NZ Dairy Foods Signs Contracts with Fonterra

FOR IMMEDIATE RELEASE
16 October 2001

New Zealand Dairy Foods Finally On An Even Playing Field With Fonterra
New Zealand Dairy Foods Signs Contracts with Fonterra

New Zealand Dairy Foods and Fonterra, today signed key supply and brand licensing contracts ensuring New Zealand Dairy Foods can now operate on an even playing field in the New Zealand market. A key outcome is that Fonterra must charge New Zealand Dairy Foods the same transfer price for raw milk and other ingredients as it does its own subsidiary, Mainland. The ten-year contracts cover costs for supply of raw milk, cream, butter and cheese, as well as licensing the Chesdale brand. Licensing agreements for the Anchor, and Fernleaf brands were signed some months ago.

Peter McClure, CEO, New Zealand Dairy Foods, says, “These contracts have a huge impact on how we operate and to finally have them in place brings far greater certainty to our whole business. With the new legislation through and the regulations in place, we can get on doing what we do best – producing and marketing great dairy products. Internationally Fonterra might be larger than New Zealand Dairy Foods but in New Zealand we are competing on a level playing field and we intend to be the biggest player in this market.”

Another important feature of the new agreements is that New Zealand Dairy Foods will now have better forward visibility on the cost of raw milk.

Mr. McClure says, “The previous situation of retrospective pricing for raw materials was hopeless and cost us dearly. We were in the unacceptable position of not knowing the true costs for raw materials. We therefore worked hard to reach agreements that would remove these uncertainties so we can now manage our business in a way most other industries take for granted.”

The signing of the contracts marks the end of months of painstaking negotiations, during a time when many other events were also taking place. It is also the first major test of how New Zealand Dairy Foods and Fonterra will compete in the new environment.

Mr. McClure says, “To Fonterra’s credit they have been extremely professional throughout the negotiations. The outcome is fair to both parties and I believe we have reached a sensible and successful conclusion.”

ENDS

For more information contact Peter McClure, Chief Executive Officer,
New Zealand Dairy Foods. 09 295 2786.

Issued by Network Communications, Jane Dodd, 09 306 5804 or 027 4470 446.

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