Fonterra coy on its Kapiti plans

Fonterra has succeeded where billionaire Graeme Hart failed by reaching a deal to buy premium icecream maker Kapiti Fine Foods.

The agreement with Kapiti's present owner, supermarket cooperative Foodstuffs Wellington, also gives the dairy giant the rights to supply Pam's brand milk in the lower-North Island and production facilities in Palmerston North and Paraparaumu.

Two years ago Kapiti - then a boutique cheese and icecream maker - was the subject of a battle between Hart's New Zealand Dairy Foods and United Milk, owned by Foodstuffs and a group of Manawatu farmers. United Milk successfully fended off Dairy Foods and amalgamated with the cheese company to form Kapiti Fine Foods.

Foodstuffs bought Kapiti's farmer shareholders out of the combined company in late 2003, but the deal with Fonterra could now endanger their supplier relationship with Kapiti.

A spokesman for Fonterra said a range of options would eventually be discussed with Kapiti suppliers but it remained "business as usual" until the deal received regulatory approval, a process expected to conclude in the first quarter of next year. It was too early to discuss Fonterra's plans for Kapiti, he said.

Fonterra Brands managing director Sanjay Khosla said the acquisition supported Fonterra's strategy of focusing on strong brands that delivered fast growth and better margins.

Foodstuffs Wellington chairman Brian Drake said Kapiti had been a "very good investment" but the group had developed the business to its natural boundaries. The new structure would give the business renewed impetus and would keep it in New Zealand hands, he said.

Kapiti chief executive Greig Shearer said in 2002 that Kapiti had revenues of around $20 million and facilities that could process 1 million litres of icecream a year and 50,000 litres of milk daily. Now it has over $60 million of revenues and its facilities could handle 18 million litres of icecream annually and up to 200,000 litres of milk daily.