| Investing in India’s consumer dairy market not a core priority at this time: Fonterra. |
Bangalore, April 28 Britannia Industries will acquire the entire stake of Fonterra, the company’s joint venture partner since 2002 in Britannia New Zealand Foods Pvt Ltd, which is engaged in the dairy business.
Britannia Industries has informed the Bombay Stock Exchange that it has entered into an agreement with Fonterra Brands (Mauritius Holding) Ltd, Mauritius, for acquiring the latter’s 49 per cent equity and preference shareholding in Britannia New Zealand Foods Pvt Ltd (BNZF). This acquisition is subject to the Reserve Bank of India approval.
With this acquisition, Britannia will hold the entire equity and preference capital of BNZF. The company earlier had a 51 per cent stake.
Ms Vinita Bali, Managing Director of Britannia Industries Ltd, said: “The joint venture of Fonterra and Britannia has created a strong foundation in the dairy business, with leadership in categories like cheese. Britannia intends to pursue profitable growth opportunities in differentiated dairy products and solidify its position. We believe in the growth of the dairy business in India.”
On why Fonterra chose to exit, Ms Bali said Fonterra’s mainstay is ingredients (liquid milk, primarily) and has very little presence in branded business. “The company primarily is a cooperative of several New Zealand farmers and it didn’t see a big opportunity in India right now for its core competency (i.e. ingredients),” she added.
Mr Mark Wilson, Fonterra’s Managing Director – Asia Middle East, said: “For several years, Fonterra and Britannia have enjoyed a good business relationship. On an ongoing basis, we cast a critical eye over our investments to ensure that they reflect our key strategic priorities. While we are seeing a lot of growth in India, given the fragmented local milk supply that requires significant development, investing in India’s consumer dairy market is not a core priority for Fonterra at this time.”
But the dairy business is still working for us, said Ms Bali. Britannia’s dairy business, comprising cheese variants such as slims and spreads, curds, butter and dairy whitener, is worth Rs 200 crore, growing at 15-18 per cent for several years, she said.
Cheese, under the Britannia Milkman brand name, is Britannia’s best seller in the dairy category and enjoys a 50 per cent market share. The company earlier also sold liquid milk but it exited out of this business to focus on “value-added differentiated products.”
In the fiscal year 2007-08, the joint venture company registered approximately, a turnover of Rs 143 crore but returned a net loss of a little over Rs 5 crore after tax. Its net worth stood at close to just Rs 3 crore as of March 31, 2008.
Britannia now plans to strengthen its dairy business in India by adding several new products.
At the National Stock Exchange, Britannia Industries’ shares closed on Tuesday at Rs 1,562.85, up 1.4 per cent from the previous day’s close of Rs 1,541.45.
Source: The Hindu Businessline