Fonterra sells off under-performing Mexican cheese division

Related tags New zealand Cheese Fonterra

Fonterra, the New Zealand dairy co-operative, has announced it is
to sell off its under-performing Mexican cheese division, in
keeping with its long-term strategy to move away from
commodification, Tom Armitage reports.

Although the deal is still subject to regulatory approval from the Mexican Federal Competition Commission, Fonterra has sold its New Zealand Milk (Mexico) subsidiary to Sigma Alimentos, the food division of Mexican industrial group ALFA, for an undisclosed sum.

Despite New Zealand Milk (Mexico) being the market leader in Mexico's cheese market - estimated to be worth US$800 million - Fonterra chief executive Andrew Ferrier said that it "was in the wrong market segment, and its size was neither niche enough to be effective, nor big enough to be a real market presence".

Fonterra consolidated its presence across Mexico in 2001 following the acquisition of New Zealand Milk, a sub-division of the New Zealand Dairy Board, which had been active in the Mexican dairy sector for almost a decade. In August this year the company acquired northern Mexican cheese maker Grupo Chen adding Chihuahua and Manchego cheese brands to its portfolio.

Ongoing consolidation attempts across the Australian dairy sector, continuing market expansion in China and a change in long-term strategy severely affected Fonterra's ability to edge in on the highly fragmented Mexican dairy sector - of which no single company controls more than 10 per cent.

Ferrier denied allegations that the sale was part of an attempt to raise additional funds for its US$1.2 billion (€895 million) takeover offer for Australia's National Foods:

"Our best option was to sell the business. The recent move to consolidation in the Mexican market, towards fewer and bigger players in the cheese segment, meant the timing was right to complete the sale,"​ he said.

The dairy co-operative noted that the sale would not affect its ingredients' business, which currently exports a number of milk protein concentrates to Mexico, and confirmed it would retain a presence in the Mexican consumer dairy sector through its activities with leading Swiss-based food company, Nestlé.

The announcement of the sale came shortly after market analysts Statistics NZ announced that total exports from New Zealand had fallen by an average of 9 per cent in the September quarter, adversely affected by the strong New Zealand dollar - with dairy exports accounting for the largest decrease of 27 per cent.

Related topics Manufacturers Cheese Fonterra

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