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Fonterra’s South American venture with Nestle opens $45m distribution centre in Brazil

Fonterra Cooperative Group's South American joint venture with Nestle opened a $45 million distribution centre alongside its Araras, Brazil factory to distribute more than 200,000 metric tonnes of dairy products a year across South America's biggest economy.

Auckland-based Fonterra and Nestle formed Dairy Partners Americas, South America's largest dairy company, in 2003 to take advantage of rising demand for milk and dairy products in fast-growing emerging economies.

"Brazil is an important market for Fonterra," chief executive Theo Spierings said in a statement. "Rapid urban growth and a focus on healthy nutrition are driving demand for dairy products. The new centre enables us to lower distribution costs and move product quickly across the country."

Units in the Fonterra Shareholders' Fund, which gives outside investors access to the company's dividend stream, gained 0.2 percent to $5.79 today, and have sunk 18 percent this year.


Comments and questions

According to the article below, Fonterra has three kinds of partnerships: market channel partnerships, supply capability partnerships and innovation research partnerships. DPA is a supply capability partnership (ie it offers year-round supply).

Fonterra entered into a strategic alliance with Nestlé in Latin America to form Dairy Partners America (DPA), a 50/50 joint venture operating 13 joint ventures in the Americas. The joint ventures source both local milk from within the country of operation and ingredients from New Zealand. (2010)

A proposed merger between Fonterra-owned Soprole and Nestle in Chile became controversial and did not proceed. (2011) The president of the National Federation of Milk Producers in Chile, Dieter Konow, warned that a company such as Soprole, which controlled more than about 60% of the market, was "free to set the prices for both sales and purchases of dairy products [...]

Chile Soprole's grass to glass vertically-integrated structure and local brand was offered as a model for Fonterra expansion into other markets by a company executive. (2013) Soprole is the only company in Chile that collects milk nationally and is the country's biggest milk buyer.