Fonterra purchase Nestle yoghurt and dessert

Posted by Daniel Palmer on 25th June 2008

Nestlé Australia Ltd has announced it has sold its yoghurt and dairy dessert business, including its Echuca factory, to Fonterra.

Under the agreement, dairy giant Fonterra will also acquire the long-term rights to manufacture, market and sell Nestlé’s yoghurt and dairy dessert brands in Australia under licence, alongside its own existing brands, thereby creating a stronger competitive presence in the chilled dairy sector.

John Doumani, Managing Director of Fonterra Australia New Zealand, believes the acquisition represents a major step toward achieving the company’s Australian growth strategy. “We currently do not have a national presence in Australia’s yoghurt and dairy dessert sector,” he advised. “By acquiring Nestlé’s yoghurt and dairy dessert business, it provides us with a national position and complements our existing portfolio where we hold leading national positions in cheese and spreads through our Mainland, Bega and Western Star brands.”

In 2005 Nestlé and Fonterra completed a similar arrangement. Nestlé moved out of the collection of milk from farmers and the manufacture of powdered milk in Australia, selling to Fonterra its Dennington factory in Victoria. Nestlé does, however, continues to market milk powders, manufactured by Fonterra, to both local and export markets.

“This agreement builds on Fonterra’s long and successful global partnership with Nestlé and makes good business sense for both parties,” Mr Doumani added.

Mr Graham Campbell, Managing Director of Nestlé Australia Ltd, says the decision by Nestlé is a key element of their strategy to have a significant ongoing brand presence in Australian yoghurt and dessert markets, while also enabling an increased focus on strengthening their position as a leading nutrition, health and wellness company.

“We have a successful track record of marketing through arrangements of this kind, both in Australia and overseas,” Mr Campbell claimed. “We believe that this new operation creates a soundly-based commercial entity that is well placed to be one of the leaders in the yoghurt and dairy dessert sector, and we are delighted that the vast majority of employees will be moving across to Fonterra.”

Yoghurt and dairy dessert brands marketed by Fonterra currently include Brownes Fresh n’ Fruity yoghurt, Connoisseur and CalciYum dairy dessert, while Nestlé’s brands include Nestlé Diet and All Natural yoghurts, Milo Mousse, Blissful and Munch Bunch. The rights for the SKI brand, currently managed by Dairy Farmers, will be owned by Nestlé from 2012 and transferred to Fonterra.

The agreement becomes effective on September 1, 2008.

Fonterra, a New Zealand co-operative, also announced that they were interested in purchasing Dairy Farmers last month, signifying their desire to expand their Australian operations. They are owned by over eleven thousand NZ dairy farmers and currently control about a third of the world’s dairy exports.