THE acquisition of Fonterra by French dairy giant Lactalis could spell the end of many iconic dairy brands according to the United Dairy Farmers of Victoria (UDV).
Fonterra’s Darnum plant was built by Bonlac Foods in July 1997 and acquired by Fonterra in 2006 to produce milk powder for domestic and global markets.
Lactalis and Fonterra both currently acquire raw milk from dairy farmers in Victoria and Tasmania as well as processing and supplying a range of popular dairy products.
UDV President Bernie Free said the acquisition could result in product duplication.
“Some existing brands may disappear from supermarket aisles,” said Mr Free.
“Our farmers produce the best dairy products in the world, and I hope this move doesn’t restrict consumers’ access to locally made, fresh Victorian dairy products.
"It's hard enough for consumers to find out what products are Australian made and moves such as this make that challenge even more difficult," Mr Free said.
“Any reduction in competition is likely to place downward pressure on farmgate prices and leave producers with less negotiation power, jeopardising farm viability.
“Rationalisation of processing facilities could result in job losses, reduced regional investment and undermine the infrastructure that has long supported Victoria’s dairy industry.”
Mr Free said he was concerned that increased reliance on imported dairy products may not only displace locally produced milk but also weaken the security of our food supply.
“Smaller processors could find their access to milk swapping or supply contracts increasingly constrained, further limiting diversity and competition.”
“There is no clear evidence prices will improve,” said Mr Free.
“Farmers need fair access to competitive markets and transparent contracts,” he said.
Deputy Chair of the Australian Competition and Consumer Commission Mick Keogh said the ACCC would not oppose the proposed acquisition by Lactalis in Australia.
“We looked very closely at the transaction, as it will combine two of the largest buyers of raw milk in Victoria,” said Mr Keogh.
“While we acknowledge the concerns raised by some representative bodies, after careful consideration we (the ACCC) have determined that the acquisition is unlikely to result in a substantial lessening of competition.”
Fonterra has agreed to sell its consumer and associated businesses to Lactalis for AU$3.48 billion subject to shareholder approval and receipt of regulatory approvals.
The sale comprises Fonterra’s global consumer business and consumer brands(excluding greater China) and Fonterra’ integrated foodservice and ingredients businesses in Oceania, Sri Lanka, the Middle East and Africa.
Lactalis CEO Emmanuel Besnier said the acquisition would significantly strengthen the company’s strategy across Oceania, Southeast Asia and the Middle East.
Fonterra is a New Zealand-based dairy co-operative owned by around 8,000 New Zealand farmers with consumer brands such as Western Star, Mainland, and Perfect Italiano, as well as certain Bega Cheese products produced under licence.
Lactalis owns brands such as Pauls, Vaalia, Oak, Président and Lactalis Foodservice.
The ACCC found the acquisition would not substantially alter current market dynamics in Victoria as Lactalis would continue to be constrained by Saputo.
“Because Fonterra and Lactalis have differing end product mixes they often seek to acquire milk from farmers with different production profiles and accordingly we found that they are not likely to be each other’s closest competitors.”
The ACCC found retailers and wholesalers would continue to benefit from the competition provided by imports of cheese, dairy ingredients and chilled yellow spreads.
According to the ACCC retailers also had the ability to sponsor a new entry (into the market) or enter the market directly as Coles had through the acquisition of Saputo’s milk processing assets.