Fonterra takes stake in Lithuanian dairy producer to strengthen supply chain

07 Nov 2017 --- New Zealand’s Fonterra Co-operative Group has deepened a long-standing commercial agreement with Lithuania’s biggest dairy producer, AB Rokiskio Suris, taking a 10 percent shareholding in the company. Ranked by Rabobank as the world’s sixth largest dairy company by turnover in 2017, Fonterra has invested €7.1 million (US$8.2 million) in Rokiskio, securing a supply line of high-value whey ingredients while opening up product options across Europe and the Middle East. 

It also creates the opportunity to source additional dairy products from the Baltic milk pool to serve the increasing demand from nearby developing markets.

Fonterra Chairman John Wilson says the investment is closely aligned to Fonterra’s strategy to grow its global sources of milk in strategic locations such as Europe, enabling the co-operative to satisfy customer demand in market closer to those sources.

“Our New Zealand farmers will always remain our primary source of milk, but increasingly we are supporting our growth and their returns through strategic partnerships in Europe, Latin America, Australia and China. These partnerships enable us to produce products in demand closer to the market while providing more opportunity for milk and milk products we make elsewhere,” he said.

Fonterra CEO Theo Spierings says the development built on Fonterra’s current long-term supply relationship with Rokiskio and would benefit both companies.

“Our ability to access high-value whey protein ingredients is increasingly important as demand grows, especially in Eastern and Western European, Middle Eastern and North African markets.”

“Rokiskio is also a highly-respected cheese producer and this also opens up further opportunities for us to satisfy customer demand in these markets. This is another step in our strategy to develop a sustainable European-sourcing network, providing a reliable and efficient chain of supply that will complement our New Zealand-sourced ingredients.”

Rokiskio Suris Chairman, Dalius Trumpa says Rokiskio’s focus on product quality and safety, as well as its environmental performance, were important strengths the company brought to the relationship with Fonterra. Contract manufacturing for Fonterra had played a role in the company’s capacity expansions and upgrades in 2014 and 2016 and he is optimistic about future growth opportunities.

"We have worked closely as commercial partners for five years and over this time we have built a strong relationship. Fonterra’s investment in Rokiskio Suris lifts our company to a new global level, opening up export opportunities which will generate more value from our local milk pool,” says Trumpa. 

“By welcoming Fonterra as a shareholder, future growth can be accelerated by entering new markets and investing in new technologies.”

Rokiskio has three factories in Lithuania and makes cheese, butter, whey protein and milk powders. It is one of the largest and most well-known cheese producers in Central and Eastern Europe, producing more than 30 thousand tons of cheese each year.

The company exports to both Eastern and Western markets as well as producing a wide range of fresh dairy products for the Baltic region.

In September, Fonterra confirmed that it lodged a bid for Australia’s largest dairy processor, Murray Goulburn, and also released its full-year results. A number of groups were believed to have made offers for the struggling company, but Fonterra was the first to confirm its interest on the back of a successful business year.

Fonterra’s full-year results were described as successful. The company announced that it had seen its net profit fall by 11 percent in the year to July 31. However, revenue rose to NZ$19.2 billion (US$15.52 billion), up 12 percent from NZ$17.2 billion (US$12.3 billion) the year before. 

The Asian protein ingredients market forecast to grow by 11.5 percent from 2016 to 2020, according to Fonterra NZMP Ingredients General Manager for South & East Asia, Hamish Gowans. 

You can listen to a podcast interview with Gowans here.