Two of Kenya’s biggest dairy processors have completed a merger of their operations, 15 months after the deal was approved by Treasury.
Officials said operations of Spin Knit Dairy have been fully merged into one business unit under the Brookside brand name as part of market positioning ahead of another round of peak milk production in the March to May season.
Following the merger, the combined total installed capacity now stands at 600 000 litres per day, up from 450 000 litres previously handled by the Ruiru-based processor.
“All milk processing is now being done under the Brookside brand,” said John Gethi, Brookside’s general manager for milk procurement.
Last week, private equity fund Aureos Capital, announced that it had spent part of its Sh28 billion Africa Fund, the firm recently raised from European and American investors to complete the acquisition of Spin Knit Dairy and finance the ongoing expansion that has so far spread to nine countries in the region.
Now, Brookside Dairy’s fund of $19.7 million is managed by Aureos Capital.
In mid-2008, Spin Knit snubbed Italian milk major Parmalat and sold its operations to its local rival, Brookside Dairy, in a move that created a dairy conglomerate to compete with the giant New KCC.
The merged company has since triggered milk wars with the New KCC for the control of Kenya’s multi-billion shilling dairy industry.
At the height of the glut, consumers have been reaping from the tussle of market share with a Sh8 per half litre price cuts across the board.
But farmers were on the receiving end with Sh2 per litre drop for their deliveries to either of the competing firms.
Apart from price wars, the two processors also compete through annual sponsorships for annual field days geared for the best-practice in livestock management and provide networking opportunities for smallholders.
“We have reduced prices as a response to market forces. It is, however, not the best we could do since it does not motivate farmers,” added Gethi on the price wars coming at the height of the milk glut.
Industry statistics by the Kenya Dairy Board show that Brookside was the biggest processor in the month of December, but was last month dislodged by New KCC, which currently processes some 620,000 litres of the milk.
Together, the two processors account for 90 per cent of the total processed milk in the country.
Brookside said its network of suppliers has grown, especially with a wider farmers’ supply base.
“All the contracted farmers from Spin Knit are now on board the Brookside family. We have got a bigger farmers’ base,” said Mr Gethi.
Brookside is planning to stimulate higher consumption as well as motivate farmers through increased pay.
“Our success relies on wide network of farmers and ready markets. We will soon open a collection centre in Njoro near Nakuru where Spin Knit was strongest, “ added Gethi.
Brookside is a private company founded in 1993 following the deregulation of the dairy sector in the early 1990s.
Based in Ruiru, Brookside, now has a 40 per cent share of the Kenyan dairy market, with milk sourced from 120,000 suppliers.
Seven per cent of these are commercial farmers and the remainder are small scale producers.
Established in 1996, Spin Knit Dairy which produces Tuzo, Lea and Ever fresh milk brands started as a mini-dairy processing plant in Nakuru.
It employs about 700 workers. Spin knit controls 11 per cent of milk intake.
Brook side says all the former workers of Spin Knit were absorbed into the expanded business unit.