CloverSAisSouthAfrica'slargestmilkanddairyproductcompanyand process 30% of South Africa's milk in 17 factories. It has a staff complement of 6 200 and its annual turnover is R4, 3 billion (Clover, 2009). The company started in 1889 as a small creamery in the natal Province. It was eventually operatedformanydecadesasaco-operativecalledNCD(NationalCo- operative Dairies). As a co-operative it essentially belonged to milk-producing farmers until it became a public company in 1994.

The company's core values include idealism, dedication and respect.The currentvisionstatementreads:'Tobeleadingandcompetitivecompany in South Africa and selected South African countries, reaching every consumer on a daily basis with its most admired branded and trusted products, delivering improved and sustainable shareholder value by being a responsible corporate citizen and preferred employer' (Clover.2009).

During 2004-2005, the company went through a series of unfortunate events. In 2003 Clover showed as a loss of R50 million. The next year (2004) it made a profit of about R180 million on a turnover of R3.8 billion. The profit was largelyduetosevereasset-strippinginthecompany(Solidarity,2005). According to the 2004 annual report, a number of executive directors and senior managers earned R56 million by selling shares back to the company (De Lange. 2005). This amount represented 11, 56% of the company's share capital issued. They had previously purchased these shares at a price of 60c per share. The share. The shares were then sold to the company at R6 per share (Solidarity.2005). Soon thereafter they bought back 10, 7% of the company at a price of R15, 8 million (De Lange.2005).

Top management also earned R6, 55 million in income from dividends during 2004 After initially increasing the price of milk purchased from producers by 10c per litre in early February 2005, Clover then unilaterally decreased the producer price of milk on two separate occasions by a total of 20c per litre (in early February and mid-March 2005). The company justified its decision based on a statement that there was an oversupply of milk of 60 million litres on an annual basis of a country (Van Rooyen. 2005).

The milk producers, however, denied that there was an oversupply (Van Rooyen, 2005). It also came as huge shock to them, as feeding costs were much higher in the southern hemisphere winter months. An estimated 700 producers owned shares in the company at the time. Also the first quarter of 2005, Clover announced a joint venture with Fonterra (a NewZealanddairyco-operativeandthe world'slargestexporterofmilk product (Visser.2005).

Clover's reason for the intended joint venture was that it experienced a shortage of 300 tons of milk products (Visser.2005). In case brought against Clover by a number of producers in the South African Competition Tribunal. Judgement was eventually passed in favour of the Clover - Fonterra deal (Enslin. 2005). In April 2005 the Competition Commission also investigated Clover and other companies in the industry for collusion to control milk prices (Van Vuuren. 2005).

In April 2005, less than nine months after executives had benefited from their share options deals, the company announced the retrenchment of 621 employees (De Lange. 2005). This would result in a cost saving of about R100 million in employee costs. The CEO of Clover at the time, Robert Wesseloo, said about the cost-cutting intervention: 'The only solution is to pay less for raw materials and take out people. This is normal business practice' (De Lange. 2005).

1.1 Critique the possible causes of the action taken by the management of Clover(50)

1.2 Discuss and present the impact of the chain of events on trust relations between Clover and its stakeholders.(40)

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