Monday, 18 September 2017

Consumers teach Clover a Lesson

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Price of 2 litres fresh milk 2015 - September 2017

In its financial statements to end June 2017 released on Friday 12 September, Clover Industries Ltd a major listed dairy producer, reports operating profit down 44.3% to R314.5m with headline earnings down by 65.9% to R121.6m.

Viccy Baker of the independent consumer website Retail Price Watch checked the CE’s presentation of the results to find out why. 

“Clover clearly pushed prices beyond the limits of consumers’ pockets – and their patience with what had previously been a known and trusted brand,” she said.

“Clover admitted to making a fundamental sales and marketing error – instead of decreasing prices to combat declining sales volumes, it increased them – by nearly 7% according to their presentation. 

“Analysts have defended Clover saying that other milk producers are following suit – but the facts as laid out in the table below show that while the price of milk has indeed climbed over three years, inflation for all brands is between 11 and 13.5%. 

“Clover’s prices have consistently been 17-20% higher than another large producer Douglasdale and around 10% higher than Fair Cape, which might legitimately claim a “prolonged drought” as it is based in the Western Cape.

 “Such aggressive pricing tactics which tread roughshod over hard pressed consumers – at one stage in 2016 Clover 2l milk was selling at over R30 in some stores around the country – will result in a backlash, which is clearly evident in their results.

“South Africa desperately needs companies and shareholders in the food sector that are interested in sustainability, and not just short term profits.

”As the CEO of Unilever International Paul Polman says: “The power is in the hands of the consumers and they will not give us a sense of legitimacy if they believe the system is unfair or unjust. Some companies that miss the standards of acceptable behaviour to consumers will be selected out. ”

Viccy Baker
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