Fonterra sold the Tip Top business to Froneri in 2019 for $380m. Fronei is 50/50 owned by private equity firm PAI Partners and Nestle SA.
A farmer-owned co-operative, Fonterra is New Zealand’s biggest business and leading dairy exporter.
Last week it announced that following a review, it was looking at full or partial divestment options for some or all of its global consumer business, including well-known brands such as Anchor and its integrated businesses Fonterra Oceania and Fonterra Sri Lanka.
“We believe we can grow further value for the co-op by focusing on being a business-to-business dairy nutrition provider, working closely with customers through our high-performing ingredients and foodservice channels,” chief executive Miles Hurrell said.
Fonterra’s global consumer business has grown over the years since Fonterra was formed and the co-op has said it is performing well.
It includes a portfolio of market-leading brands such as Anchor, Mainland, Kāpiti, Anlene, Anmum, Fernleaf, Western Star, Perfect Italiano and others.
Some market analysts, including Fonterra observer Arie Dekker of Jarden, have been calling on the dairy heavyweight to consider divesting its underperforming Australian business, which includes a consumer retail operation.
But Fonterra’s suggestion of quitting all or parts of its consumer product operations has raised concerns the company is moving down the value chain.
This is, in part, due to the public’s memory of the dairy market dominator being created in 2001 under special legislation which bypassed the Commerce Commission, to move dairy products up the value chain from commodities.
Fonterra’s response is that the business-to-business segment is where Fonterra needs to be and where it sees the value growth.
The company recently sold its South American consumer and manufacturing business Soprole. This business was founded by the New Zealand dairy industry many decades ago. Fonterra returned $800m from the sale to its farmer-shareholders.
Chairman Peter McBride said the announcement was a significant move for the co-op, which would 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,” McBride said.
“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,” he said.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
