Author: Xiaoshidai (original)
Following Unilever's announcement of plans to divest its ice cream business, another multinational food giant has announced a major divestiture.
At about 4 o'clock Beijing time today, many people are still asleep, but Fonterra, the world's largest dairy exporter, announced one of the company's most important strategic decisions in recent years - plans to "large-scale" divestment of consumer goods business, involving Anman, Anjia, Anyi and other brands.
Fonterra is New Zealand's largest company, exporting about one-third of the world's dairy trade. The three business segments of foodservice, raw materials and consumer goods earned NZ$23.4 billion (about 96.5 billion yuan) in FY2022.
In the Chinese market, Anchor, Anyi, Anman, etc. are all well-known dairy brands, and there are also many loyal consumers in the field of milk powder and liquid milk, including online and offline channels for many years. In the future, who will bid for these brands, and whether Yili and Mengniu will also be interested in these global dairy brands, may change the pattern of dairy competition in the Chinese market.
Below, let's take a look at Fonterra's latest announcement.
Long list
Today, the New Zealand dairy cooperative issued a bulletin titled "Fonterra Announces Significant Change in Strategic Direction", suddenly announcing a series of strategic decisions.
Fonterra today announced a significant change in its strategic direction as part of its commitment to strengthening its position as the world's leading supplier of innovative high-value dairy ingredients, the statement said. As part of the changes, the company is exploring options for a full or partial divestiture of its global consumer products business, as well as the integrated Fonterra Oceania and Fonterra Sri Lanka businesses.
"We have completed a strategic review that will strengthen our core business role." Fonterra chairman Peter McBride said the decision would create significant value for dairy farmers and shareholders alike.
He said Fonterra's core business is to work with farmers to collect sustainably supplied milk, efficiently produce products that value to our customers and deliver great returns to our farmer shareholders and co-op holders.
Fonterra chief executive Miles Hurrell also said today that the assessment also gives us confidence in our role in the dairy nutrition value chain, believing that one of its biggest strengths is the production of "world-class innovative ingredients" for customers to deliver to consumers.
He said further value could be added to Fonterra by focusing on being a supplier of B2B nutritional dairy products, working closely with customers through high-performance ingredients and foodservice channels. He stressed that further investment will be made in raw materials and catering businesses.
Next, Fonterra pulled out a long list of brands for this planned divestiture.
消费品及相关业务，包括了Anchor（安佳）、Mainland、Kāpiti、Anlene（安怡）、Anmum（安满）、Fernleaf、Western Star、Perfect Italiano等。
As for Fonterra Oceania, it was recently created by merging the Fonterra brand in New Zealand and the Fonterra brand in Australia, and it includes consumer goods, foodservice and ingredients businesses; Fonterra Sri Lanka includes consumer goods and foodservice.
"Already interested"
What impact will this divestment have on Fonterra as a whole?
Overall, the businesses in the scope of potential divestment accounted for about 15% of Fonterra's total milk solids and about 19% of Fonterra's operating profit for the first half of the 2024 financial year – with strong underlying earnings from the consumer products business, Fonterra said.
Hao Wanli said the divestiture will make it simpler and more efficient, focusing more on the core ingredients and foodservice business, and doing what it does best. He noted that while the divestments were "all great businesses", with recent strengthening and greater potential, it was not necessary to have the businesses to be divested to fulfil Fonterra's core function of collecting, processing and selling milk.
Hao Wanli further explained that in the long run, Fonterra is not the highest value owner of consumer goods and related services, and withdrawing from these businesses will allow new owners with the right expertise and resources to reach their full potential.
According to the company, in fiscal 2023, Fonterra's consumer goods business accounted for about 7% of its New Zealand solid milk sales and brought in 3.3 billion New Zealand dollars (equivalent to 14.6 billion yuan) in revenue, with a global business footprint, and its brands are most well-known in New Zealand, Australia, Sri Lanka, China and Southeast Asia.
In particular, he noted that while recognising that brands such as Fonterra and Anchor are closely linked, new owners can help these businesses thrive. He said he had received unsolicited interest in some of the businesses, and now was a good time to consider ownership. However, he did not also disclose which companies or capital have shown interest in acquiring them.
