Fonterra initiates steps in growth strategy

Has signalled its intention to be a leading player in the Australian dairy industry by consolidating all its interests in Australia under the Fonterra name and further expanding its milk collection and processing capacity.

07/06/05 Fonterra Co-operative Group Ltd has signalled its intention to be a leading player in the Australian dairy industry by consolidating all its interests in Australia under the Fonterra name and further expanding its milk collection and processing capacity.

Fonterra's consumer products companies in Australia - Bonland Dairies in Melbourne and Peters & Brownes in Perth - are being consolidated under Fonterra Brands.

Fonterra Chief Executive Andrew Ferrier said that consolidating the consumer businesses would create a strong foundation for future growth.

"Bringing our Australian consumer businesses together will enhance our business objective of growing our branded consumer dairy business, with a strong Australasian base."

Fonterra's brand portfolio in Australia includes Mainland, Bega, Perfect Italiano, Western Star, Brownes and Peters.

Expansion in Fonterra Brands will include the acquisition of Murrumbidgee Dairy Products (MDP) - the liquid milk, desserts and yoghurt company based in Wagga Wagga - formerly owned by Bonlac Foods Limited (BFL). This brings the Riverina Fresh brand portfolio into the business. Fonterra's intention is to grow the MDP business.

At the same time, Fonterra has moved to strengthen its position as a purchaser, processor and marketer of milk in Australia, replicating its successful cow to customer supply chain in New Zealand.

As part of this, Fonterra is seeking to move from 50 per cent to full ownership of BFL, a move supported by the Board of Bonlac Supply Company (BSC), its joint venture partner, but still to be ratified by BSC shareholders.

Fonterra will acquire Nestlé's plant at Dennington on Victoria's south west coast and integrate this into its dairy manufacturing business, along with the BFL plants. As part of the agreement, Fonterra will take over the collection of milk from around 420 farmers in Victoria who currently sell their milk to Nestlé and will manufacture a range of powdered milk products for Nestlé in Australia. Nestlé is one of Fonterra's large global customers and this relationship builds on that partnership.

Fonterra will take over the Dennington plant from the start of August and begin a process to transform it into a world class, milk powder manufacturing plant. Fonterra will integrate Dennington with its other facilities to maximise economies of scale and ensure optimum product mix across its plants. After a transition period of up to five months, employees at Dennington will become Fonterra employees on January 1, 2006.

The transition to Fonterra will be seamless for farmer suppliers, allowing them to continue with business as usual.