Global dairy giant Fonterra to sell Bega Cheese, Western Star brands

Cheyanne Enciso
The Nightly
2 Min Read
Global dairy giant Fonterra plans to sell its Australian assets
Global dairy giant Fonterra plans to sell its Australian assets Credit: AP

The world’s biggest dairy exporter Fonterra will sell its Oceania business — behind household name brands Western Star butter, Bega Cheese and Perfect Italiano — to focus on its “core function” of collecting, processing and selling milk.

The ASX-listed, Auckland-headquartered dairy company on Thursday announced it was exploring full or partial divestment of its global consumer business. The co-operative is also considering the same for its Oceania and Sri Lanka divisions.

Fonterra chief executive Miles Hurrell said it had received “unsolicited interests” in parts of these businesses, making now a good time to consider their ownership.

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“We believe Fonterra is not the highest-value owner of the consumer and associated businesses in the longer term and a divestment could allow a new owner with the right expertise and resources to unlock their full potential,” he said.

“This presents a great opportunity for these brands and businesses. While I recognise there’s a strong connection to brands such as Anchor, a new owner could help these businesses to flourish.”

Fonterra shares were up 6 per cent to $3.36 just before midday on Thursday.

Mr Hurrell believes it can grow further value for the co-op by focusing on being a business-to-business dairy nutrition provider.

“This will be enabled by strong relationships with farmers, a flexible manufacturing and supply chain footprint, deeper partnerships with strategic ingredients customers, further investment in our food service channel, continued delivery on our sustainability commitments and investment in innovation,” he said.

Among those parties interested in purchasing parts of the business could be ASX-listed Bega Cheese, which in 2001 signed a 25-year exclusive trademark licensing agreement with Fonterra.

The deal allowed Fonterra to use Bega’s name on products like blocks and slices of cheese and stringers until 2026. In return Fonterra paid Bega royalties based on sales.

The news on Thursday comes as the Australian dairy industry undergoes consolidation.

The Australian Competition and Consumer Commission last December gave Coles the go-ahead to buy two milk processing plants in Sydney and Melbourne from Saputo, which produces Devondale milk and Mersey Valley and Cheer cheeses.

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