Danish Crown enters Africa via acquisition

24-Nov-2017 - Last updated on 24-Nov-2017 at 10:25 GMT

Danish Crown has snapped up a majority stake in South Africa's Overberg Food Distributors, marking the pork giant's first entry into a continent boasting big "potential".

ESS-Food, a hitherto pure trading company owned by Danish Crown, has moved to buy a 70% stake in Cape Town-based Overberg.

Its acquisition, still subject to regulatory approval, makes a significant change of strategic direction.

Formerly trading-focused, the business wanted to reinvest itself as a foodservice firm. And what was once a boardroom strategy is now a reality, with ESS-Food set to sell and distribute meat, firstly in Cape Town, then across South Africa.

It has tapped into one of the continent’s most lucrative economies in South Africa. With the wider region expected by many to see a long-term rise in population growth and affluence - metrics companies like because they suggest the market is getting bigger, the customers richer.

But put Africa's growth potential to one side and another reason for the takeover leaps out at you: dangerous market pressures that could dent Danish Crown's margins.

Morten Holm, CEO of ESS-Food, said Africa could be an "important and profitable" market should another "suddenly grind to a halt" or get "closed down completely".

Meanwhile, Russia has widened its import ban on meat products from Brazil, the EU, US and Canada. Other markets too, like the UK and the US, appear increasingly protectionist and Danish Crown's takeover suggests it - and perhaps many more in the business world - is wary of the uncertainty in global markets and free trade.

"It's important for Danish Crown as a group to create a strong foundation for future business on the African continent," Danish Crown CEO Jairs Valeur said. "In doing so, we'll be able to benefit from economic growth which is expected in Africa in the coming decades."

Overberg poised to expand reach

Founded 25 years ago, Overberg boasts a 250-strong workforce, serving around eight times as many customers through cold stores in Cape Town and Port Elizabeth. Its revenue today is around DKK 350m (US$55m).

While still subject to regulatory approval, ESS-Food could soon own over two-thirds of the business. The remaining 30% minority stake would be retained by Guy Osler, who would remain CEO.

Henceforth, ESS-Food will be the conduit through which all Danish Crown goods - be that Danish bacon, German schweinshaxe, Polish sausage or tinned pork - flow through Africa.

In 2015 to 16, ESS-Food sold 25,000 tonnes of meat to the tune of DKK 150 (US$23min South Africa).

Holm added that it's "hard to tell how big a market Africa can be for Danish Crown".