Finding a foothold in a competitive industry is always a challenge for a new business. At Farmgate Dairy, the solution was to focus on quality products to a local market in the early months, when the company formed back in 2010.
Today the business, located in KwaZulu Natal, has well and truly established itself as a producer of UHT milk, not just in its home province, but nationally.
Farmgate is the creation of Creighton Dairies, owned by a group of southern KwaZulu Natal farmers, who for 30 years have delivered raw milk to manufacturers throughout South Africa.
Kyle Antel, CEO, explains how the company has developed:
“Farmgate Dairy is a UHT milk producer; we receive raw milk from the farmers and process and package it at the plant. The idea started when a group of Creighton’s farmers wanted to add value to their product and decided that UHT processing, which preserves the life of the milk, was the way to go.
“They had no experience in this field and therefore decided to partner with a technical group. Today Farmgate is jointly-owned by the farmers, technical partners, Creighton Dairies and management.”
A facility was developed from a Greenfield site, right next to Creighton Dairies, covering 15,000 square metres, of which 2,000 square metres is under roof. The company invested in state-of-the-art machinery to ensure efficiency, utilising the best machinery from Europe to create a modern, automated milk processing plant.
“We have 43 employees working over three shifts, but aside from the packing of pallets and the cleaning of the plant, we are highly automated,” states Antel.
At present Farmgate Dairy produces approximately 2 million litres of UHT milk per month, which is sold in 6 x 1 litre and 10 x 500 millilitre packs.
Farmgate initially concentrated on selling locally but has since expanded its customer base nationwide, as it has become a better known, reliable brand. Antel says that most of the customer base is focussed around independent wholesalers, smaller independent retail chains and the Government feeding schemes.
Location has proved an important factor for Farmgate, as Antel outlines: “We are supplied by 22 local farmers, who deliver 190,000 litres of milk each day, from approximately 10,000 cows. Farmgate processes 70,000 litres of this milk per day with the balance being sold to other producers around the country. Creighton is a very milk-rich area and the furthest we go to collect milk is to Underberg.”
Once the milk has been processed and packaged, it is transported to a marketing and distribution team in Pietermaritzburg and then stored or delivered around the country.
At all stages of the process, quality control is of paramount importance, with Antel indicating that this makes up the bulk of internal staff training.
“Further external training is carried out by Tetra Pak, who supply a lot of our machinery and help to educate our machine operators and maintenance team,” he says. “Because we are so rural, we are a long way from parts and technical assistance so it has been important to establish a good maintenance team and critical spares store on-site.,” he continues.
“Regarding quality, we are currently working towards ISO: 22000 accreditation, having completed the first stage; we are now working on the second stage and hope to attain certification within the next month. We have an extremely effective quality management team and system and ISO accreditation is a verification of what we currently do.”
That element of quality delivers reassurance to the customer of course – and that has been imperative in a strong commercial market:
“It has been a big challenge for us to establish a market with so many well-known brands already out there. However, we found a niche market and we are still going strong. We focussed on the local market initially and deliberately avoided targeting the big chains, looking more to wholesalers and small, independent retailers in KwaZulu Natal. From those beginnings we have gradually expanded our footprint.”
Another big challenge is the availability of raw milk, with seasonality playing a key role in that dilemma. Of course when there is less milk around, the price goes up, with the low milk season running from March to May. In contrast, the spring can see a surplus of milk and prices reducing. There is also the problem of the big retail chains importing UHT milk and increasing the local surplus, which puts added pressure on smaller dairies. Fortunately, Antel says that Farmgate is afforded some level of consistency with raw milk supply from Creighton’s farmers;
“We are extremely fortunate to have Creighton Dairies as a partner as they are able to supply us with a fairy balanced milk flow throughout the year.”
Having overcome its initial start-up challenges, Farmgate Dairy is on a much firmer footing now and Antel is looking forwards with some exciting investments:
“We are currently spending around R6 million on new equipment such as a separator, pasteuriser, bulk tank and cream machinery. We are funding the investment ourselves and should receive the last piece of machinery from GEA in Germany in late January, which will enable us to begin production in March.
“This investment will increase our milk production and we can start to produce pasteurised cream and possibly butter in the future,” he describes.
Furthermore, there is the prospect of creating additional jobs as the company looks to increase production to up to 90,000 litres of raw milk per day, whilst diversifying its product range.
“For us to be successful, we need to grow and diversify as fast as possible; the goal is to be able to process all of the milk which Creighton Dairies collects and then look at encouraging new farmers to join us over the next few years,” Antel concludes.