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By RACHNA LAL and
Cabinet has approved the sale of Fiji Dairy to Southern Cross Foods Limited (SC Foods) for a basic sum of $10 million.
This mean, Southern Cross Foods, a wholly-owned subsidiary of CJ Patel Group, will own 80 per cent of Fiji Dairy.
The remaining 20 per cent will lie with the Fiji Dairy Cooperative Limited, run by the dairy farmers.
The Attorney-General and Minister for Industry and Trade, Aiyaz Sayed-Khaiyum, at a press conference yesterday said together with the sale price, SC Foods would take up the entire debt portfolio of Fiji Dairy Limited which is approximately $17m.
“The purchase price could fluctuate and could go up depending on the level of debt at the time of the actual sale being finalised,” he said.
He said the farmers would get to start off on a very clean slate.
Mr Sayed-Khaiyum said the agreement for sale had a number of conditions which had been agreed to with the proposed purchased.
These include setting up chilling plants in Ba and Lautoka within four months of the actual contract being executed, modernising and upgrading the Fiji Dairy factory and starting up a dairy farm in Waidina.
“Setting up of chilling plants in Ba and Lautoka will give farmers in the Western Division the opportunity to supply the milk in the supply chain and encourage farmers to get into the dairy industry in Fiji,” Mr Sayed-Khaiyum said.
“Government’s focus will be primarily on assisting the farmers to increase yield. That is critical because we have a huge gap in supplying milk in Fiji.”
The Minister highlighted that SC Foods already had a 350-acre farm in Waidina which they intended to develop with 150 cows.
“That should be up and running within the next year or so,” he said.
“They have also undertaken to completely modernise and upgrade the factory within two to three years.
“So you will expect to see more Rewa brands coming out of the factory and this will provide lot more competition in the market and it will be good for consumers.”
Confidence in the industry
Fiji Dairy executive chairman, Adrian Sofield, said he was very confident in the future of the industry that it had growth potential.
“The processing unit (Fiji Dairy), now in the private enterprise hands, will be operated on a commercial basis where accountability will be number one now,” he said.
“I believe in the past that was not really been the case.
“But as we move forward, the private enterprise will certainly introduce new equipment, new ideas, new management techniques that will streamline the whole industry.
“The fact that our new owners will become farmers themselves, I think is a positive for the industry because they will understand and learn about the problems that are developing in the paddocks.
“They will understand and appreciate the problems and will be able to know how to tackle those problems.
“They will become a substantial farmer and within two years they will be expected to produce seven per cent of the total milk supply.
“They are looking to expand further where they could end up producing well over 10 per cent of the country’s milk supply.”
Mr Sofield said the farmers wished to increase their production from currently from just 10 million litres to 25 million litres.
“At present the factory is operating at only 60 per cent capacity with what is supplied to it,” he said.
“With new equipment introduced in the factory, I have no doubt that 25 million litres would to processed locally.
“Fiji Dairy Limited imports 80 per cent of its products, we’re a distributor but we want to become more of a manufacturer.”
Meanwhile, Mr Sofield revealed that 16 companies had responded to the expression of interest and this was brought down to two.
“We had Tappoos and SC Foods in the end but SC Foods won the race,” he said.
“What they (SC Foods) offered to the industry, not so much in money terms but in value to the industry, we have taken that into consideration for the benefit of the industry.”
Mr Sofield said one of the positives herewas that SC Foods is not connected with the dairy industry.
“We felt that that would take out any conflict of interest that may arise with offshore suppliers, whereas Tappoos for instance has connections with Fonterra; our biggest supplier.
“We felt it would be better to have an independent player rather than having someone who is connected with our principal supplier.”
Mr Sayed-Khaiyum stressed it was critical that whoever was given the final offer, had their focus on developing the local industry.
“And not partnering up with some foreign company because right now, in order to meet our milk supply demand, we have to import milk.
“SC Foods on that basis, offers the best proposition in terms of developing the local industry and not simply relying on foreign partners to supplement the local supply chain,” he said.
Mr Sofield said the new owners would not only be investing in developing dairy farming and being hands-on farmers themselves.
“They already have experience in food processing and a good distribution network not only here in Fiji but in other Pacific Islands,” he said.