Fonterra And Nestle In Americas Alliance

Fonterra And Nestle In Americas Alliance

Fonterra Co-operative Group Ltd and Nestle SA today announced plans for an alliance to create a number of joint ventures in the dairy business.

The ventures will be restricted to the Americas and are subject to due diligence as well as to regulatory and other clearances. They will cover a wide range of dairy products, including shelf-stable as well as chilled refrigerated milk foods and beverages under their respective existing brands. Infant formula, evaporated and condensed milks, certain speciality products, cheese and butter are not covered by the alliance. The joint ventures will be managed by senior executives from both founding partners of the alliance and will report to a joint supervisory board.

Fonterra will be the world’s largest exporter of dairy products once legislation is passed next month to allow for the New Zealand dairy merger. Nestle is the world’s largest food company and the global leader in branded dairy products. The two partners plan to proceed with their study and implementation in progressive steps, following the evaluation of business opportunities.

The two companies expect considerable benefits from their alliance, especially in the following areas: combined sales progression in existing and new markets; optimisation of capital expenditures through optimal use of each others’ assets; cost efficiency through the use of their respective infrastructures; optimal use of resources; distribution and manufacturing strengths; purchasing synergies; and optimal use of research and development as well as product development resources.

The partners envisage increasing use of fresh milk, sourced from countries in which the joint ventures will operate, and ingredient products sourced from New Zealand.

Nestle CEO Peter Brabeck-Letmathe said that Fonterra would bring to the alliance “universally-recognised expertise in the development of dairy farming, in livestock and milk technologies, and in large-scale milk procurement, processing and management, as well as strong market positions in a number of countries throughout the Americas”.

Fonterra CEO Craig Norgate said that Nestle, a long-standing major customer of New Zealand dairy ingredients, “not only has had its own extensive dairy infrastructure in the Americas for over a century but possesses established and trusted dairy brands and product development expertise from its worldwide research and development capability”.

Mr Norgate said the alliance would involve the part of the world that will deliver the strongest growth in demand for dairy products over the next five years and with a partner “that is widely recognised as the industry leader for branded products”.

“Our two companies will complement each other in what is without doubt New Zealand’s biggest ever commercial deal. It will be a partnership of equals which would not have been possible without the restructuring of our industry and the creation of Fonterra,” Mr Norgate concluded.

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