Fonterra Cooperative Group Ltd, New Zealand's biggest company and one of the leading cooperative groups in the world, will invest Rs 110.4 crore in its new joint venture with Britannia Industries Ltd, for expanding both companies' dairy business in India.
Fonterra Cooperative Group has sought the approval of the foreign investment promotion board (FIPB) to bring in Rs 110.4 crore as FDI for picking up a 49 per cent stake in the new company.
An equal amount will be pumped in by Britannia for another 49 per cent stake, while the remaining 2 per cent will be shared by resident trade partners. The proposal to set up the joint venture was cleared by Britannia's board of directors in the last week of October and conveyed to the stock exchanges.
The new venture will operate Britannia's existing dairy business, which includes marketing and distribution of milk and milk products. Sources said that in the long-run, the joint venture is expected to set up a milk processing plant. Milk-based products will be manufactured in this unit, packed and distributed through the existing retail chain of Britannia.
Meanwhile, Britannia's existing similar arrangements with the Baramati (Maharashtra)-based Dynamix Dairy Industries Ltd, in which it also has a 11 per cent stake, is under a cloud.
Britannia was supposed to increase its shareholding in Dynamix to 50 per cent by September 30, 2001. But chances are that the existing shares will now be sold back to the company's promoter K M Goenka.
Britannia executives were not available for comment. Dynamix Dairy director Deepak Jain said: "We are evaluating Britannia's interests in our company. As far as increasing the shareholding is concerned, I do not think that will happen any more."
Fonterra Cooperative Group (with assets worth NZ$11 billion) is owned by around 14,000 New Zealand dairy farmers (100 companies) with its 20,000 staff operating in 120 countries around the world.
In December 2000, the two major dairy companies -- New Zealand Dairy Group and Kiwi Co-operative Dairies -- had signed a merger agreement incorporating the assets of New Zealand Dairy Board.
In June this year, more than 80 per cent of the shareholders of both firms voted to form Fonterra. A parliamentary legislation to this effect became a law in September 2001.
Since then, this is also the Kiwi firm's first global venture in its pursuit for a prime position in the global milk as well as FMCG businesses. It is already the world's ninth dairy cooperative in terms of size.
The joint venture with Fonterra will also be developed as Britannia's ingredient business, responsible for the entire cow-to-consumer value chain from milk collection, through manufacturing and logistics operations and ultimately for the marketing of quality ingredients to customers around the region.
It could not be ascertained whether the several consumer brands such as Anchor, Anlene, Chesdale, Tip-Top, Mainland, Peters, etc, -- owned by Fonterra -- will be launched in the country. Sources said the initial thrust of the business will be to promote the existing brand of Britannia, Milkman.
In the past one year, Britannia has been trying to develop Milkman as its master brand, with all milk-based products -- cheese, ghee, flavoured milk, UHT (ultra-heat treated) milk and packed milk -- under the same brand name.
