Kapiti icecream on Fonterra's menu

Fonterra has been given the green light to buy Kapiti Fine Foods and United Milk from the grocery co-operative Foodstuffs.

The Commerce Commission will allow Fonterra to buy Kapiti's milk and icecream factory at Palmerston North, its cheese factory at the Lindale tourist complex near Paraparaumu, and contracts to supply the Pam's milk and cream brand to supermarkets in the lower North Island.

Fonterra told the commission Australian rival National Foods might be about to establish a milk-processing plant in Auckland, allowing its entry into the retail milk sector and providing extra competition.

* Dairy farmers said yesterday that they were not surprised by Landcorp's decision to move a quarter of its milk supply away from Fonterra to Open Country Cheese.

Dairy Farmers of New Zealand chairman Frank Brenmuhl said the general feeling was that such moves were inevitable because of Fonterra's capital structure.