Dairy products

The Company

Founded in 1978 by Mohamed Meddeb, Délice Group specialises in milk and dairy products (yoghurt, butter, cheese, juices and other drinks). The group has been strengthening the value chain at all levels, including through partnerships with world-leading groups in milk and dairy (Danone in 1997 and Bongrain in 2008). The result is that Délice Group has become Tunisia’s leader in both the milk and yoghurt markets. It is:

• Number one in yoghurt, with a 66% market share (Vitalait is second with 18%);

• Number one in milk, with a 47% market share (Vitalait is second with 28%);

• Number two in juices, with a 28% market share (Société Nouvelle des Boissons Gazeuses, which is part of the Boujbel family group, is the market leader with 50%); and

• Number three in cheese, with an 8% market share (Industries Alimentaires de Tunisie, which is part of the Mabrouk family group, is the leader with a 67% share, followed by Land’or, with 19%). Délice Group is 100% controlled by the Meddeb family. It was restructured under Délice Holding in preparation for its listing on the Tunis Stock Exchange in 2014. The holding company now directly and indirectly controls eight companies, which operate in the milk, yoghurt, juices, cheese, plastic containers and distribution sectors.

Since 2008 the group has gone to a higher level in terms of its marketing and product range, with an emphasis on higher-value-added products, such as yoghurt and juices. Meanwhile, the group has undertaken a number of strategic moves, including forming a partnership with French cheese maker Bongrain, external growth through the acquisition of a cheese factory and raising capacity in the yoghurt segment, and investing heavily in marketing.

These moves have started to pay off in the form of higher product quality, a stronger brand name and higher operating margins. The impact of this strategy on profitability was not as strong as at the level of operation. The main cause of this is the significant investment carried out by the group, which resulted in higher amortisation costs and higher financial charges that dented profitability, with the group’s net margin at 4%, against an international average in the dairy sector of 8%.

Outlook

The group is expected to start reaping rewards from its investments as follows:

• Milk division: the recent opening of the Sidi Bouzid milk factory, Centrale Laitière de Sidi Bouzid, will enable the group to add 60% capacity progressively between now and 2018;

• Yoghurt division: buying new equipment – most of it technical – and raising packaging capacity to keep pace with higher sales;

• Juices division: raising capacity; and

• Cheese division: buying an existing cheese factory. Additional investments are also forecast for 2015-18 amounting to TD198m (€84.9m). Most of this will be channelled to the yoghurt and milk divisions.

These investments should start to pay off soon. The company estimates that sales growth will climb to 10% per annum and hit TD995m (€426.7m) in consolidated sales by 2018. Milk activity will continue to drive the group’s turnover, with a 50% contribution in sales expected between now and 2018. Yoghurt activity should stay at around 28% of consolidated sales, while juices and cheese are expected to be the fastest growing of the group’s activities, and to reach 9% and 5%, respectively, by 2018.

As far as margins are concerned, the progressive rise of higher-value-added products – mainly yoghurt, juices and cheese – as a percentage of total sales, coupled with a decrease in financial charges, is likely to result in higher earnings. We expect the group’s consolidated bottom line to grow from TD40m (€17.2m) in 2015 to TD43m (€18.4m) in 2018.