Fonterra to focus on B2B services in sweeping strategic change

Fonterra Co-operative Group Ltd is exploring how to divest from some of its global consumer and integrated businesses in order to focus on its ‘high-performing’ ingredients and foodservice channels.

The announcement follows a strategic review which confirmed the co-op’s B2B services should be prioritized ahead of the Group’s consumer and associated portfolios.

Fonterra’s consumer offering includes well-known brands Anchor, Fernleaf and Western Star, but the co-op’s management thinks that focusing entirely on its ingredients and foodservice provision would offer the highest value in the long term.

CEO Miles Hurrell said a divestment – which is expected to take 12 to 18 months and require shareholder backing – would create ‘a simpler, higher performing co-op with our focus on our core business and doing what we do best’.

“We are exploring divestment options for our global Consumer business as well as our integrated businesses Fonterra Oceania and Fonterra Sri Lanka,” he said.

“While these are great businesses with recent strengthening in performance and potential for more, ownership of these businesses is not required to fulfil Fonterra’s core function of collecting, processing and selling milk. Due to our co-operative structure, we believe prioritising our Ingredients and Foodservice channels and releasing capital in our Consumer and associated businesses would generate more value.  

 “At the same time, 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.