The Anchor, Mainland and Kāpiti brands look set to be sold, with Fonterra now increasingly focusing on "advanced ingredients and food service" products. Photo: RNZ / Diego Opatowski
It is goodbye to iconic New Zealand brands Mainland, Kāpiti and Anchor, as more than 88 percent of Fonterra's farmer shareholders have voted to sell them to French dairy giant Lactalis for $4.2 billion.
It is estimated farmer shareholders will get an average tax free payout of about $392,000.
The deal includes multi year contracts for Fonterra to supply Lactalis raw ingredients.
Winston Peters' has labelled the decision utter madness, economic self-sabotage and an outrageous short-sighted sugar hit.
The chair of Fonterra's cooperative council, and farmer John Stevenson said there had been 18 months of robust conversation and it was good the vote was so decisive.
"It is a strong mandate from our farmers for Fonterra to go forward and an endorsement of their direction of travel. So not only is it a strong return, but it's also one of the strongest participations we've seen in a Fonterra vote."
Stevenson told Checkpoint that although many farmers did have a strong connection to the brands, the sale made sense from a financial standpoint.
"Our farmers are really proud of and connected to our brands, we have a long history with them. Throughout this process Fonterra has spoken to farmers, answered the questions and really explained the rationale for divestment.
"I'm really confident that farmers have put the long term future of their Co-op at the forefront rather than the short term future of their bank accounts."
Photo: Anchor
He said although the payout was an upside for farmers, there were other benefits that he expected to come with the sale.
"I think that's the key thing that we've tried to get our farmers to think about because post any capital return, we're still going to be supplying milk, many of us for generations to come, so there's no point taking a short term sugar hit without considering the long term implications.
"Fonterra have told us that ... they'll be able to be more focused, they'll be a better business post this divestment."
Only about 7 percent of milk will be sold to Lactalis, the remaining 93 percent would be focused further into advanced ingredients and food service.
Stevenson was confident the sale would bring long-term benefits to farmers.
"Farmers, we're generational in our investments, many of us carry a lot of debt, so you know, if we were taking a short term sugar hit and walking away from the long term reliability and sustainability of our coop and future returns, I think it would be very short sighted.
"I'm confident that farmers have taken a long term view, the key thing now is for Fonterra to execute on what they've explained to farmers."
Photo: Supplied
Stevenson was also sure that if Lactalis ended up walking away from their supplier agreements, things would be easily resolved.
"Fonterra, it's really important that they have a strong relationship and they do everything they can to make this partnership work. But worst case scenario, if we end up not continuing with them for whatever reason, Fonterra has been able to demonstrate that for that 7 percent of milk, they'll be able to find other homes for it.
"We've seen Fonterra invest and or announced investments in the advanced ingredients and food service space over the last few months."
While some farmers are experiencing tough economic times, Stevenson said he didn't view the move as a "stress sale".
"Fonterra didn't have to bring this to farmers for consideration... they've viewed this as the time to bring a strategic change to farmers for consideration."
Farmers expect to see the money from the sale in the first quarter of next year, but Stevenson said many still had debts they would have to pay off, particularly after the weather over the past week.
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