- March 24, 2006
- Posted by: admin
- Category: Historic Investments
Johann Vorster has recently taken over as CEO of the Clover Group, SA’s largest dairy producer with a turnover in excess of R4.5 billion and about 6300 employees. he spoke to Chris Louw about the challenges that lie ahead.
CLOVER has come a long way since it was transformed from the National Cooperative Dairies Limited (NCD), representing the interests of dairy farmers, into the company Clover Industries some two years ago. What exactly has changed?
It is indeed a new beginning for Clover, with the appointment of John Bredin as new chairperson, a new CEO and a new young and energetic management team. I would like to take this opportunity to thank Or Vos Grey, the retiring chairperson, for the uncompromising and dedicated 28 years that he devoted to Clover/NCD.
Many changes have occurred in Clover over the last few years and many of the bold initiatives taken are starting to pay dividends. Clover’s strong sales and distribution ability, as well as the superior support from its trading partners, are placing it far ahead of its competitors.
How have the new challenges affected your relationship with dairy farmers?
Clover’s commitment to communicate with its producers on a uniform basis has been strengthened recently with the creation of regional Clover Producer Forums. A facilitation process was used to get full feedback and comments from all producers in each region and was widely supported. We believe these forums will create very strong platforms between producers and the Clover board with regard to a wide range of producer issues. The concept is based on the Fonterra (New Zealand) shareholders’ council dynamic.
Where does Clover currently find itself in the market place?
Clover operates in a very competitive environment, but restrictive structures and obstacles have been removed for the company to become more agile and quick in its decision-making. Sealfresh, Twistop, Aquarts water and Manhattan Ice Tea are but a few of the many new inventions introduced recently by Clover. The interim results have shown a positive turnaround to the corresponding previous period, with attributable earnings to ordinary shareholders increasing to R65,8 million from a loss of R17.9 million.
There was a certain amount of unhappiness about staff retrenchments in the not too distant past. Has the situation stabilised now?
We continue to be proud of the commitment and dedication of our staff in achieving the levels of service and efficiency that make the company stand out in comparison to our competitors. To really capitalise on these successes. Clover is working on a number of strategies to extract more value for stakeholders by aligning all the relevant parties’ interests in the entire system. Clover has entered a new era, with the consolidation phase something of the past, and we’re looking forward to an exciting growth phase. Many tough and unpopular decisions had to be made in the past but a more vigorous and young Clover is a clear result of these actions. With an ever-changing landscape and increased competition, tough decisions will always be part of staying in the game.
What are the challenges facing Clover?
One of the most significant challenges facing any fast-moving consumer goods company today is how to deal with inflationary cost pressures in a generally noninflationary environment. It is here that Clover feels it has developed something special to counter such pressures. Projects are being initiated to ensure that costs are being trimmed, which is in line with international best practices.
Last year some dairy farmers publicly questioned Clover’s commitment to milk producers. They argued that the company’s focus has shifted too much toward the interest of shareholders. Your reaction?
It is widely accepted that milk price is not the only point of contention among milk producers. Issues such as stability, growth, cash flow and other types of support play major roles in helping a company become a milk purchaser of choice. With this in mind. Clover has recently embarked on an alignment strategy whereby the money tied up in the entire supply chain wiU be carefully analysed and re-employed to extract value out of the Clover system for all stakeholders. This, in fact, will be the second time that value will be unlocked from Clover. The first time was two years ago when Clover invented a unique dual shareholder structure whereby control was vested solidly in the hands of the producer shareholders, but where preference shares were created at a guaranteed dividend yield, and reserves of R44 million were allocated to shareholders. And that was done at a share price of R2,90 – today it is trading at R4.50.
There were concerns in certain circles about some business agreements Clover has entered into with foreign dairy companies. Some dairy farmers fear Clover will eventually be controlled by these foreign groups to the detriment of local producers. What`s your view?
Clover has international partners in almost all key areas of its business. It has a joint venture with the Danone Group (the number-one yogurt company in the world), it has joined up with Fonterra NZ to capture sub-Saharan Africa, it has-recently invited Hosken Consolidated Investments (HCI) as its BEE partner, and it has unchallenged support from its producers. Imperial has also made a significant contribution to Clover’s distribution ability by providing vehicles in any configuration that’s requested. Indeed a formidable partnership scenario.
What can be expected under your leadership and how do you see your approach to the new challenge? In short: where Is Clover heading?
Clover stands for trust and integrity, and many opportunities beckon for the years ahead. Sound structures are in place on which we can capitalise. Future opportunities will include, inter alia, mergers and acquisitions in selected markets. Clover has a clear vision going forward, and that is one of complete alignment of all stakeholders arid the unlocking of value for the benefit of all. These types of changes naturally take some time to implement, but Clover has shown in the recent past that it has the ability to move fast. Commitment, passion and speed have become key words in the Clover vocabulary.
Source: Farmer’s Weekly