Fonterra And Nestle Proposal To Extend DPA To Chile

Posted by Josette Dunn on 29th November 2010

Fonterra and Nestle confirmed today a proposal to expand their Dairy Partners Americas (DPA) joint venture into Chile.Fonterra subsidiary Soprole and Nestle Chile today filed an application with the local competition authority in Chile, seeking approval for a 50:50 joint venture between parts of Soprole’s and Nestle Chile’s local dairy businesses.

If approved, DPA-Chile will have sales of approximately NZ$770 million per annum – with a large proportion of this coming from Soprole’s business.

DPA-Chile will focus on accelerating the growth of the liquid and chilled consumer dairy market, which has grown rapidly over the last three years.

It will bring together both parent companies’ strong local brands, manufacturing operations, sales, chilled distribution and marketing activities.

Fonterra’s dairy ingredients and export business in Chile – Prolesur – will remain outside DPA-Chile. Other parts of Nestlé’s dairy business in Chile; milk-powder, condensed milks and export products will also remain outside DPA-Chile.

Because Soprole is contributing a larger business, Fonterra will also receive approximately NZ$300 million when DPA-Chile is established.

“DPA-Chile, if approved, will represent the next step in our DPA business strategy for Latin America,” said Andrei Mikhalevsky, Managing Director Fonterra Global Ingredients and Foodservice.

“Since it was formed in 2002, Fonterra’s joint venture with Nestle, DPA, has grown dairy consumption, as well as local milk production, in Brazil, Ecuador, Venezuela, Colombia and Argentina.

“Through DPA, we have a track record of developing exciting new consumer products for Latin American markets which have grown dairy consumption and driven demand for local milk.

“We are looking to increase dairy consumption and drive higher milk production levels in Chile, and are confident that DPA-Chile will help support that aim.”

The joint venture is subject to approval by the Tribunal de Defensa de la Libre Competencia, Chile’s competition authority. Similar applications have taken at least 12 months to move through the various approval stages. If the application is successful the transaction is therefore likely to be completed during 2012.

“We will work through the necessary regulatory processes in Chile but in the meantime, our Soprole team will continue to pursue their winning business strategy,” Mr Mikhalevsky said.