Fonterra to move to B2B from consumer businesses

New Zealand Fonterra Co-operative Group announced a step-change in its strategic direction, as it commits to deepening its position as a provider of dairy ingredients. As part of this, the co-op is exploring full or partial divestment options for some or all of its global consumer business, as well as its integrated businesses, Fonterra Oceania and Fonterra Sri Lanka.

Chairman Peter McBride says this is a significant move for the co-op, which will set it up to grow long-term value for farmer shareholders and unit holders. “We have conducted a strategic review which has reinforced the role of our core business. This is working alongside farmers to collect a sustainable supply of milk and efficiently manufacture products valued by customers, to deliver strong returns to farmer shareholders and unit holders,” says McBride.
CEO Miles Hurrell says, “We believe we can grow further value for the co-op by focusing on being a B2B dairy nutrition provider, working closely with customers through our high-performing ingredients and foodservice channels. This will be enabled by strong relationships with farmers, a flexible manufacturing and supply chain footprint, deeper partnerships with strategic ingredients customers, further investment in our foodservice channel, continued delivery on our sustainability commitments and investment in innovation. In this context, we are exploring divestment options for our global consumer business as well as our integrated businesses Fonterra Oceania and Fonterra Sri Lanka.”
Fonterra’s global consumer business has grown over the years since Fonterra was formed and includes a portfolio of market leading brands such as Anchor, Mainland, Kāpiti, Anlene, Anmum, Fernleaf, Western Star, Perfect Italiano and others.
Fonterra Oceania is a fully integrated business, recently created through merging Fonterra Brands New Zealand and Fonterra Australia. It comprises Consumer, Foodservice and Ingredients businesses. Fonterra Sri Lanka comprises Consumer and Foodservice businesses.
“While these are great businesses with recent strengthening in performance and potential for more, ownership of these businesses is not required to fulfil Fonterra’s core function of collecting, processing and selling milk. Due to our co-operative structure, we believe prioritising our Ingredients and foodservice channels and releasing capital in our consumer and associated businesses would generate more value,” Hurrell says.
“At the same time, we believe Fonterra is not the highest-value owner of the consumer and associated businesses in the longer term and a divestment could allow a new owner with the right expertise and resources to unlock their full potential.”

As a next step, Fonterra will appoint advisors to assist with assessing divestment options over the next 12 to 18 months.

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