Leading SA food producer Libstar has confirmed that a foot-and-mouth disease outbreak in the Eastern Cape severely disrupted its supply chain, affecting production yields and pushing up transport costs at its Swellendam processing facility.
First detected in 2021, a fresh outbreak occurred in 2024 when the company was already navigating a difficult trading environment marked by inflationary pressures and shifting consumer behaviour.
A highly contagious viral illness affecting cloven-hoofed animals, the disease has afflicted the Eastern Cape since May 2024, with 37 farms in Humansdorp and one in East London affected, the department of agriculture said.
Writing in the company’s annual report, CEO Charl de Villiers said the disease led to logistical bottlenecks and affected input sourcing for its dairy operations, particularly the Lancewood brand, which produces cream cheese, cottage cheese and yoghurt.
“The outbreak of foot-and-mouth disease in the Eastern Cape in April 2024 disrupted supply chains, increasing transportation costs and affecting production yields at our Swellendam plant,” De Villiers said. “These factors collectively created a challenging operating environment.”
The dairy operations faced further pressure due to cyclical pressures and oversupply.
“A significant inflow of unprocessed milk, due to higher national production, led to elevated inventory levels, intensifying competitive price promotions across both retail and food service channels, the group said. “This resulted in margin compression and a more volatile pricing environment.”
Despite these challenges, Lancewood delivered a resilient performance, defending its margins and maintaining market share through improved planning, brand investments, and cost efficiency, the group said.
“The Lancewood brand gained market share in focus categories — cream cheese, cottage cheese and yoghurt — consistently driving category growth. Brand building efforts are yielding positive results, evident in the Lancewood brand growth of 15% in retail and increased consumer awareness.”
Libstar expects “significant uncertainty around economic growth and political stability locally and internationally” for the year ahead, given the mounting trade war and its effects on global growth, interest rates and currency stability.
“These factors are likely to exert increasing pressure — both directly and indirectly — on SA consumers … our priority is to navigate these challenges strategically: managing costs effectively, exploring new markets and territories for Libstar’s products, and upholding the highest standards of quality and consumer trust,” it added.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.