New-look Fonterra – not to mention the sector it will transform – begins to come into view.
Fonterra says the sale of consumer subsidiary Mainland Group to Lactalis enables it to single-mindedly focus on what it calls advanced dairy ingredients and business-to-business sales.
Advanced ingredients include higher value milk powders, milkfat products and milk proteins. These have specifications and tailored properties that make them sought after when compared with commodities from other major dairy exporting countries.
The NZMP ingredients house brand covers sales to more than 1000 customers in over 100 countries and has a reputation based on consistent qualities, food safety, sustainability credentials and reliability.
By exiting consumer products in every region except China, Fonterra will no longer be competing for revenue with its customers who make consumer products using Fonterra ingredients. In business jargon, it has abandoned BtC to concentrate on BtB.
Ingredients and foodservice account for 92% of Fonterra’s milk supply in New Zealand, soon to become 100%, and generate revenue around $20 billion annually.
Fonterra’s core business consumes 16 billion litres of milk annually in 24 manufacturing sites for ingredients and foodservice products like UHT cream, cream cheese, cheese slices and mozzarella.
Mainland Group consumer businesses included in the proposed sale to Lactalis had revenue of $4.9bn in the 2024 financial year and made $200m in earnings before interest and tax. That compared with $1.3bn earnings from ingredients and foodservice combined.
The consumer products channel made a 4% margin and a return on capital (ROC) of 6.8%, well below Fonterra’s group ROC target of 10-12%.
Within NZ, the consumer products absorbed 7.5% of the milksolids collected and that volume will in future be sold to Lactalis for its three newly acquired sites – Takanini in south Auckland, at the Kāpiti cheese plant in Bridge St, Eltham, and the liquids bottling plant on Makomako Road, Palmerston North.
Read More: Get more News from Dairy Sector
Without more disclosure of the long-term milk purchasing agreement between Fonterra and Lactalis, the Dairy Industry Restructuring Act (DIRA) provides a supervised pricing procedure for factory-gate supply based on the reference products for setting a farmgate milk price, plus a transport fee.
Goodman Fielder and Yashili Group are two DIRA milk customers that will have Lactalis as a new competitor.
In Australia, Lactalis will be acquiring eight sites in Victoria and Tasmania, taking in about 1 billion litres of milk annually, or around 80 million kg milksolids from 500 supplying farms.
More than two-thirds of the Australian milk production is consumed domestically, versus only 5% in NZ.
Lactalis is also buying Mainland Group consumer businesses in southeast Asia, Sri Lanka and the Middle East where there are five manufacturing sites – Saudi Arabia, Malaysia (2), Indonesia and Sri Lanka – and a further eight offices.
Fonterra will publish a Notice of Meeting in early October that will contain information on the impact of the divestment on Fonterra’s financial shape as well as the proposed $2 a share capital return.
Join Our “Dairy & Food Jobs Updates” WhatsApp group
Stay informed on all the latest news updates
All Agriculture Books Free Download
All Dairy Technology Books Free Download
All Agricultural Engineering Books Free download
All Horticulture Books Free Download
All Fisheries Science Books Free Download
For Daily Update follow us at:
Facebook Telegram Whatsapp Instagram YouTube
The contents are provided free for noncommercial purpose such as teaching, training, research, extension and self learning.
If you are facing any Problem than fill form Contact Us
If you want share any article related Agriculture with us than send at info@agrimoon.com with your contact detail.
