Dairy co-op Fonterra has agreed to sell its consumer and associated businesses
Dairy co-op Fonterra has agreed to sell its global consumer and associated businesses, raising questions over what impact the sale will have on Kiwis at the checkout.
Staple New Zealand dairy brands Anchor, Mainland and Kāpiti are among those impacted by the $3.845 billion sale to French food group Lactalis.
Given that butter and cheese prices have soared recently, concerns have been raised. Butter prices have almost doubled in the past 14 months.
The average 500g block jumped from $4.49 in April last year to $8.60 last month. In January 2015, the same block cost $2.97.
Asked about the impact Fonterra’s divestment will have on prices for consumers, the dairy co-operative’s chief executive, Miles Hurrell, said there would be none.
“The competitive environment of New Zealand will remain unchanged. Business as usual on day one,” Hurrell said.
Fonterra chairman Peter McBride and chief executive Miles Hurrell. The dairy co-op is selling its consumer brands to a French company. Photo / Jason Dorday
New Zealand’s retail prices are affected by international markets because the country exports wholesale dairy products.
Brad Olsen, the chief executive of economic consultant Infometrics, said dairy prices for consumer goods had increased because international prices have risen.
“That’s going to be the exact same under the sort of proposed agreement with Fonterra and Lactalis,” he said.
“You’ll have Fonterra, which is getting the milk out of farmers, and then selling it through to Lactalis, and they’re effectively going to have to pay that going rate for dairy as well.
“I don’t think it will do very much by way of prices or anything else, certainly not in the short term.”
He said Lactalis could see different product innovations in the longer term.
“The question is, what will Lactalis want to do? It’ll be wanting to make sure that it’s looking across the wider product lines that it has.
“And for a lot of this, it’s also about thinking about what happens overseas a lot more in that consumer brand space.
“We’ve only got five million consumers. The other markets across the world, most places, have got far more consumers, sometimes in just one city, than we were able to provide in the entire country.
“There’s a global question around the sort of various product offerings that could come. That might be anything from nutraceuticals, healthier protein yoghurts, different flavoured cheese slices.”
Olsen said Fonterra’s consumer brands were already strong and viable businesses.
Fonterra’s brands include Anchor, Mainland, Kāpiti, Fresh‘n Fruity, Primo, along with Perfect Italiano, De Winkel and Mammoth.
“So from that point of view, when buying its consumer brands, you don’t have to do anything in the short term to get pretty reasonable returns, but they will want to lift them over time.”
Raphael Franks is an Auckland-based reporter who covers business, breaking news and local stories from Tāmaki Makaurau. He joined the Herald as a Te Rito cadet in 2022.
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