South America: Nestle and Fonterra joint venture to be discontinued

Nestle has announced that it is to resume dairy production in various parts of South America in a deal that sees it buy back a number of facilities from dairy multinational Fonterra, as the two companies review their partnership in the region.

Nestle and Fonterra first signed an agreement on dairy production in the continent in 2003, through the joint venture Dairy Partners Americas.

The revised deal will see Nestle take over a number of milk powder production facilities across the continent as well as a liquid dairy business in Ecuador. Fonterra will receive $82.1 million over the next financial year for the value of the assets it is selling.

Meanwhile, Fonterra and Nestle will respectively own 51% and 49% of the cold dairy business in Brazil, giving Fonterra the controlling stake.

Nestle commented that, although the joint venture had functioned well for 10 years, the time had now come to “realign the business in order to better reflect the respective strategies of Nestle and Fonterra in the region”.

Theo Spierings CEO of Fonterra said: “We value our relationship with Nestle and this agreement will see a continuation of our successful partnership".

Source: Portafolio