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December 9, 2015

Coega Dairy ensures the quality of the product is good for the consumer

One of the most progressive operations of its kind in South Africa, Coega Dairy has been milking every opportunity for growth since entering the market three years ago.

“The South African market is expanding quite dramatically, and for us to be able to service that market effectively, we need to capitalise on the growth opportunities.” Chief executive officer, Victor Korsten

“The South African market is expanding quite dramatically, and for us to be able to service that market effectively, we need to capitalise on the growth opportunities.” Chief executive officer, Victor Korsten After starting production in December 2012, the Eastern Cape dairy doubled its capacity within the first year. To date, it has trebled its volumes and now processes between 120- and 130-million litres of milk per annum.

“The reason we’re growing is primarily due to market demand,” says chief executive officer Victor Korsten. “The South African market is expanding quite dramatically, and for us to be able to service that market effectively, we need to capitalise on the growth opportunities.”

The Eastern Cape is currently South Africa’s largest dairy producing region, accounting for 30% of the country’s milk production. Now the fourth-largest player in the province, Coega Dairy aims to distinguish itself in three key areas; environmental friendliness, community involvement and empowerment of workers.

“It’s the cornerstone of our business, and we’re continuously working hard to improve our support in all three aspects,” says Korsten. “We also have to ensure that the quality of our product is good for the consumer and that the right products are on the shelf.”

The dairy processes its milk into sterilised products, of which ultra-high temperature (UHT) milk is the main one. The cream obtained during the process is used for butter production.

“We also do a lot of work for one of the large retailers in South Africa for their private labels, and most of the milk then goes to them,” he says.

The Coega Empowerment Trust, which owns 38% of the business, is made up of three secondary trusts held by factory and farm workers, and the Amadlelo Project Trust, which is responsible for farm development in rural areas.

Korsten says MCEP funded the empowerment trust portion at start-up, while the rest of the capital investment for the business was funded by the remaining shareholders.

Aside from start-up capital, MCEP also financed capital expenditure in the form of factory upgrades in 2013, with a third allocation recently earmarked to fund growth, bringing the total MCEP contribution to the region of R70-million.

“The IDC and the dti [the Industrial Development Corporation and the Department of Trade and Industry are the implementers of MCEP] are key stakeholders in our business because of the funding, but also because they bought into our vision,” says Korsten. “If we didn’t have those funds, we simply wouldn’t have been able to grow to where we are currently. “We have a positive relationship with regular strategic discussions about the way forward.”

Korsten says having the funds to set up a greenfield operation from day one gave his company the competitive advantage from the outset. “We were fortunate that we could start with a plant that consumes less energy, water and chemicals, and discharges less effluent.”

He says Coega Dairy has until recently had the lowest carbon footprint of any dairy in South Africa, and that new players entering the market are starting to follow suit.

He is quick to emphasise that the green technologies have in no way impacted negatively on the product quality; the effect has, in fact, been quite the opposite.

“We process our milk, which is a very perishable product, in a much more efficient way than a normal dairy does. The technology allows us to produce a better quality milk because we’re not handling it that often and subjecting it to multiple processing phases.”

Milk is currently collected mainly from the Tsitsikamma and Grahamstown areas, the Sunshine Coast region, and as far inland as Cradock. Around 20% of the supply comes from developing farms, which train previously disadvantaged farm, parlour and dairy managers in the latest production methods and high-tech equipment.

“One of our main objectives is to ensure that the milk producers have a secure and stable buyer for their raw product,” says Korsten. “In turn, because our farmers are shareholders in the business, we have a secure milk source.” He says Coega Dairy aims to be involved in all aspects of the value chain, from the farm to the shelf.

Exporting to other African countries forms a small component of what they do, with the business focus remaining primarily within national borders. “Dairy is probably one of the most cyclical industries in agriculture. We have definite summer and winter cycles, and our challenge is always how to balance production with the market demand.”