Fonterra, New Zealand’s leading dairy cooperative, is facing a complex decision regarding the divestment of its consumer business, Mainland Group, as it prepares to release its interim financial results on March 20. While strong financial performance could attract potential buyers, it also raises questions about whether selling a profitable division is the right move. With record earnings and the highest-ever farmgate milk price forecast, farmer-shareholders remain divided on the future of Mainland.
Fonterra, New Zealand’s largest dairy cooperative, is at a crossroads as it weighs the divestment of its consumer business, Mainland Group. The decision comes just ahead of its interim financial results, set to be released on March 20, which are expected to showcase record earnings and the highest-ever farmgate milk price forecast.
Fonterra, a farmer-owned dairy cooperative, plays a pivotal role in the global dairy industry, supplying a significant portion of the world’s dairy products. Mainland Group, its consumer division, has attracted interest from Australian dairy companies and private investors as Fonterra’s leadership embarks on a roadshow to present the divestment plan.
While strong financials may make Mainland an attractive acquisition target, they also raise questions among farmer-shareholders about whether selling a highly profitable division is the right move. Some argue that Fonterra should retain its consumer business to capitalize on growing dairy demand, while others believe the cooperative should focus on maximizing added value in its core operations.
“Why sell an arm when the body is doing so well?” is a question many farmers are asking, given the projected farmgate milk price of $10 per kilogram of milk solids and record revenue nearing $30 billion. However, Fonterra’s strategy focuses on long-term sustainability and ensuring consistent value creation.
Mainland Group’s net revenue in FY24 is estimated to be just under $5 billion, with added value earnings of around $200 million—about one-eighth of Fonterra’s total. The company has already refined its divestment strategy by deciding to retain a manufacturing facility in Saudi Arabia and its Greater China consumer business.
As the roadshow unfolds, the debate over whether to sell or retain Mainland Group will intensify, with financial performance, shareholder perspectives, and market interest playing key roles in shaping Fonterra’s final decision.
