Nestlé and Fonterra agree American joint venture

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

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

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 practises 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 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 (1.6 billion euro), although Fonterra has said it does not expect to see any benefit from the deal for at least a year.

The deal follows an announcement in August last year that Nestlĩ and Fonterra planned to launch an American joint venture.