What is Fonterra selling?
Fonterra, a dairy cooperative owned by about 10,000 farmers, essentially buys raw milk from New Zealand farmers, processes and sells it.
In August, Fonterra announced it would sell off its consumer businesses, including such iconic brands as Mainland and Anchor, to the French dairy giant Lactalis for nearly $4 billion.
The $3.845b sale would include a large chunk of the cheese, milk and yoghurt sold in New Zealand stores, including brands Anchor, Mainland, Kāpiti, Perfect Italiano, Fresh’n Fruity, Anlene, Anmum, Fernleaf and Western Star.
The inclusion of Bega licences held by Fonterra’s Australian business brings the total sale above $4.2b.
The deal also includes three manufacturing sites in New Zealand and others offshore.
The sale requires approval by Fonterra shareholders and includes long-term agreements for Fonterra to sell New Zealand farmer-produced milk and ingredients to Lactalis.
Once the sale is completed, those shareholders will get a $2 per share tax-free payout.
Farmers own shares in proportion to the volume of milk that they produce every season.
For instance, a smaller farm of 300-400 cows producing 100,000kg of milk solids a year could be expected to receive around $200,000 in the sale.
All right, but why are Fonterra selling?
Fonterra’s consumer goods make up a small part of its milk solids sales. Photo / 123RF
Basically, the consumer division is only a small part of Fonterra’s overall business.
According to Fonterra, of New Zealand farmer milk solids, 79% of them are sold as ingredients such as powders and protein solutions.
Another 14% of their business is wholesale food service products, while consumer goods such as fresh milk, cheese, yoghurt and butter make up less than 7% of Fonterra’s milk solids sold.
Fonterra’s board takes the view that focusing on the ingredients and food service sectors will “generate more value for shareholders than retaining and continuing to invest in the consumer business”.
“The decision to divest the consumer and associated businesses is significant and one we don’t take lightly,” Fonterra chairman Peter McBride has said.
“We have examined the strategic context we operate in, our strengths, and how, as a co-op, we create value for our owners.”
Fonterra said it has been engaging extensively with farmers on the proposal through meetings across the country, webinars and direct engagement with members of the board and management team.
Lactalis may not be a household name in Aotearoa, but the French firm is actually the biggest dairy company in the world, with €30 billion (NZ$60b) in sales in 2024.
It’s a family-owned business started by the Besnier family in 1933 and currently led by billionaire CEO Emmanuel Besnier.
“As the world’s largest dairy company, Lactalis has the scale required to take these brands and businesses to the next level,” Fonterra chief executive Miles Hurrell has said.
“Fonterra farmers will continue to benefit from their success, with Lactalis to become one of our most significant ingredients customers.”
So is it a done deal?
Fonterra chairman Peter McBride (left) and Fonterra chief executive Miles Hurrell. Photo / Jason Dorday
The farmers who make up Fonterra’s co-op are currently voting on the proposed deal, which needs 51% approval.
Shareholding farmers have been voting on the deal since October 7, with online submissions closing on October 27 before briefly reopening for a special online meeting at 10.30am on October 30.
The company’s decision is expected to be made public that same day. If the sale is approved, it would be completed in early 2026.
As the voting period has been going on, New Zealand First leader Winston Peters has been outspoken with his concerns about the sale.
Why is Winston Peters upset about this sale?
NZ First leader Winston Peters has raised questions about the sale. Photo / Mark Mitchell
A lot of it boils down to whether or not the sale is good for New Zealand.
In a public letter to farmers NZ First released last week, Peters said Fonterra must answer “serious questions” and they are “giving away” the work built up by Anchor since its 1886 founding.
“We must grow New Zealand’s fortunes, and farmers need to think very carefully about this deal.”
Peters told farmers that “under this deal you will not control the very thing that has underpinned your success for generations: quality”.
“We need to get real. Quality always sells. The Anchor brand has growth ahead of it; why else would the largest dairy company in the world offer almost $4 billion to own Anchor?”
He also questioned whether top Fonterra executives would be getting bonuses for the deal, and if they planned on leaving the company after the deal was done.
Fonterra has refuted Peters’ claims of a lack of transparency.
“Fonterra has outlined the rationale for the divestment and the terms of the transaction clearly in materials released to the NZX and shared with farmer shareholders, media and stakeholders, including government,” the company said.
