French dairy major Lactalis has acquired the joint-venture assets in Brazil owned by Fonterra and Nestlé.

Lactalis, which already has a presence in the South American country, has struck a deal for Dairy Partners Americas (DPA) for BRL700m (US$131.5m). Fonterra holds a 51% stake in the venture, set up in 2003, and Nestlé owns 49%.

The transaction is expected to close by mid-2023, subject to approval from Brazil’s competition authority – the Administrative Council for Economic Defense (CADE).

New Zealand-headquartered Fonterra and Switzerland-based Nestlé put the DPA business up for review in 2019 as the two parties considered the future of the chilled dairy products venture.

DPA operates two plants located in Araras, Sao Paulo, and Garanhuns in Pernambuco state, employing 1,300 people, all of whom will be retained by Lactalis. It supplies dairy products, including milk-based beverages and yogurts, under the Nestlé brand and also Chamyto, Ninho, Chandelle, Chambinho, Neston and Molico.

Lactalis said it has secured “long-term” licensing agreements to use the Nestlé trademarks of Ninho, Neston, Molico and Nesfit in Brazil and which will continue to be marketed by DPA.

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By GlobalData

Patrick Sauvageot, the managing director of Lactalis’ Brazil business, said in a statement: “The acquisition of DPA brings complementarity to our portfolio of brands and of products and will allow us to develop our commercial and geographic coverage. By thus consolidating its position as responsible leader in dairy products in Brazil, Lactalis do Brasil is determined to pursue the process of continuous improvement of all of the local production chain.”

Lactalis in Brazil

The French firm first entered Brazil in 2013 when Parmalat, its part-owned Italian dairy business at the time, acquired gourmet cheese specialist Balkis Indústria e Comércio de Laticínios through Lactalis’ Brazilian subsidiary. Lactalis went on to build up its stake in Parmalat into full ownership.

In 2019, the French group completed a deal for Brazilian dairy cooperative Itambé Alimentos and in 2021 bought Confepar Agro-Industrial.

Privately-owned Lactalis now markets a range of dairy brands in Brazil, including Elegê, Parmalat, Batavo, President, Cotochés, Poços de Cladas and Itambé. The company claims to be the largest milk-collection business in Brazil, operating 23 manufacturing sites in eight states.

Lactalis dominates the market in Brazil for dairy and soy-based products, followed by Nestlé and French peer Danone, according to research firm GlobalData. The Itambé brand holds a 3.8% share by value and Elegê 3%, figures compiled by Just Food’s parent company show. The Ninho brand commands 5.7% and Nestlé 1.4%.

In a separate statement, Fonterra CEO Miles Hurrell said the “sale of DPA Brazil is aligned with the co-op’s strategy of prioritising its New Zealand milk pool”.

He added: “DPA Brazil has reached maturity as an investment for us, and the sale allows us to prioritise our resources to the businesses that are core to our strategy.”

In the aftermath of the 2019 review of DPA, Fonterra said the disposal of its joint-venture stake was delayed due to Covid. Its interest “has been held for sale in Fonterra’s financial statements since January 2020”, the co-op said.

Fonterra and Nestlé initially created DPA to manufacture dairy products in Latin America. In 2014, the joint venture refocused its activities on Brazil and chilled dairy.

As part of Fonterra’s focus on New Zealand, the listed business recently sold its Chile dairy operation Soprole to Peru’s Gloria Foods. The disposal plans were flagged in 2021, along with a review of its dairy operations in Australia under its 2030 strategy goals. However, in September Fonterra backtracked on a plan to sell the Australian assets, with Hurrell saying “the business is going well”.

Elsewhere, the co-op has withdrawn from a dairy joint venture in India with Future Consumer, sold dairy farms in China – although Fonterra remains committed to the country – and has exited an infant-formula partnership with Beingmate in China.

In 2019, Fonterra also sold its share in an ingredients venture with Netherlands-based dairy major FrieslandCampina – DFE Pharma.