Fonterra Closes Australian Subsidiaries Amid $50 Million Export Scandal

Fonterra, a major player in the global dairy industry, has taken decisive action by closing two of its Australian subsidiaries, Cottee Dairy Products and Australasian Dairy Ingredients, amidst ongoing investigations into the 'Powdergate' scandal. This scandal involves the illegal export of milk products worth at least $50 million and has roots tracing back to their previous owner, Kiwi Dairies, before Fonterra's formation.

The closures are part of a broader rationalisation effort following Fonterra's merger, as stated by Deputy Chief Executive Chris Moller. This strategy aims to eliminate duplicated cost structures and improve operational efficiencies, building a unified global organisation. The subsidiaries affected have now entered voluntary liquidation, and their business activities will continue under Fonterra's global ingredients division, NZMP, in collaboration with its Australian joint-venture partner, Bonlac.

The scandal has already led to significant management changes, with the dismissal of an Australian-based executive and the suspension of two New Zealand managers pending investigation outcomes. These individuals held positions across the implicated entities involved in developing and marketing health and nutrition products.

Meanwhile, multiple investigations continue on both sides of the Tasman Sea. A Fonterra board subcommittee receives updates from an internal inquiry led by KPMG, Deloitte, and a former CIB detective. Concurrently, New Zealand's Ministry of Agriculture and Forestry is conducting its regulatory probe into the illegal exports.

The liquidator has confirmed a creditors' meeting as part of the winding down process for the subsidiaries. This move represents Fonterra's most significant corporate response to date regarding the scandal, as the cooperative seeks to consolidate its global operations.