Fonterra exits UK butter market

Fonterra is getting out of the business that was the cornerstone of New Zealand's multibillion-dollar dairy industry - the British butter market.

Eight years after Fonterra cut a deal with one of its biggest competitors in Europe, Arla Foods, for a joint venture in the European butter and margarine markets, it is handing its share to its former rival.

Fonterra has sold its 25 per cent stake in Arla Foods Fonterra (AFF), to Arla Foods of Denmark.

Fonterra chief financial officer Jonathan Mason said the joint venture had been successful but Fonterra had "determined the investment was no longer core to the long-term strategy".

In essence, the farmer co-operative thinks it can make more money boosting its value-added ingredients sales and regional consumer businesses in Asia, Africa and the Middle East, Australasia, and Latin America.

Fonterra will continue to license the Anchor brand to Arla and to supply New Zealand butter.

Mason did not disclose how much Fonterra has been paid for the stake, but said it would have a positive effect on the balance sheet.

AFF was established in 2002 to market "block" butter, spreads and aerosol cream products in Britain.

New Zealand's dairy exports were built on butter and cheese sent to Britain, with Anchor becoming one of that country's most popular brands.

But by the time Fonterra took over exports in 2001, 40 per cent of New Zealand butter going to Europe was being shipped to the continent - outside the traditional market in Britain.

- NZPA