Fonterra’s strategic sale to Lactalis sets stage for B2B growth in dairy ingredients

Fonterra Co-operative Group has completed the sale of its global consumer and associated businesses, including Mainland Group, to global dairy leader Lactalis. This divestment marks a significant milestone for Fonterra, enabling the company to sharpen its focus on core B2B dairy operations, while strengthening a key partnership with Lactalis that is expected to drive future growth in the dairy ingredients sector. 

The sale of Mainland to Lactalis strengthens the partnership between Fonterra and Lactalis by shifting their relationship from competition to collaboration. Fonterra will continue supplying high-quality dairy ingredients to Lactalis, solidifying a long-term, mutually beneficial partnership.

Mainland is a popular New Zealand-based brand specializing in dairy products, such as cheese and butter. The brand has a strong presence in domestic and international markets, primarily offering a range of consumer products.

Fonterra’s chairman, Peter McBride, described the divestment as a critical move in the company’s future strategy. “With the divestment complete, Fonterra can return capital to its owners and focus on growing further through its core business as a New Zealand farmer-owned global B2B dairy provider,” he says.

Although the sale price has not been disclosed publicly, Fonterra has said that the total proceeds from the divestment would be NZD$3.2 billion (~US$1.9 billion), which will be returned to its farmer shareholders. The specific details of the Mainland sale price alone have not been specified.With the sale complete, Fonterra focuses on growing its high-performing dairy ingredients business.

Fonterra’s strategic shift: Refocusing on core B2B business

The divestment of Mainland enables Fonterra to concentrate its resources on its high-performing Ingredients and Foodservice businesses. Through its NZMP and Anchor Food Professionals brands, Fonterra is a supplier of dairy-based solutions to businesses worldwide, including food manufacturers, restaurants, and foodservice providers.

Fonterra CEO Miles Hurrell explains the company’s new direction: “We can now focus our resources, R&D spend, and farmers’ capital on continuing to grow these businesses, which generate the greatest return for farmers’ milk.”

By focusing on the dairy ingredients sector, which includes a range of milk powders, cheese, and butter products, Fonterra can better meet the growing global demand for high-quality dairy products in developed and emerging markets.

At Food Ingredients China in Shanghai last month, Lactalis Ingredients highlighted a range of dairy solutions that tap into the nation’s growing market, where demand for high-protein and functional foods continues to rise.Lactalis’ dairy ingredients business is set to grow as it becomes a major B2B customer for Fonterra.

Food Ingredients First recently explored how dairy ingredient suppliers are deploying new technologies to meet converging consumer demands, from stabilization systems that alter the mouthfeel of high-protein formulations to postbiotics engineered to survive pasteurization.

The dairy industry is also witnessing rising demand for milk products from cows primarily fed on grass rather than grain, as consumer interest in transparency, regenerative agriculture, and minimally processed F&B grows. Marshall Fong, senior marketing and communications manager at Fonterra, told us this week how the New Zealand dairy giant is targeting this demand.

Lactalis partnership: Strengthening global B2B relationships

A key element of this transaction is the emerging partnership between Fonterra and Lactalis, one of the world’s largest dairy companies. The sale of Mainland to Lactalis marks the transfer of the consumer business, but also establishes Lactalis as a significant long-term B2B customer for Fonterra’s Ingredients division.

The partnership between Fonterra and Lactalis signals the shift from competition to collaboration in the global dairy market. While the two companies were once competitors, the sale paves the way for a collaborative future, where Lactalis becomes one of Fonterra’s most important customers for dairy ingredients.Fonterra’s sale of Mainland to Lactalis shifts their relationship from competitors to long-term B2B partners.

“We continue to supply milk and other products to the divested businesses, and Lactalis becomes one of our most significant Ingredients customers,” says Hurrell.

Fonterra’s ongoing supply of milk and dairy products to Lactalis highlights the strategic nature of this partnership. It reinforces Fonterra’s leadership in the global dairy supply chain, and the relationship could evolve to include collaborative product development and joint efforts to meet the increasing global demand for dairy-based ingredients in food products.

The New Zealand co-operative recently flagged how increased GLP-1 use is fueling the demand for protein. The global dairy exporter predicts a surge in demand for protein powders, ready-to-drink protein shakes, and protein-enhanced snacks, as the number of weight loss medication users rises globally.