16 Sep 2024 Nestlé divests iconic Cremora brand
The world’s largest food and beverage company will sell iconic creamer brand will be sold byto French multinational Lactalis, as part of a “strategic decision to sharpen business focus”.…
The 77-year-old Cremora brand, which is currently manufactured in SA across two facilities in Babelegi and Potchefstroom, as well as in Zimbabwe, would be sold to the Lactalis, owner of Parmalat, Melrose, Steri Stumpie and Bonnita brands.
Lactalis has operations in the Western Cape, Eastern Cape, Gauteng and KwaZulu-Natal. No price was disclosed.
Nestlé East & Southern Africa Region (ESAR) said it was reaffirming its “long-term commitment” to the region’s economic development by “evolving its business model to stay competitive and sustainable”.
“Our commitment to growth in the region, alongside localised production and sustainable practices, remains steadfast,” said Nestlé SA spokesperson Mota Mota.
He noted that even though Cremora had a “deep-rooted” history in Southern African homes, the decision was not made hastily and was the result of a careful analysis of Nestle’s operations and product line.
Nestlé owns five factories and two distribution centres across SA, and a Cremora factory in Zimbabwe.
In Harare, the production of Cremora is set to halt as part of the deal, but the production lines will be pivoted to products such as Nestlé Everyday powdered milk and Cerevita cereals.
Mota said no jobs would be impacted in Zimbabwe or South Africa by the transaction, which will need competition authority approval.
Cremora ‘in good hands’
“We believe that Cremora is in good hands with Lactalis SA – a leading food company known for its expertise and commitment to excellence,” Mota added.
“This transition is in the best interests of our business, employees, customers, partners and consumers, ensuring that Cremora continues to thrive and deliver quality products under new ownership.”
Lactalis SA’s GM, Herman Janse van Rensburg, said the group was “excited to welcome this iconic brand to Lactalis South Africa”, adding it was aligned with its strategy of innovation and diversification of its product offering to cater to local consumer preferences.
Sasfin Wealth senior equity analyst Alec Abraham was not surprised by the transaction, saying that Nestlé, which owns brands such as Nespresso, Nescafé and Ricoffy, had for some time been exiting ranges aimed at lower-income groups, and shifting its products more towards to higher-income and growth categories such as pet food and premium coffee.
According to Abraham, it has been streamlining its portfolio over the last couple of years as they adjust to normalising growth post the pandemic spike in Nespresso, particularly. Nestlé has, however, had a couple of missteps, with some production and supply chain issues in certain categories, such as their nutrition business. They have also had similar issues in the pet business too and a slowdown on the coffee side.
Abraham pointed out these problems had culminated in a shakeup in management with the shock resignation of CEO Mark Schneider last month as the “board wasn’t happy that enough was being done to set it on the growth path again”.
He believed the decision to sell Cremora was “very much in keeping” with the shift to higher income groups and faster growth areas, cutting ranges that no longer “work for it”.
Abraham said Nestlé was instead pushing products such as Nespresso, as well as its partnership with Starbucks to produce coffee capsules.
Lactalis, on the other hand, was a “dairy business”, so this acquisition fitted in nicely with its portfolio, he added: “This is much more in keeping with them as they will be supplying the milk to make Cremora.”
Good news for Ellis Brown?
AVI, the owner of rival Ellis Brown Creamer, reported that its creamer segment performed exceptionally well in the year to end-June, with revenue growth of 26.7%. Gains in market share and improved service levels were also factors in sales, which were bolstered by disruptions in competitor supply.
For Nedbank senior research analyst Shaun Chauke, the sale of Cremora could provide an opportunity for AVI to make some market share gains, at least in the short term.
He said Cremora and Ellis Brown pretty much had the creamer market sown up between them, with “supply chain constraint issues over various formats” at Nestlé.
Source: Nestlé, BusinessDay.co.za, News24.com