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Fonterra Farmers Open to Brand Divestiture Amid Profitability Focus

New Zealand 21.05.2024
Source: The DairyNews
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Federated Farmers has expressed cautious openness to Fonterra's plans to divest its well-known consumer brands, including Anchor, Mainland, and Kāpiti, as the dairy cooperative shifts its focus towards business-to-business products.
Fonterra Farmers Open to Brand Divestiture Amid Profitability Focus
Richard McIntyre, Federated Farmers dairy chairman, highlighted that while there is sentimental value attached to these iconic brands, the primary concern for farmers is maintaining high returns on their milk. "It shouldn’t really impact what we get for our milk," McIntyre noted. He added that the divestiture could potentially boost the dividends Fonterra pays to its suppliers by simplifying and optimizing the business structure, www.odt.co.nz writes.

Farmers recognize the added value of their milk being used in these popular brands but are looking for assurances that Fonterra will continue to operate a robust and profitable business. "It’s very hard to survive as a farming business if you’re not making any money," McIntyre stated, underscoring the necessity of profitability in farming.

Over the next few months, farmers expect Fonterra to provide extensive communication and detailed analysis regarding the sale proposal. "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," McIntyre said, indicating the need for thorough preparation and transparency from the cooperative.

Support for Fonterra's proposed strategy also comes from investment firm Forsyth Barr, which has endorsed the divestment plan. The firm noted that moving away from the volatile consumer sector and focusing on core competencies could be a wise decision. Forsyth Barr also highlighted the potential financial upside of the divestment, estimating the proceeds could range from $2.5 billion to $3.5 billion.