Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
Fonterra has also changed the roles of some of its management team members to reflect its strategy of growing its foodservice and ingredients business.
The co-op is weighing up whether the sale of the business, including major household brands Anchor and Mainland and integrated businesses, will be by trade sale to industry players, or an initial public offering (IPO) to investors.
The roadshow is headed by Mainland Group chief executive-elect Rene Dedoncker and CFO-elect Paul Victor.
Fonterra chief executive Miles Hurrell says the meetings were an important step in the process of testing the merits and value of an IPO, which the co-op was exploring as a divestment option alongside a trade sale.
"We are pleased to be making progress in both the potential trade sale and IPO processes and will continue to keep our farmer shareholders, employees and the market updated on milestones."
The divestment will need Fonterra shareholder approval. The co-op is targeting a significant capital return to be made to farmer shareholders and unit holders following the divestment.
The sale was part of its programme to grow further value for Fonterra farmer shareholders through its foodservice and ingredients businesses.
Last week the co-op also announced changes to its management team as a next step in implementing its strategy.
Richard Allen will lead Fonterra's global Ingredients business as president - global ingredients, with his remit expanding to include the co-op's Ingredients businesses in Greater China and Middle East Africa.
Teh-han Chow will lead Fonterra's global foodservice business as president - global foodservice with his remit expanding to include the co-op's Foodservice businesses in South East Asia, Middle East Africa and other markets. In addition to this, Chow will continue as the CEO for Greater China.
Hurrell says as the co-operative moves to divest its Consumer and associated business, now is the time to make changes to management team roles responsible for driving end-to-end value through Fonterra's global Foodservice and Ingredients business.
"This is an exciting time for the co-op as we shift to the front foot and drive greater value creation through our high-performing Foodservice and Ingredients businesses. Enabling our teams to have a clear end-to-end view of our channels will strengthen their ability and focus to deliver end-to-end value to our farmer shareholders," says Hurrell.
"Both Richard and Teh-han have extensive knowledge across these channels, and I know they are placed to lead these teams to help the co-op deliver our strategic goals."
Dedoncker's title will change from managing director global markets consumer and foodservice to managing director global markets consumer as he leads the Mainland Group businesses in scope for potential divestment.
All four of Mainland Group's geographic regions have improved gross profit over the past three financial years, Fonterra's roadshow for potential purchasers has reported.
The Oceania division of New Zealand and Australia is the biggest with nearly $500 million gross profit, and 14% of revenue, in FY2024.
It is followed by southeast Asia on $293m and 36% gross margin, Sri Lanka $106m and 22% GM, and Middle East and Africa $41m and 17%.
The Mainland Group of consumer businesses in Fonterra has 15 manufacturing sites, 11 of which are in NZ and Australia.
The four further abroad are the Biyagama plant in Sri Lanka, the Dairymas and Susumas plants in Malaysia, and Sikarang in Indonesia.
