May 28, 2014
 

Fonterra and Nestle realign decade-long Latin American joint venture
 

Fonterra and Nestle have realigned their 10-year old Dairy Partners Americas (DPA) 50/50 joint venture, resulting in ownership changes to DPA Brazil, DPA Venezuela, DPA Ecuador and DPA's milk powder business.

Under the agreements, Fonterra will take a 51% controlling stake in DPA Brazil, with Nestle holding the balance; Fonterra together with a local partner will acquire Nestle's share of DPA Venezuela. Fonterra will meanwhile sell its share in DPA's milk powder manufacturing business to Nestle, and Nestle will buy Fonterra's share in DPA Ecuador.

Set up in 2003, DPA is the largest dairy company in South America, purchasing and processing more than two billion litres of milk each year in Brazil alone. DPA produces ingredients and consumer products with strong brands in the liquid and chilled dairy market throughout Latin America.

Fonterra's CEO, Theo Spierings, said the DPA joint venture has performed well for ten years and that it is currently a good time to realign the partnership to better reflect the respective strategies of Nestle and Fonterra in the region.

He said the revised alliance supports Fonterra's group strategic focus on everyday nutrition in key growth markets such as Latin America, China and Indonesia.

"We value our relationship with Nestle and this high-quality agreement will see our successful alliance continue."

"The deal also enables the co-operative to drive more long-term value in the region for its farmer shareholders," he added.

Fonterra's managing director of Latin America, Alex Turnbull, said, "The region's economies have undergone considerable change during the past 10 years. We've seen increased prosperity in markets like Brazil with rapid urban growth and a focus on healthy nutrition driving demand for dairy products."

"A bigger stake in DPA Brazil means we will be well placed to drive our volume and value growth strategy focusing on everyday nutrition offerings," he explained.

Fonterra's Latin American footprint drives more than 900,000 tonnes of volume per year and US$3 billion in revenue from consumer dairy, food service and dairy ingredients.

"We are very proud with what we've achieved through the DPA joint venture with Nestle and are looking forward to continuing to work together with renewed focus," Turnbull concluded. 

The changes to the joint venture are subject to regulatory approval. As a consequence of the realignment, Fonterra expects to receive about US$82.26 million in the next financial year.

Fonterra licenses brands and provides its large-scale milk procurement, product development, and manufacturing and processing expertise, as well as technical services and certain technology to the alliance, while Nestle licenses brands and provides its product development, manufacturing and processing expertise, as well as distribution infrastructure.