Fonterra, the world's largest supplier of dairy raw materials, announced on May 16 that it would gradually change its strategic direction and planned to spin off some or all of its consumer goods business and its integrated operations in Fonterra Oceania and Sri Lanka. From the point of view of the industry, consumer goods business accounts for a large proportion of Fonterra's total income, but the performance of some brands lags behind domestic and European and American strong dairy enterprises. at present, the dairy industry at home and abroad is in a period of adjustment, so it is not easy to find someone to take over.

All consumer goods are stripped off

This time, Fonterra announced that it has changed its strategic direction and is exploring plans to spin off all or part of its global consumer goods business, as well as the integrated Fonterra Oceania business and Fonterra Sri Lanka operations. It is expected that the divestiture process will take at least 18 months.

According to MilesHurrell, Fonterra's chief executive, the businesses planned to be spun off are "great businesses" with enhanced recent performance and more potential, but they are not needed to achieve Fonterra's core functions of collecting, processing and selling milk. Fonterra has received news of interest in some of its businesses and now is a good time to consider its ownership.

Shen Meng, director of Xiangsong Capital, is optimistic about Fonterra's strategic adjustment.PowerballdrawingtonightFonterra's core business is dairy products, so consumer goods are not the main business and will be assessed according to strategic needs and may be spun off if they do not meet revenue maximization expectations. Thus, Fonterra can concentrate resources into its core business and strengthen its differentiation advantage. "

It is reported that Fonterra was founded in 2001, its nature was originally a cooperative, formed by the merger of the two largest dairy companies in New Zealand and the New Zealand Dairy Board. At present, Fonterra includes four major business units: Fonterra global trade, Fonterra raw milk powder, Fonterra consumer dairy products and Fonterra catering services.

Fonterra said the divestment of these assets would help create a simpler and higher-performing dairy co-operative, focus more on raw materials and catering services, and do what it does best. By focusing on becoming a supplier of B2B nutritious dairy products and working closely with customers through high-performance raw materials and catering service channels, we can further add value to Fonterra.

Data show that in fiscal year 2023 (the 12 months ended July 31, 2023), Fonterra had total revenue of NZ $26 billion and after-tax profit of 15.Powerballdrawingtonight.77 billion NZ $, or NZ $0.95 per share, and the return on capital rose from 6.8% to 12.4%.

Song Liang, an independent dairy analyst, believes that Fonterra's strategic adjustment has something to do with its performance. After more than 20 years of practice, Fonterra is better at doing to B business than to C business. The added value of Fonterra dairy products has not been effectively improved, in this case, Fonterra can enhance its strengths and circumvent its weaknesses and concentrate on doing to B business to maintain better profitability.

"if Fonterra sells part of its consumer goods business, it will have a certain impact on the company's financial position and strategic positioning. First of all, the sale of part of the business will bring a certain amount of cash flow to the company, which will help to improve the company's financial position. Secondly, it will also enable the company to focus more on its core business and improve the overall operational efficiency. However, this may also pose some challenges, such as the need to properly handle employee, customer and supplier relationships related to the sale of the business to ensure a smooth transition. " Zhan Junhao, an expert in strategic positioning and founder of Fujian Huatze brand positioning consulting, said in an interview with a reporter from Beijing Business Daily.

The Chinese market has an influence

Fonterra has always regarded China as an important strategic market, and this strategic adjustment may have a certain impact on the Chinese market. It is reported that the brands planned to be spun off include Anchor, Mainland, Kemppiti, Anlene, Anmum, Fernleaf, Western Star, Perfect Italiano and so on. These brands are best known in New Zealand, Australia, Sri Lanka, China and Southeast Asia.

If you log on to Fonterra's Chinese website, you can see that Anjia, Anman, Anyi and NZMP are still its main brands and businesses in the Chinese market. Fonterra sells more than 3000 raw materials in more than 13000 stores across the country, catering services in more than 385 cities in China, and Tencent App Center in Beijing, Shanghai, Guangzhou and Chengdu.

In fiscal year 2023, Fonterra Greater China achieved revenue of NZ $7.072 billion (about RMB 30.5 billion) and after-tax profit of NZ $284 million (RMB 1.228 billion).

In Zhan Junhao's view, "Fonterra used to rely heavily on consumer goods business in the Chinese market, and this divestiture will undoubtedly have a certain impact on the Chinese market." First of all, it will affect Fonterra's brand image and market position in the Chinese market. Secondly, it will also affect Fonterra's product mix and sales channels in the Chinese market. However, given Fonterra's brand awareness and market influence in the Chinese market, as well as the company's long-term commitment to the Chinese market, Fonterra still has the opportunity to maintain a leading position in the Chinese market.

Shen Meng disagrees. "Fonterra's advantage in the Chinese market is no longer obvious, so it does not rule out that selling consumer goods is also an option to shrink its Chinese business." However, from the point of view of the industry, the global dairy industry is in a period of adjustment, Fonterra is selling consumer goods business on a large scale, and the relevant buyers are not easy to find.

Song Liang believes that Fonterra's biggest advantage lies in its low cost, and most of its milk sources are supplied to foreign markets, so Fonterra should pay attention to its advantages, concentrate on to B business, and adjust product categories, so as to benefit from this strategic adjustment.

Fonterra should continue to adhere to its core business strategy as a leading global supplier of high-value and innovative dairy raw materials. Consolidate its leading position in the global market by continuously improving product quality and innovation. " Zhan Junhao suggested.

For future development and other issues, the Beijing Business Daily reporter contacted and interviewed Fonterra, but as of press time, the other side did not reply.

Beijing Business Daily reporter Bai Yang