Fonterra expects strong farmer mandate for $3.8b Anchor sale

Saturday, 23 August 2025

Selling the consumer brands, including Anchor, is Fonterra’s highest-profile deal since the 2019 sale of TipTop to British dairy giant Froneri.

But the $3.8 billion sale of Anchor and the rest of Fonterra’s consumer brands business to family-owned Lactalis is 10 times the scale of the $380 million Tip Top sale.

It’s not a done deal yet as Fonterra’s supplier-owner dairy farmers must approve the deal in a vote in October by a simple majority of 51%, but the cooperative thinks that’s a formality.

Fonterra chair Peter McBride said farmers had “mixed feelings” about selling its consumer brands, especially the venerable Anchor brand which dates back to 1886.

But the majority of farmers supported the move, and he expected farmers to give Fonterra a “strong mandate” for the sale. .

The “core” of Fonterra was not its consumer brands operations, but its ingredients and food service businesses, supplying food and beverage manufacturers around the world, and supplying specialist products like creams and butter to restaurants and the hospitality business, especially in the booming Chinese market.

Should farmers choose to approve the deal, it wouldn’t feel like “Christmas” for them as they had a connection to brands like Anchor, which dated back decades, McBride said. But they would have capital to invest in their businesses, or to pay down debt.

A series of webinars to prepare farmers to vote in favour of the sale began on Friday, with the first held just hours after the deal was announced.

McBride and Fonterra chief executive Miles Hurrell told a massed rank of media that the sale was a success for the cooperative, but they acknowledged the public might not feel that way about it.

But Hurrell said the deal, finalised early on Friday morning, was: “Pleasing for our farmer shareholders, pleasing for New Zealand.”

Forsyth Barr analyst Matt Montgomerie said the deal was a good outcome largely because 'Fonterra had historically been poor owners of these brands and the Australian operations“.

“If you benchmark margins and returns through history, they’ve been underwhelming,” he told The Post.

“Consumer and Australia were relatively small parts of the business, so while the sale is a big headline, the core business isn’t changing that much.”

The Lactalis sale valued Fonterra’s consumer arm at more than 20 times its earnings before interest and tax (EBIT) which was $173m at its 2025 half-year.

Meanwhile, EBIT for Fonterra’s food service and ingredients businesses were $230m and $696m respectively.

“That’s in part reflective of Fonterra being such poor owners,” Montgomerie said. “Lactalis is clearly taking a constructive view on the synergies they can realise, whether through cost savings, marketing, distribution, or asset utilisation in Australia.”

Hurrell was keen that reporters took away the message that Lactalis was not spending nearly $4b on the consumer brands to run them down, but would want to see the brands grow.

“It’s a long-term investment. They will be wanting to continue to grow, and invest, probably putting cash in behind those brands to take them to the next level.”

Lactalis, owned by the wealthy Besnier family, had global reach, he said.

It is the ninth largest food group in the world, and the world’s largest dairy company with more than 85,000 employees worldwide. It sells dairy products in 150 countries under brands including Kraft in America, President in France, Parmalat in Italy, Seriously in Scotland and Penguin in the Middle East.

However, the sale of TipTop showed that once a brand changed hands, the new owner might not respect all the sacred cows the New Zealand public took for granted.

Shortly after buying TipTop, Froneri stopped selling Goody Goody Gum Drops and Cookies and Cream in 2-litre tubs.

Hurrell and McBride were questioned about whether the sale could ultimately lead to the closure of any of Fonterra’s New Zealand dairy factories, which were major suppliers in their local areas.

They projected confidence, but there were details of the deal that Hurrell said Fonterra was not sharing.

Lactalis would continue to take Fonterra’s milk and ingredients far into the future, but there remained the uncomfortable, and Hurrell thinks unlikely, possibility of Anchor-branded butter one day being made without New Zealand milk.

Fonterra had locked in a 10-year milk supply deal with Lactalis, he said.

Montgomerie said while the beloved Kiwi brands would not be owned by the co-op, the milk inside them would still be New Zealand milk, not French milk.

“Even though they’re selling the brands, Fonterra will remain the supplier of milk.”

The deal also kept Fonterra’s food service business intact, and it would still be able to use the Anchor Food Professionals brand, he said.

It sold product into restaurants, bakeries, caterers, hotels, and cafes around New Zealand, so Anchor products would still flow through to Kiwi consumers.

The deal, with Lactalis could get bigger, rising to $4.2b in value, if the Australian Bega brands ended up being included.

But it would leave Fonterra drawing a higher proportion of its revenue for China.

“Post-sale, China will account for 30–40% of earnings,” Montgomerie said. “They lose some diversification that came from the consumer brands.”