Critical Consumer Pat Sidley
CONSUMERS in the Gauteng area may have noticed over the past two years that they have fewer choices of dairy products every time they get to the shelves.
Those in other areas may have noticed the same over differing periods.
For those consumers with high cholesterol, or a serious desire to lose weight, it has been the gradual loss of all the skim-milk products that has hurt most.
First the skim milk went, then all the fat-free and artificially sweetened yoghurt products disappeared along with several well-known name brands.
Much of this is accounted for by various take-overs, mergers and an animal that does not always serve consumers as well as it is cracked up to: the market.
Now, the Competition Board is taking a look at part of the most recent sale in the industry – – and this has been provoked, at least in part, by consumer irritation at having products they liked off the shelves.
What is being investigated by the board is a restraint of trade clause in the sale of one factory from one large dairy company to another.
It arises out of the sale by ICS’s Dairybelle company of its processing plant in Clayville to Clover which is part of NCD.
Although, says Competition Board chairman Pierre Brook, they came to his board first and asked for its approval (which was initially given), the board’s questioning turned up facts which worried it.
It had been billed simply as a sale of some of Dairybelle’s assets to Clover. The factory was not making money, it had a lot of high-tech equipment in it, and they wanted to “get shot of it”.
But during the course of routine inquiries around the topic, the board ascertained that Clover had placed in the sale contract a restraint of trade clause which would have prohibited Dairybelle from selling certain of its products within a defined area (most of Gauteng).
So why, if it was just a routine selling of surplus equipment at a plant not wanted, should this clause exist, the Board asked.
Additionally, some time back, Dairybelle had bought Nels dairies in the Johannesburg area — an event which had already reduced the choices consumers had at their disposal.
The board wondered whether this buy-out, seen along with other similar moves and the lack of profitability in the moves, did not indicate bad management on the part of Dairybelle.
The board suggested to the two companies that the deal could only go through if that clause was not in the sale agreement — which the companies did not accept.
Hence the inquiry. It has been initiated by the board and is to some extent prejudged as the board initially believed that the restraint of trade clause was not in the public interest — and that was why it did not want it there.
But it is now taking representations from the public and interested parties to see if the clause is legal or not and cannot move against the deal until it has gone through the process.
It is by no means an isolated incident within the dairy industry. Consumers may have noticed some (quite good) advertising by Bonita aimed to boost their place in the market.
This brand name is owned by another food giant, Premier Group, which also bought a smaller dairy, cut some of the brands back and now is a contender along with NCD and ICS as one of the big three dairy suppliers. Consumers outside of Gauteng will have seen some of their brands disappear over the course of time as well.
It is apparently quite easy to get to sell plain milk products on the market — but the real money (and skill) in the industry is in those products “with added value” — like cheese, yoghurt, fromage frais and the like. They are seen as luxury items and the profit margins are much higher than in plain milk — and the competition keener.
As usual in this country, that means a concentration in the market of interests so that consumers buying yoghurt are basically confronted with fewer choices in products and only three companies. Effectively, with the type of deal between Dairybelle and Clover, it also often means one can only get one company’s products in a certain geographical area which limits consumer choices even further.
The Competition Board generally has its hands tied by the laws which make it less effective than consumers would often like to see. However, with the new government and moves towards United States-style anti- trust legislation (which is pro-competition legislation in many other places), perhaps it will be given new teeth.
Maybe the board could look at the dairy issue from the consumer perspective and insist that consumers get fat- free products and yoghurt with real cultures in. In Gauteng, the choices are now limited — unless you like the long life Ultra Heat Treated skim milk (yeccch).