Consumers could see increase in dairy prices if Fonterra sells off consumer brands

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Photo: RNZ

There are a lot of cons in Fonterra’s plan to sell off some or all of its most well-known brands, a marketing professor says.

Earlier on Thursday it was announced Fonterra was looking to sell all or part of its global consumer business as it shifts its focus to becoming a global business-to-business provider of dairy nutrition products.

Fonterra’s consumer business brands included Anchor, Mainland, Kāpiti, Anlene, Anmum, Fernleaf, Western Star, Perfect Italiano and others.

Those brands used about 15 percent of the co-op’s total milk solids and represented about 19 percent of its underlying profit in the first half of this financial year.

Massey University marketing professor Bodo Lang told Checkpoint there were a lot of cons for Fonterra and the company risked losing its “face”.

It was a loss for the company – and a loss for consumers.

If the brands were sold to an overseas conglomerate whose main priority was profit, Kiwis could see an increase in prices of dairy products.

Lang said Fonterra was once the ninth largest producer of dairy products in New Zealand and doing a “fine job” with its brands domestically.

“I was really surprised when I heard about this but I’m not surprised to hear there’s lots of potential buyers queuing up because it is a good business with many good brands in the portfolio.”

There was also a risk that a change in ownership could result in a change of flavour.

Fonterra chief executive Miles Hurrell said a sale would simplify its operations and let it focus on producing and selling products for other dairy companies to use.

Any sale would take at least 12 to 18 months and need shareholder support.

Agriculture minister Todd McClay said he did not believe there would be a significant change for consumers, as there were more players in the market compared to previous years.

“It means that Fonterra have said they want to look at value over volume, and I know around the world there are many other similar companies who are doing similar sorts of things,” he told RNZ.

McClay said Fonterra was realising there was more to their business than selling butter or cheese, and focusing more on innovation and partnerships to drive greater returns for farmers.

He expected there would be companies both in New Zealand and overseas that would be interested.

“[Fonterra] and New Zealand have an extremely high reputation, and I know they will be thinking about that as they go through a process. If they do decide, with farmers, to make a sale, they’ll want to protect reputation, and I back them in that.”

McClay, who is also the trade minister, said he was not necessarily surprised Fonterra was looking to go down this route.

“I’m starting to see as I’ve been overseas, a lot of the companies who want to partner with New Zealand, looking at that value-added dairy product, as opposed to just taking cheese or butter or milk powder and selling it in their stores.

“There’s a really big opportunity there.”