Blue River Group, an Australia-based impact investment group launched last year by former Macquarie banker Craig Shapiro, has agreed to acquire Fonterra’s Riverina Fresh milk manufacturing facility located in Wagga Wagga, New South Wales and its Riverina Fresh brand for an undisclosed amount.
The investment group that labels itself as seeking “profit with purpose” is entering the dairy sector at a difficult time. In June of this year Fonterra announced it will cut its price paid to dairy farmers next season to an average $4.75 per kilogram of milk solids (kgms) according to ABC, while Murray Goulburn is offering $4.31 kgms, Bega Cheese is offering $5 kgms, and Warrnambool Cheese and Butter is offering $4.80 kgms.
Despite that the global dairy sector has faced considerable headwinds recently due to oversupply and the lifting EU production quotas, The Australian reports that Mr. Shapiro sees the potential for sales growth and retail market expansion for the 94-year-old niche dairy brand that has a loyal following from baristas in Sydney and Melbourne due to its sought-after coffee making properties.
“When you combine the great brand with its importance in terms of regional impact and the ability to invest in the dairy sector, it was an exciting opportunity that was too good for us to miss,” Mr. Shapiro told The Australian.
Blue River has stated that it will retain all existing contracted relationships with the twenty dairy farms that currently supply 40 million liters of raw milk per year to the Wagga Wagga facility, and has offered the factory’s 80 employees their positions under its new ownership. Additionally, Rob Collier will remain as chief executive of the business.
Fonterra states that the current challenges in the industry were not the driving force behind the divestment.
“Divesting the Wagga Wagga business follows the divestment of non-core assets, including our yoghurt and dairy desserts business, our Bega shares and our stake in Dairy Technical Services, and allows us to focus and put all our energy into our core businesses of Ingredients, Consumer and Foodservice,” said Fonterra Australia Managing Director, Mr. René Dedoncker in a company statement.
Fonterra points out its recent investments in its Western Star, Perfect Italiano and Mainland cheese and spreads businesses, and the success of the launch of New Zealand’s Anchor brand across Australia as indications of the company’s strength.
“In the past 12 months, we’ve commissioned a multi-million beverages plant in Cobden, creating over 50 local jobs; secured new long-term customers for our nutritionals plant in Darnum including Bellamy’s Organics as well as entering into a joint venture agreement with Beingmate; and we’re building a new state-of-the-art cheese plant in Stanhope which is on track for completion mid-2017,” Mr. Dedoncker said. “These initiatives have laid the foundation for a strong sustainable business that is profitable for the long-term and well-positioned to pay our farmers the best possible milk price in a competitive global market.”
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Lynda Kiernan