Fonterra today announced it has signed a binding agreement to sell its Brownes dairy business to DairyWest, owned by Australian private equity group Archer Capital.

DairyWest will acquire the Brownes business, which is based in Western Australia and manufactures and sells white milk, flavoured milk, yoghurt, dairy desserts, cream, custard, juice and bulk cheese, including the Brownes brand, the Chill flavoured milk brand nationally, and the Balcatta and Brunswick manufacturing sites.

The agreement, which is only conditional on the transfer of certain key contracts and the finalisation of transitional arrangements, is expected to become effective in early 2011.

Fonterra Brands Australia New Zealand Managing Director, John Doumani, says the decision to divest the business reflects Fonterra’s overall strategic direction in Australia.

“Our West Australian Brownes dairy business is a profitable business, with strong brands, consumer loyalty and a track record for innovation,” he said.

“However, fundamentally Brownes is a regional business and it is not receiving the right level of focus within Fonterra given our decision to focus on national leadership in our priority categories of cheese, spreads, yoghurts and dairy desserts in Australia. Subsequently, the Brownes business will be better served as a stand-alone entity.

“Fonterra remains fully committed to Western Australia through our Mainland, Bega, Perfect Italiano, Western Star, Nestlé Ski and Nestlé Diet brands, which we will continue to develop and grow, to ensure they meet the needs of West Australian dairy consumers.”

All Brownes employees and existing farmer arrangements in the state, including farmgate pricing, will transfer to DairyWest.

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