New Zealand dairy giant Fonterra is taking another significant step towards "divesting" out of the Australian dairy industry.
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The move to sell off brands is seen as a focusing on its core business of milk and cheese supply.
Fonterra's main brands include Anchor, Fresh'n Fruity and Mainland and its Australian portfolio includes well-known brands Western Star, Perfect Italiano and Bega Cheese.
The cost of living crisis is also seen as having a part to play with price-driven customers choosing home brands in greater numbers.
Fonterra has 1600 employees and eight manufacturing sites in Victoria and Tasmania, including its flagship Cobden plant where it produces star performer Western Star butter.
Fonterra Oceania managing director René Dedoncker on Tuesday, May 21, 2024, after questions were posed, released a statement to ACM to try and clarify the company's position.
He said mid-last week the Fonterra Co-operative in New Zealand announced it was exploring options to potentially divest all or some of its global consumer business, including the Fonterra business that operates in Australia.
"The Australian business is performing well, and recently completed an integration with Fonterra's brands business in New Zealand, to form Fonterra Oceania," he said.
"It is our belief that the Fonterra Oceania business will strengthen our presence in Australia, New Zealand and across Oceania.
"At this stage, the Fonterra Co-operative is exploring potential divestment options.
"Any decision would take at least 12 to 18 months to finalise."
Mr Dedoncker said Fonterra in Australia was committed to continuing to operate as normal.
"Including working with our farmer suppliers, continuing to produce and deliver dairy products for consumers and customers, and supporting the communities in which we operate, without disruption," he said.
"We understand that this is an important time for many Australian farmers as they consider their milk supply options.
"We would like to assure our farmers that, if a divestment was to go ahead, we intend to include all existing milk supply contracts that are in place at the time of sale.
"These contracts are vital to our business. Any purchaser of the business would then be obligated to comply with the terms of agreements until expiry of the term of the agreement.
"We are committed to keeping our people, farmers and community updated as this process progresses and will share any new information as soon as we can."
The timing of the announcement is best described as interesting, with the dairy industry in Australia bracing for a significant price drop when opening gate prices are announced by dairy companies in the first week of June.
