After the dairy industry was de-regulated in 1998 the dairy industry started seeing a narrowing of margins, this resulted in farmers having to milk more cows for the same return. Although this accelerated radically in 2007 between 1998 and 2016, 6500 of the 8000 dairy farms in South Africa closed. This led to an ongoing battle by farmers to achieve a better price, with very limited success as farmers are price takers on both inputs and outputs, with very little say in price determination
In the past farmers belonged to co-operatives like Clover which helped them regulate price, this changed in 2007 with Clover changing from a co-operative to a listed company. After some lean years between 2007 and 2013 a group of farmers in Underberg decided to form a company – Berg Dairies and to use that company as a vehicle to seek and develop opportunities in the secondary industry and thereby participate higher up the value chain, to create value and improve farm gate price
In August 2013 an opportunity arose to enter into a contract with a Major Pizza Chain – Romans Pizza – based on this agreement, Berg Dairies designed and built a factory in Underberg.
The idea was to process our own milk and in time, as much as possible of the districts 400m litres of milk into cheese and other solid products. By targeting solid products such as cheese and milk powder the factory would gain considerable price advantage on the transport savings as truck payloads would be up to 11 times that of milk. Due to the local processing capability savings are achieved on milk processing at source due to the very short route from factory to farm. Historically, many of South Africa’s milk processing facilities have been left far from the milk source as dairy production moved to more pasture based areas like Kwa-Zulu Natal and the Eastern Cape.