Since the intention to divest is a fait accompli, according to the arrangement, the next step is to get started.
Today, Fonterra said it will appoint consultants to assist in evaluating the divestiture proposal. It emphasises that the choices made when considering options will depend on how best value creation can be achieved, whether it is the potential proceeds from the sale or the ability of Fonterra to generate sustainable economic returns.
In the long run, the net proceeds from the sale of the business may be used for Fonterra's debt repayment, support for strategic investments and distributions to dairy farmer shareholders and holders, according to the report.
Fonterra expects the divestment process to take at least 12 to 18 months.
Chinese market
Xiaoshidai noticed that among the brands that Fonterra plans to divest, Anchor, Anyi and Anman have a high reputation in the Chinese market. Today, looking through the Fonterra Chinese official website, these three major consumer brands are also in the product introduction, being placed in a prominent position.
Online, Xiaoshidai saw that Anjia, Anyi, and Anman all have their own flagship stores. According to the online product category, Anchor has the most extensive product portfolio, covering milk powder, pure milk, children's milk, and even probiotics. Fonterra's official website describes Anchor as: Anchor is our flagship brand that provides daily nutrition for Chinese families, with a wide range of products.
Anyi, which focuses on middle-aged and elderly milk powder, has classic series, high-fiber series, gold series, gold evergreen series, etc. Fonterra's description is: "Comfort is one of our core brands, and through the Comfort brand, we are committed to providing high-quality bone nutrition to Chinese consumers.
As for Anman, the main maternal and infant dairy products, including Anman Zhizheng Bao and Anman Beiyu maternal milk powder series, Anman children's milk powder and infant milk powder, etc., the latter is divided into two types: domestic and New Zealand imports. Fonterra's description of Anman is: from the launch of maternal nutrition milk powder in Asia to the launch of infant formula, Anman has always been innovating and growing.
This means that Fonterra's divestiture decision will have an impact on the above-mentioned product portfolio in China, and the scale of the divestiture is also unprecedented for the number of brands in China.
In fact, Fonterra also relied heavily on consumer goods in the Chinese market.
Xiaoshidai has reported that in the 2018 fiscal year, Fonterra's consumer brand business in China achieved breakeven for the first time. In September 2019, Fonterra CEO Wanli Hao unveiled its new global strategy to focus on the consumer brand market in the Asia-Pacific region, where most of the products we sell are processed from New Zealand milk.
According to Fonterra's statement at the time, in the Chinese market, Anchor room temperature milk has ranked first in the sales volume of imported room temperature milk brands, Anchor skim milk and Anman pregnant women's milk powder have "firmly ranked the champion" in their respective categories, and Anchor adult milk powder has become the No. 1 product in sales of offline imported brands.
In November of the same year, the then head of Fonterra in China said that it would continue to invest in the consumer goods business and strive to cut into more consumer goods categories and consumption scenarios. Among them, since Anchor's consumer goods business entered the Chinese market in 2013, it started with only one room temperature milk at the beginning, and has more than 50 SKUs at that time.
However, in recent years, with the deepening competition in the dairy consumer goods market and the shift of Fonterra's strategic focus to high value-added business, catering services and raw materials have gradually become the "top brands" of our business in China.
Earlier this year, Casey Thomas, Fonterra's vice president of Greater China, said that the larger market space of Fonterra's raw materials business in China comes from providing customers with more localized innovative products. To this end, the company brought five series of innovative products and solutions from the raw material business NZMP brand milk powder, milk fat, cheese, milk protein and special ingredients to the trade fair FIN.
In addition, Dai Junqi, vice president of Fonterra Greater China, also said at the HOTELEX exhibition in March this year: "This year, we will seize the popularity of cheese and butter in many catering tracks, strengthen Anchor's product strength and promote application innovation." ”
He emphasized: "We are positioned as a 'professional partner' for our catering customers, and we want to accompany our customers to grow together. We are continuing to strengthen our customer-centric sales and service network to help our customers' businesses develop and expand healthily and steadily. ”
Xiaoshidai will continue to pay attention to the progress of this large-scale divestiture plan of Fonterra.