Fonterra and Nestlé have reached an agreement to sell their Brazil-based Dairy Partners Americas (DPA) joint venture to French dairy company Lactalis for BRL 700 million (US$131.5 million), subject to closing transaction adjustments. The deal is expected to be completed by mid-2023, subject to regulatory authority approvals.
Fonterra CEO Miles Hurrell says the sale of DPA Brazil is aligned with the Co-op’s strategy of prioritizing its New Zealand milk pool. “DPA Brazil has reached maturity as an investment for us, and the sale allows us to prioritize our resources to the businesses that are core to our strategy.”
Hurrell also highlights that the sale was delayed due to market conditions related to COVID-19. In May 2019, Fonterra and Nestlé began reviewing their strategic options for the future ownership of their DPA Brazil. DPA Brazil has been held for sale in Fonterra’s financial statements since January 2020.
Key Latin American dairy player
Fonterra and Nestlé created DPA in 2003 to manufacture and commercialize dairy products throughout Latin America. In 2014, the joint venture refocused its activities on Brazil and chilled dairy.
Fonterra holds a 51% stake and Nestlé 49%. DPA operates two plants and employs 1,300 people. Nestlé, Chamyto, Ninho, Chandelle, Chambinho, Neston and Molico are among the brands marketed by DPA in Brazil.
The sale is subject to receipt of regulatory approvals from competition authorities. Fonterra’s previously announced FY23 earnings guidance will continue to reflect the underlying performance of the DPA Brazil business during the pre-completion period.
Fonterra will provide an update on the overall impact of its divestment program as part of its FY23 financial reporting.
This latest development comes at the heels of other recent Fonterra-Nestlé and Fonterra collaborations in the dairy field, including a new project to reduce New Zealand’s milk farm emissions and develop a commercially viable net zero carbon emissions farm.
The project will run for five years with co-partner Diary Trust Taranaki and assess all aspects of dairy farm operation regarding greenhouse gas (GHG) production.
Dairy sector developments
Due to the strengthening of underlying milk commodity prices, industry’s leading dairy companies this year exhibited higher turnover growth and strategic activities, hailed as more significant than in recent years. This is according to Rabobank’s latest Global Dairy Top 20 report.
At SIAL 2022 in Paris, France, it is examined the market dynamics in global cheese sectors. At the show, Lactalis underscored fat shortages while other companies flagged a “dramatic slowdown” in cheese exports. US companies also discussed the uphill battle of gaining market share in Europe, while the US Dairy Export Council highlighted American innovation.
Among significant developments in dairy technologies, the industry has been seeing a deeper integration of AI systems, while new advancements have been achieved in developing bioprotective cultures for better shelf life stability in recent months.
