dairy products and juice maker in West Africa, as well as a controlling interest in Morocco’s top dairy firm, Centrale Laitiere.
The Kenyatta family, which previously held a 90 per cent stake in the milk processor, will now control 50 per cent, with the Dubai equity firm Abraaj Group retaining 10 per cent. Abraaj’s Africa Fund bought the stake in 2009 for Sh1.6 billion.
Locally, the deal will be a big boost to Brookside Dairy’s ongoing expansion and will help it tighten its grip on the Kenyan market. Experts expect that the processor will ride on the financial muscle and the extensive experience of Danone to increase production and execute growth strategies.
Brookside has been on an expansion drive over the past year that has seen it buy out rival processors, making it as the dominant player in the dairy products market.
Last year, Brookside acquired Buzeki Dairy, the producers of Molo Milk, in a deal estimated to be worth at Sh1.2 billion. It had previously acquired other local dairy brands including Ilara, Tuzo and Delamare.
The acquisition of Buzeki automatically gave Brookside a presence in South Sudan, thereby enlarging its regional reach. The processor currently controls over 44 per cent share of the dairy products in the Kenyan market.
PUT UP A POWDER PLANT
As part of its growth plan, Brookside has put up a Sh3 billion milk powder plant, expected to double the capacity of milk processed at the plant to 2.4 million litres daily.
“By uniting Danone’s international expertise in fresh dairy products with Brookside’s regional expertise and robust supply chain, the partnership will enable Brookside’s growth acceleration by expanding its product portfolio and strengthening its geographical presence in key markets in the East African region, including Uganda and Tanzania,” Danone said on Friday.
There are, however, concerns about the impact on the local dairy industry and Kenyan dairy farmers if Brookside entrenches its market dominance. By buying out its competitors, Brookside, whose CEO is President Uhuru Kenyatta’s brother, Muhoho, has limited farmers’ choice of where to sell their milk. Brookside’s biggest competitor is state-owned New KCC which lacks the financial muscle to battle it out in the market in terms of prices.
This could leave Brookside with the prerogative of setting milk prices, for both farmers and end consumers.
Danone joins a growing list of French firms that have ramped up investment in the Kenya over the years as more western companies eye a piece of the African consumer market.
