Fonterra courts Nestle alliance in Chile

By MIKE SMITH

Fonterra has moved to increase its stake in Chile, signalling an interest in strengthening ties with Nestle as part of its Latin American strategy.

Jose Luis Letelier, the new president of Chilean dairy company Soprole, in which Fonterra has a controlling interest, told El Diario newspaper that Fonterra was interested in bolstering its strategic alliance with Nestle at a regional level, and Chile was a part of the plan.

The Chilean executive, who was confirmed at an extraordinary meeting of shareholders, said that from a legal viewpoint, if Fonterra had 70 per cent of Soprole, it would be able to carry out a merger.

But Chile has an Anti-Monopolies Commission that must grant approval and, although the companies were co-operating elsewhere in Latin America, there was strong opposition in Chile from minority shareholders and some market players.

Fonterra owns 57 per cent of Soprole, with the rest in the hands of Fundacion Isabel Aninat.

Letelier explained that the local operation, which has 27 per cent of the Chilean market, was important for the New Zealandcompany.

"The policy of Fonterra is to increase their participation [in Soprole] and if there is interest in selling, they are willing to buy provided there is agreement on the price," he said.

In the meeting, two new directors were also named, Paul Campbell and Letelier as representatives of Fonterra, who will replace former Soprole president Juan Carlos Pestana and Alfonso Rey, both of foreign origin and representatives of the international company.

At the same time, the company appointed a new vice-president, Scott Eglinton of Fonterra, who will replace Enrique Mayor, of Fundacion Isabel Aninat.

This move marks the exit of foundation executives from top positions in the company.

But the group continues to have directors on the board - Manuel Valdes and Juan Jaime Besa.

These changes, said Letelier, followed the normal rotation of the directors of Fonterra in their operations outside of New Zealand.

He added that the appointment of a Chilean executive as company president reflected the need to have more direct links between Fonterra and the local administration.

Soprole has projected sales of US$165 million ($245 million), which is a growth of 7 per cent compared with 2002.

Exports fluctuate from 5000 to 6000 tonnes, with each tonne worth about US$2500.

This year, Soprole will invest US$10 million, with the focus on added-value products.

The dairy market in Chile is worth about US$750 million a year.

Soprole's main competitors are Nestle, Loncoleche, Colun and Parmalat.