Fonterra brand sale proposal eyed warily

Federated Farmers Dairy chairman Richard McIntyre. PHOTO: FEDERATED FARMERS
Federated Farmers Dairy chairman Richard McIntyre. PHOTO: FEDERATED FARMERS
Some farmers are apprehensive about Fonterra selling off its iconic brands, but they may consider it if their profits are protected, Federated Farmers says.

The dairy co-operative is looking to concentrate on business-to-business products, and sell off its consumer brands, which include Anchor, Mainland, and Kāpiti.

The plan would need the voted backing of the co-op’s farmer shareholders.

Federated Farmers dairy chairman Richard McIntyre said there was an openness to explore the sale, if farmers could still see high returns for their milk.

"It shouldn’t really impact what we get for our milk," he said.

"If anything it could improve the dividend that Fonterra pays to its suppliers through providing a more-efficient, simplified business."

Farmers did identify with the brands and recognised the added value of their milk going to those products, but it was also about trusting Fonterra to create a resilient business which returned strong profits, Mr McIntyre said.

"It’s very hard to survive as a farming business if you’re not making any money."

Farmers would expect to see "a lot of communication from Fonterra" and a lot more detail about the proposal over the coming months, he said.

"They’re obviously going to have to do some more analysis and get some more advice and then put some more detail into their proposal and then present it to farmers."

A report from Forsyth Barr said the investment firm supported the proposed divestment, saying the decision — if it went ahead — was sensible given the consumer sector had been very volatile over many years, it streamlined Fonterra’s business towards its core competency, and there was a possibly attractive divestment value; there was potential for proceeds of $2.5 billion-$3.5b, it said.

— RNZ/Staff Reporter