Food and Beverage Business
Finance

Fonterra to sell consumer business as part of restructuring plan

Fonterra to sell consumer business as part of restructuring plan Fonterra Food and Beverage Business Fonterra

Fonterra, a New Zealand-based dairy co-op, announced plans to exit its consumer-facing business and focus on ingredients as part of a “step-change in strategic direction.”

The co-operative, known for brands like Anchor butter and De Winkel yogurts, is considering full or partial divestment options for its global consumer business, as well as the integrated businesses Fonterra Oceania and Fonterra Sri Lanka. CEO Miles Hurrell stated that the process may take at least 12 to 18 months and is driven by unsolicited interest in parts of these businesses.

“We believe we can grow further value for the co-op by focusing on being a B2B dairy nutrition provider,” Hurrell explained. The company aims to strengthen relationships with farmers, invest in innovation, and deepen partnerships with strategic ingredients customers.

The consumer business includes well-known brands such as Mainland, Kāpiti, Anlene, Anmum, Fernleaf, Western Star, and Perfect Italiano. Fonterra Oceania, which serves retail, out-of-home, and B2B channels in New Zealand and Australia, and Fonterra Sri Lanka are also part of the divestment considerations.

Chairman Peter McBride emphasized the importance of the core business model, which involves working closely with farmers to collect milk sustainably and produce high-quality products.

Fonterra revealed that the consumer businesses under review utilize around 15% of the co-op’s milk solids and contribute about 19% of group operating earnings. The company reported a 23% increase in group profit after tax to NZ$674m and a 14% rise in EBIT to NZ$986m in the interim first-half results.

Hurrell outlined that while the consumer businesses are performing well, owning them is not necessary to fulfill Fonterra’s core function. The company aims to prioritize its ingredients and foodservice channels to generate more value and potentially find a new owner who can maximize the businesses’ potential.

In recent years, Fonterra has streamlined its global consumer operations by selling stakes in ventures like Rokiškio Sūris, ending joint ventures in Brazil, selling operations in Chile, and exiting a venture in India. Hurrell stated that these moves have set the company on a path to consider long-term growth investments for the future.

As Fonterra continues to evolve its strategy, Hurrell promised to provide further updates on their long-term plans and growth strategies in the coming months.

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