So will New Zealand farmers still supply milk to Lactalis?
The sale is a sign of Fonterra’s changing business, experts said. Photo / Rowena Duncum
Peters said in his statement that “after three years Lactalis can terminate milk supply from Fonterra for Anchor and Mainland.”
However, in a statement to RNZ, Fonterra said “the global supply agreement covering ingredients and other products like cheese had an initial three-year term but could only be terminated with 36 months notice, so Mainland and Anchor would continue to be supplied by New Zealand farmers for at least six years”.
“Its raw milk supply agreement – which mostly covers New Zealand as raw milk must be processed before being sent offshore before it spoils – had an initial term of 10 years and an additional 36-month notice period.”
Peters, however, disputed some of that language, claiming that “’Automatically renews until it is terminated’ is corporate flannel, executive flimflam, tier one C-Suite rubbish that translates to: ‘after three years, we cancel.’
“That’s it. Milk split. Fonterra will be a wholesaler. Lactalis will control your brands.”
Wait, why are David Seymour and Winston Peters arguing about milking cows?
Act leader David Seymour disagreed with Winston Peters’ interference with the Fonterra deal. Photo / Mark Mitchell
Act leader David Seymour disagreed with Peters’ interference, saying that commercial decisions “should be for business owners, and political decisions for politicians”.
Seymour said Peters had “free speech” to question the deal, but Act’s position was supporting businesses to make their own decisions.
“This is not a socialist country.
“Fonterra is a company owned by Fonterra shareholders. It’s up to them.
“We don’t all own it; if we did, then we would be a communist country, and I’m opposed to that.”
Perhaps on-brand for a dairy industry stoush, the two politicians also clashed a bit over who knew more about milking cows.
“If anyone wants a say on the Fonterra vote, they should earn the right by getting up at 4am and milking cows for a few decades,” Seymour said.
“If they’re not prepared to do that, they should leave it to the people who are.”
In response to that, Peters said he “milked cows almost two decades” as did others in the NZ First caucus, and: “We actually know what one end of the cow looks like compared to some who don’t.”
What does this mean for the future of dairy in NZ?
That depends on who you ask.
Nic Lees, a senior lecturer in agribusiness management at Lincoln University, said both Fonterra and Peters have points to make but the sale “deserves a closer, more balanced look.”
“When Winston Peters warns that selling Fonterra’s Anchor and Mainland brands to a French multinational will ‘end farmers’ control over quality,’ it’s easy to understand why his message resonates,” he said.
“Many New Zealanders feel a deep connection to these dairy brands that are part of the country’s national identity.”
Alan Renwick, agriculture and economics professor at Lincoln University, told RNZ there were challenges in the proposed sale.
“We do need to consider what we’re giving up, these future earnings and value added that those brands, the policy now will be to focus down on their ingredients and food service.
“So, we’re putting our eggs in one basket and moving away from having a more diversified business.”
Fonterra is undergoing a reshaping of its entire business, Lees said.
“Its consumer division, though home to iconic brands, has delivered inconsistent returns and tied up capital that could be better invested elsewhere.”
“However, Peters raises a valid question about the national interest. These brands carry cultural and identity significance that extends beyond their commercial value. Selling them transfers part of New Zealand’s food identity, and that requires careful oversight.”
Farmers Weekly reporter Hugh Stringleman noted that, “By exiting consumer products in every region except China, Fonterra will no longer be competing for revenue with its customers who make consumer products using Fonterra ingredients.”
The Overseas Investment Office typically reviews major foreign investments to ensure they align with national interests, but under the coalition government, those interests focus more on economic and security risks, Lees said.
“This means the Fonterra-Lactalis sale will likely proceed unless the OIO decides that losing these iconic New Zealand brands poses a genuine national interest concern.”
That’s all great, but will this lower the price of butter?
Unlikely, as dairy prices are being largely driven by bigger market forces.
One big factor driving butter prices in New Zealand is that 95% of the country’s dairy production is exported.
Fonterra chief executive Hurrell said earlier this year the company couldn’t have cheaper butter prices in New Zealand than it does for overseas customers.
“Our job is to not come in with a two-tier pricing system… and discount here in the New Zealand market – where we have an international obligation to operate as well.”
– RNZ