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'Commitment to Ghana...strong' despite investment cut: Fan Milk

By Mark Astley+

19-Mar-2014
Last updated on 19-Mar-2014 at 15:10 GMT

Fan Milk uses its

Fan Milk uses its "unique street vending system" to distribute products across Ghana and six other West African countries.

West African dairy giant Fan Milk has reiterated its "commitment" to Ghanaian consumers after announcing plans to cut investment in the country over issues with electricity supply.

In an interview with Bloomberg TV Africa, Jesper Bjorn Jeppesen, managing director of Fan Milk International, revealed that the company, which is jointly owned by Danone and private equity firm the Abraaj Group, has slashed investment in Ghana in 2014.

Jeppesen said that recent electricity shortages had caused storage and distribution problems and in turn impacted revenue.

DairyReporter.com approached majority shareholder the Abraaj Group regarding Fan Milk's plans for Ghana, but was referred back to Fan Milk.

The Danish firm, which also operates in Nigeria, the Ivory Coast, Liberia, Burkina Faso, Benin, and Togo, declined to answer specific questions, but wanted to make clear that significant investment will still be made in Ghana.

“Fan Milk continues to invest in the development and expansion of its Ghanaian operations,” said the spokesperson.

“Ghana has been a key market for Fan Milk for over 50 years, driven by sustained and increasing demand for dairy products. Our commitment to Ghana and Ghanaian customers remains as strong as ever.”

Revenue growth barriers

In his interview with Bloomberg TV Africa, Jeppesen announced that the company's board had recently approved a decision to reduce investment in Ghana in 2014 to 15m Ghanaian Cedi ($5.8m, €4.2m).

Fan Milk declined to confirm the original investment figure.

“It’s not a very, very high figure this year," said Jeppesen. "We have scaled it down at our last board meeting due to the fact that we are waiting for the market to move again.”

He pinpointed electricity shortages, water supply issues, and a lack of road infrastructure as the three most significant barriers to achieving revenue growth in Ghana.

“We are having some electricity challenges, we are also having water supply challenges and we can also talk about the road infrastructure in the country, which is not as nice as it could be,” said Jeppesen.

“But I know the government has plans to come up with a lot of projects when it comes to roadwork. They also have plans when it comes to electricity and water. And we are just hopeful that these problems are going to be resolved sooner rather than later.”

Street vending

Paris-based dairy giant Danone and the Abraaj Group announced in October 2013 that they had signed a deal to jointly acquire Fan Milk.

The Danish firm manufacturers and markets a wide range of products including frozen yogurt, ice cream, flavored milk and fruit juice to consumers in Nigeria, Ghana, the Ivory Coast, Liberia, Burkina Faso, Benin, and Togo, through its "unique street vending system."

Under the terms of their deal, Danone currently holds a 49% stake in Fan Milk, while the Abraaj Group controls the remaining majority interest. 

As part of the deal, Danone's stake in Fan Milk will, however, increase to a majority.

When initially approaching the Abraaj Group for comment, DairyReporter.com asked whether the duo were aware of the problems in Ghana prior to their acquisition of the company. 

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