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Fonterra And Dairy Farmers of America Partnership

Fonterra And Dairy Farmers Of America Formalise Partnership

Fonterra Co-operative Group and Dairy Farmers of America (DFA) - the largest milk-collecting co-operative in the US - have signed a Memorandum of Understanding that will govern their partnership in the years ahead. The Memorandum was signed by the CEOs of both companies during a meeting of DFA and Fonterra board members in Dallas, Texas last week.

Fonterra already has a major US-based joint venture with DFA, DairiConcepts.

Fonterra Chairman Henry van der Heyden said the Memorandum formalises the arrangements between the two companies and will provide significant advantages to both partners in addition to those already enjoyed through DairiConcepts.

"The two co-operatives have a lot in common. Our shareholders and suppliers share similar business philosophies and beliefs, and we share the same goals of increasing the returns and long-term wealth of our shareholders and suppliers. Our joint venture with DFA, DairiConcepts, has been very successful and it makes sense to formalise our ongoing discussions and processes."

The Memorandum sets up a formal framework within which Fonterra and DFA can present partnership proposals to each other, decide which are of mutual interest, and invest in the most attractive options. These opportunities may or may not be included within DairiConcepts.

Directors of both companies will meet twice-yearly while a management Board comprised of senior executives from each company will oversee the partnership.

DairiConcepts Background

Fonterra's joint venture with Dairy Farmers of America, DairiConcepts, was established in May 2000, although the first joint venture between the two companies, Greenwood Valley Cheese, dates from 1998. Greenwood was incorporated into DairiConcepts in January 2003.

DairiConcepts combines DFA's manufacturing sites with Fonterra's technological innovations and advanced research and development, maximizing both companies' capabilities to reach global markets and large global customers.

The 50:50 joint venture makes a wide range of products, including specialty powders for infant formula, high-end cheese powders for use in specialty dry blending, snack seasoning, prepared foods and food service. The joint venture has also invested to produce Milk Protein Concentrate in the US.

The joint venture employs close to 300 people in several locations across the US and expects to record sales of nearly US$300 million (NZ$500 million) in 2003. Customers include Nestle, Frito-Lay, Kraft, Unilever and Mead Johnson.

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