Global Dairy Giant Poised to Expand Down Under as Regulator Clears Path for Mainland Group Acquisition.
Lactalis, the French dairy behemoth and the world’s largest processor by revenue (US$30 billion in 2023), has received a significant boost in its pursuit of Fonterra Co-operative Group’s soon-to-be spun-out consumer business, known as Mainland Group. The Australian competition regulator, the ACCC, announced on Thursday it would not oppose a transaction between the two, following a thorough two-month informal review. This development marks a pivotal moment in the Australian dairy industry and has profound implications for dairy economics in the region.
Fonterra’s Australian operations represent a substantial component of the business on the block, encompassing eight manufacturing sites and relying on approximately 650 farmer-suppliers. These suppliers collectively contribute about 45% of the milk destined for the Mainland Group spin-out, primarily from Victoria and Tasmania. While other significant players like Bega Group and various multinational dairy companies have been mentioned as potential contenders, Lactalis appears to be leading the charge on the trade sale side of this major divestment.
Headquartered in Laval, France, the nearly 100-year-old Lactalis is a private entity owned by the Besnier family and is globally recognized for its Président brand. Despite its immense global scale, with revenue doubling since 2019 and more than twice that of Fonterra, Lactalis currently maintains a relatively small presence in New Zealand, where it owns an Auckland blending and canning facility. Its global strategy, however, has been characterized by aggressive acquisitions in recent years, including Kraft Heinz’s natural cheese operations (US 2 billion).
The ACCC’s review extensively analyzed the potential competitive impacts across various segments: farmgate milk supply, the wholesale sector, and foodservice. Despite concerns from some farmer representative bodies regarding consolidation, the watchdog concluded that a merger would not substantially lessen competition. This was attributed to limited overlap in product profiles, with Fonterra focusing more on longer-life products like everyday cheese and dairy ingredients, while Lactalis emphasizes fresh drinking milk and yogurt for the domestic market. Furthermore, alternative buyers would continue to constrain Lactalis in key raw milk supply regions.
While the ACCC’s clearance provides Lactalis with the necessary regulatory green light to proceed, it’s crucial to note that no formal agreement has yet been reached. Fonterra’s chief executive Miles Hurrell and chair Peter McBride confirmed to their New Zealand farmers that the co-operative remains engaged in a “confidential and competitive” process with multiple interested parties. This means that despite Lactalis’s favored position, the final deal for the Mainland Group is still subject to negotiation, underscoring the high-stakes nature of this global dairy transaction.
Source: BusinessDesk: French dairy giant Lactalis gets ACCC boost in quest to snap up Mainland – but who is it?
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