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Selling Tnuva in time for Shavuot

Posted By Rachel Neiman On June 1, 2014 @ 6:19 pm In Nostalgia Israel | No Comments

Hast thou not poured me out as milk, and curdled me like cheese? – Job 10:10

Shavuot, the Feast of Weeks, will be celebrated this week. Shavuot is the spring/summer harvest holiday and, as such, is symbolized by grains and fruits; both Ashkenazi and Sephardi Jews have a tradition of of eating dairy foods on Shavuot.

This year, however, that tradition got a reality check with last week’s announcement that China’s state-owned Bright Food Group would be acquiring a majority stake in Tnuva, Israel’s largest dairy concern, from UK-based private equity house Apax Partners which had held that share since 2006.

The announcement elicited negative reactions from company workers — whose threatened  labor dispute could have affected cheese supplies for the holiday –  local media, politicians and the general public. The hue and cry should come as no surprise. After all, Israel’s 2011 Social Protests started with a hike in the price of cottage cheese.

A point of pride for MASHAV

If the Chinese have developed a taste for dairy products, it’s our own damn fault. Ever since 1958, Israel has been sharing know-how and technologies with the developing world through MASHAV, Israel’s Agency for International Development Cooperation in the Ministry of Foreign Affairs. Through MASHAV, a Sino-Israeli Demonstration Dairy farm was established in 2001 in Yongledian, near Beijing.

According to a 2003 MASHAV report, “[The farm] is operated by Beijing Sanyuan Group while MASHAV gives the professional support. The farm design was made according to the Israeli experience and includes: calves’ hatches, heifer shed, milking-cows sheds, dry-cows sheds, calving pen, cows’ hospital, milking center and feed center. All the data monitored for every cow 3 times a day… with most advanced herd management software, which is developed and made in Israel.”
 
“Applying the latest Israeli designs, technologies and expertise on its herd of over 1,000 dairy cows, it raised high of over 11,550 kg./cow/year  in 2010 and expected to rise up to almost 12,000 kg/cow/year in 2012. The farm became one of the most efficient in China and serves as an observation center for thousands of dairy producers from China and from neighboring countries.”

In 2007, then-Prime Minister Ehud Olmert spent his first day on an official visit to China learning to milk a cow on the Yongledian farm. The People’s Daily wrote that, “Israel is trying to make China’s huge population use more and more dairy products, and Olmert hoped all Chinese farms adopted the system followed by the one near Beijing… He also officiated at the cornerstone-laying ceremony of the ‘China-Israel Cooperation Center for Modern Dairy Technology’ at the farm.”

People’s Daily further reported that, “The prime minister’s elder brother Amram Olmert had worked in Beijing for four years as agriculture counselor in the Israeli Embassy, and made a lot of efforts to promote Sino-Israeli agricultural cooperation. Coincidentally, the former diplomat is in the country, too, to deliver a few lectures.”

Yongledian Dairy Cattle Demonstration Farm is owned by state-owned Beijing Sanyuan Foods which is listed in Shanghai Stock Exchange and is, according to Wikipedia, “the only listed dairy producer that has avoided being associated with China’s milk contamination scandal”  — a credit, perhaps, to Israeli technology and production techniques.

From Tnouvah to Tnuva

After all that, how can we deny China access to a cottage cheese so delightful that a rise in price drove people into the streets, and a company whose history — from cooperativism and nationalism on through semi-private and private ownership — parallels in miniature that of its Chinese counterparts?

The Central Zionist Archives (CZA), whose collection of Tnuva memorabilia rivals that of the company’s own archive, states: “In 1926, the managers of 13 Hebrew farms gathered at a meeting called the ‘Hamashbir Conference’. They decided to fund a cooperative that would coordinate and incorporate the treatment of all stages of the processing, producing and marketing of fresh agricultural products…

“In its early years, Tnuva had to deal with much competition. The yishuv was used to buying locally-made products from various regular distributors of milk. There were also Arabs who came directly to the homes with a goat, and milked fresh goat milk on the spot. The heads of Tnuva would visit the houses of the Jews and try to convince them to buy Tnuva products and in that way to support Zionism. The advertising posters of Tnuva kept at the CZA, emphasize that the products of the cooperative are locally-made and that buying these products will also strengthen the Jewish economy.”


Image: 1938 poster exhorting Haifa housewives to buy only Tnuva-produced eggs.

Over the decades, Tnouvah the cooperative morphed into Tnuva, a milk monolith that touted the health benefits of bovine dairy while at the same time quashing all competition — Jewish and non — and monopolizing the State of Israel’s dairy economy to the point where, according to a 1994 report by Corinne E. Mellul, The Milk Sector in Israel, (published by the Institute for Advanced Strategic and Political Studies – IASPS), the nutritional quality of Israel’s milk was little better than water.

The IASPS study further noted that Tnuva’s real power lay in its stranglehold on raw milk production and distribution, which greatly limited the ability of other, smaller companies to compete. The time was ripe for a change.

In 1996, Tnuva was named a monopoly by the Israel Antitrust Authority. It took another 10 years to unravel its tangled corporate web but in November 2006 Apax Partners Worldwide, a London-based buyout firm, won a tender to buy control of Tnuva. And, as mentioned, last week, Bright Foods paid $2.5 billion for a 56% holding, purchasing the shares from Apax.

As far as the burgeoning Chinese dairy sector is concerned, the Tnuva acquisition is just one of many. The Asian Venture Capital Journal (AVCJ) reported on March 4, “China’s dairy sector has long been a favorite of private equity,” and listed the following deals:

  • In February 2014, Chinese conglomerate Fosun International announced that it was acquiring a 20.45% stake in Beijing Sanyuan Foods for $325 million, to be invested via Shanghai Pingrun Investment Management and Shanghai Fosun Chuanghong Equity Investment Fund Partnership – Chuanghong Fund.
  • Also in February 2014, Sanyuan said it intended to raise an additional RMB$2 billion from Beijing Capital Agribusiness Group – also known as Sunlon - a food conglomerate created by the Beijing government in 2009.
  • AVCJ reported “One recent transaction saw RRJ Capital commit RMB1.5 billion for a 45% stake in a dairy farming joint venture with Shanghai-listed Bright Dairy & Food, a subsidiary of Chinese conglomerate Bright Food Group.”

Despite the tumult, the changes could affect the local dairy market positively. Israeli consumers, who have long conflated brand loyalty to Tnuva with loyalty to their country, would be introduced to a wider variety of products, both imported and, more importantly, quality products made locally by smaller manufacturers who, due to decades of machinations, had been shut out of the competition.

Tnuva, meanwhile, is thinking globally. CEO Arik Shor told business daily Globes that the company would “be able sell and expand outside Israel – to China and other countries where Bright Food operates. For 88 years, Tnuva has dreamed of having an owner of this quality.”

Haven’t we all.


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