French food group expands African interests with stake in Kenyan dairy firm

Out-Law News | 21 Jul 2014 | 3:36 pm | 1 min. read

French food group Danone has bought a 40% stake in a leading dairy producer in East Africa as part of its strategy to expand investment into new markets.

Danone said the agreement with Kenya’s Brookside Dairy Limited, which took effect on 18 July, will see Brookside increase its range of products and boost its “geographical presence in key markets in the East African region, including Uganda and Tanzania”.

Danone, which did not release financial details of the transaction, said the partnership “will significantly enhance the platform Danone is currently building in Africa”.

Established in Kenya in 1993, Brookside is East Africa’s leading dairy products group with revenues in 2013 of around €130 million.

According to Danone, Brookside operates “a unique distribution platform enabling a daily access to over 200,000 outlets”. The company manages the largest milk collection network in East Africa supported by 140,000 of the region’s farmers.

Brookside is the leading milk processor in Kenya with an installed milk processing capacity of 750,000 litres per day. The company works with a number of banks to provide loans to help farmers expand their businesses including the purchase of machinery and livestock.

Danone said: “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”.

In 2012, Danone generated sales in excess of €20 billion, with more than 50% in emerging countries.

Last year, Danone announced plans to acquire a 49% stake in Fan Milk International, which had sales of around €120m in 2012 and is the leading manufacturer and distributor of frozen dairy products and juices in West Africa.

According to the Kenya Investment Authority the agriculture sector accounts for 65% of Kenya’s total exports and provides more than 70% of ‘informal employment’ in rural areas.

The African Development Bank’s country strategy paper for Kenya for 2014-18 (53-page / 1.15 MB PDF) said agriculture contributed 20.7% of real gross domestic product in 2013.

A report published in 2011 (27-page / 800 KB PDF) by the UN’s Food and Agriculture Organization said that while agricultural investment represents less than about 5% of foreign direct investment (FDI) to Africa, “it has been part of the upward trend in FDI, which between 2003 and 2010 grew on average by 17% per year”.

The report said the “vast agricultural potential of sub-Saharan Africa, associated with low costs of local inputs including land, attracts foreign investors and promises high returns”.