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Fonterra to exit consumer-facing business to focus on ingredients

Fonterra has announced a step-change in its strategic direction, as it strengthens its commitments to developing high-value dairy ingredients. As part of the changes, the dairy giant is exploring full or partial divestment options for ‘some or all’ of its global consumer business, as well as its integrated businesses, Fonterra Oceania and Fonterra Sri Lanka. Chairman Peter McBride said: “We have conducted a strategic review which has reinforced the role of our core business. This is working alongside farmers to collect a sustainable supply of milk and efficiently manufacture products valued by customers, to deliver strong returns to farmer shareholders and unit holders." Fonterra’s CEO Miles Hurrell commented: “We believe we can grow further value for the co-op by focusing on being a B2B dairy nutrition provider, working closely with customers through our high-performing ingredients and foodservice channels”. He continued: “This will be enabled by strong relationships with farmers, a flexible manufacturing and supply chain footprint, deeper partnerships with strategic ingredients customers, further investment in our foodservice channel, continued delivery on our sustainability commitments and investment in innovation." Fonterra’s global consumer business includes a portfolio of brands such as Anchor, Mainland, Kāpiti, Anlene, Anmum, Fernleaf, Western Star, Perfect Italiano and others. Fonterra Oceania is a fully integrated business, recently created through merging Fonterra Brands New Zealand and Fonterra Australia. It comprises consumer, foodservice and ingredients businesses. Fonterra Sri Lanka comprises consumer and foodservice businesses. The businesses in scope for potential divestment utilised around 15% of Fonterra’s total milk solids and represented approximately 19% of Fonterra’s group operating earnings in the first half of FY24. Hurrell added: “A divestment of these assets would help create a simpler, higher performing co-op with our focus on our core ingredients and foodservice businesses... While these are great businesses with recent strengthening in performance and potential for more, ownership of these businesses is not required to fulfil Fonterra’s core function of collecting, processing and selling milk.” “Due to our cooperative structure, we believe prioritising our ingredients and foodservice channels and releasing capital in our consumer and associated businesses would generate more value. At the same time, we believe Fonterra is not the highest-value owner of the consumer and associated businesses in the longer term and a divestment could allow a new owner with the right expertise and resources to unlock their full potential." “We have also received unsolicited interest in parts of these businesses, making now a good time to consider their ownership.” Fonterra expects the divestment process to take between 12-18 months. You might also be interested in:

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