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Fonterra is to swallow Northland dairy icon Topmilk, leaving just one surviving independent processor from the days before industry deregulation.
Topmilk has been forced to sell out as it faces food safety compliance costs of more than $1 million. Fonterra said yesterday it had been negotiating for some time with the Kaitaia-based company.
Under the deal, which will see two thirds of Topmilk's 15 to 20 mostly part-time staff made redundant, Fonterra has guaranteed to continue supplying Topmilk's customers in Northland, and to maintain some of its brands.
Fonterra will purchase Topmilk's land and buildings in Kaitaia including a cool room and some packing assets, but close the processing operation, which will be folded into Fonterra Brands' Anchor production in Takanini, south Auckland.
The parties said the deal did not involve a large sum of money.
Topmilk owner David Reed said his cheese factory near the Topmilk plant was not involved in the sale, and some staff might be redeployed there.
The company, set up by his father in 1960, simply could not afford costs of more than $1 million needed to bring the factory up to hygiene standards required by the Food Safety Authority, he said.
"We approached Fonterra and basically put up our hands and said it's too difficult for us to carry on," he said.
"The difficulty lies around the fact that we have a processing and packing room all in the same area."
Pasteurisation and bottling operations needed to be separate and the building lacked positive air pressure, Reed said. It would have meant building a new factory.
He said with margins tight for small domestic dairy processors it did not make sense to invest in the plant to keep it going.
Reed said other independents had started up since Fonterra began - such as Fresha Valley and Independent Dairies which supply Progressive Enterprises - but they were almost add-ons - "separately owned but effectively vertically integrated".
Topmilk was one of the 38 independent town milk processors set up under the Milk Act 1944.
