Photo: 123rf / Supplied images
The head of Fonterra says it has been difficult for its brands to compete in global markets after shareholders voted in support of the the sale of its major brands, including Mainland and Anchor, to French dairy giant Lactalis.
More than 88 percent of the votes cast at a special meeting backed the $4.2 billion sale to French dairy giant Lactalis.
The deal includes multi year contracts for Fonterra to supply Lactalis raw ingredients.
It is estimated farmer shareholders will get an average tax free payout of about $392,000.
New Zealand First leader Winston Peters' has strongly criticised the decision and threatened more regulation for Fonterra.
The sale to Lactalis is the final step in Fonterra's transition to a slimmed-down New Zealand-based supplier of raw ingredients and high-value products to other manufacturers.
Fonterra CEO Miles Hurrell told Morning Report they were up against multinationals in large countries that have greater populations and can get products out to markets quicker.
"We are sub-scale down here in the south Pacific and as a result [of] our small population, you're always going to be hand-strung by what you can grow at."
Hurrell said the consumer business is about seven percent of Fonterra's total milk. He said the sale gives Fonterra the ability to put more of its milk into high-value ingredients.
"When you deal with multinationals that have very deep pockets and a global reach far beyond ours, and at the same time as they're growing in certain markets, you grow with them," he said.
"Yes, you're not talking directly to the consumer on the supermarket shelf, but you are talking to multinationals that have a range of products in a range of categories, far beyond what we ever would have. It gives you better insight, I'd argue, in growing with companies that are growing faster then what we would ever grow at.
"For us, it's about getting closer to those multinationals."
Addressing concerns that Lactalis could cut Fonterra out of the deal in 10 years time for cheaper milk, Hurrell said it's "simply not going to happen".
"They're not spending $4 billion on these brands to try and dumb them down, remove the good quality milk that we make in New Zealand and put some inferior pricing. You wouldn't spend this kind of cash on these brands to do that to it."
It is estimated the sale proceeds would be worth about $4.5b to the economy, with farmer shareholders receiving an average tax-free payout of about $392,000 if the sale went ahead.
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