Nestlé and Fonterra join forces to target US market

Swiss multinational Nestle and New Zealand dairy co-operative Fonterra have announced the creation of joint venture vehicle Dairy Partners Americas (DPA).

DPA will operate in the North, Central and South American regions. It will be used to market chilled products and liquid milk and ingredient milk powders under existing Nestle and Fonterra brands.

The first DPA joint ventures will be established within three months with priority countries including Argentina, Brazil, Paraguay, Uruguay and Venezuela. DPA’s turnover for the first year is expected to be around US$1.4 billion (E1.6 billion), although Fonterra has said it does not expect to see any benefit from the deal for at least a year.

The companies expect DPA to benefit them through sales growth in existing and new markets, cost efficiency through the use of their respective infrastructures, better use of resources in distribution, manufacturing strengths and research and development.

Nestle and Fonterra also expect an increase in quality and quantity of milk by developing dairy practices in host countries, especially in Latin America. Fresh milk for DPA will be sourced in the Americas and dairy ingredients from New Zealand.

Fonterra chairman John Roadley said: “In recent years, we have established sound beachheads in the Americas. The alliance will enable us to move to the next stage of the development of our business, for the benefit of New Zealand dairy farmers and the country as a whole.” The deal is subject to regulatory approval and comes after Nestle and Fonterra announced their intention to create a joint venture last August.

In March, Fonterra signed a E49.7 million deal to supply Mexican state agency Liconsa with milk powders.

Liconsa is Mexico’s largest importer of milk powder, and is responsible for the supply of milk powder and reconstituted milk in Mexico. The powder will be distributed through Liconsa’s 7,000 retail outlets in Mexico.

UK dairy processor Dairy Crest also signed a similar deal with Liconsa in March.