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Fonterra And Arla Announce Uk Alliance

Friday 19 October 2001 For Immediate Release

Fonterra And Arla Announce Uk Alliance

Fonterra Co-operative Group Ltd and Arla Foods AmbA, Europe's largest dairy co-operative group, have announced plans for a new joint venture in the United Kingdom's highly-competitive yellow fats market. It is subject to approval by the UK's Office of Fair Trading.

The joint venture will involve the establishment of a new company to be responsible for the marketing and distribution of the existing Lurpak and ANCHOR brands in the British Isles and EU respectively, as well as developing new products for the yellow fats market. It will be owned 75 percent by Arla and 25 percent by Fonterra.

The new company will begin operations as the second biggest player in the UK's yellow fats market, with 15.6 percent of the market by volume. Unilever is the market leader with 32 percent.

Fonterra CEO Craig Norgate says the new company will be well placed to provide strong competition to Unilever, and to retailer-owned brands that currently account for 23 percent of the market by volume.

"Just as we are seeing elsewhere in the world, UK retailers are becoming more powerful, leading suppliers to consolidate to become more efficient and to have the reach necessary to service larger customers," Mr Norgate says.

"Over the years, the New Zealand dairy industry has successfully built ANCHOR into one of the UK's most popular brands and achieved seven percent of the UK yellow fats market. We've done that against the backdrop of a restricted market and one where yellow fats consumption has fallen 55 percent in the last 23 years.

"This new joint venture will have the scale necessary to allow both the ANCHOR and Lurpak brands to move to the next stage of their development to maximise their value. In a market where we forecast continued decline in demand, we need all the scale we can get and every ounce of efficiency."

The completion of the joint venture is likely to mean the closure of the New Zealand dairy industry's plant in Swindon, England, at the end of next year, and the consolidation of operations at Arla's base in Leeds. New Zealand dairy industry executives are talking with staff about that and Tim Gibson, the Managing Director of NEW ZEALAND MILK (Europe), says "all efforts will be made to ensure that staff are looked after".

Arla Group Managing Director, Jens Bigum, says that food manufacturers are being exposed to new and ever-more intense competitive pressures as a result of the consolidation of retailing in Europe and elsewhere.

"The move will enable both parties to exploit their production facilities better and thus enhance our services to the large retailers and consumers," Mr Bigum says.

"We are pleased that Fonterra has decided that Arla Foods is the best partner among all the many excellent dairy companies in Europe.

"We have considerable respect for the global vision which has always characterised the New Zealand dairy industry, just as we have great respect for the fact that more than 90 percent of all New Zealand milk has been gathered into one company, Fonterra."

Arla is a farmers' co-operative, based in Scandinavia, producing and marketing a wide range of dairy products including some of the world's leading food brands, including Lurpak butter. It was established in April 2000 with the merger of Arla of Sweden and MD Foods of Denmark.

Arla is the EU's biggest dairy company, processing seven billion litres of milk a year and employing nearly 20,000 people worldwide. The company trades in 120 countries, with production facilities in Sweden, Denmark, the UK, Brazil, Saudi Arabia, Poland and Norway, and licensed production in the USA and Canada.

In the UK, Arla is the third largest supplier of fresh milk. It supplies one in five bottles of milk sold in supermarkets and is best known for producing Lurpak butter. It employs 2,200 people in the UK at six sites.

END

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