Fonterra saves Tamar Valley Dairy from administration

Dairy giant Fonterra Australia has rescued Tamar Valley Dairy from administration, acquiring the assets of the Launceston-based yoghurt business.

Fonterra will take on the processing equipment, related services, intellectual property and trademark for the Tamar Valley Dairy brand. The amount paid was not disclosed.

The acquisition will be effective from late November, subject to completion of the sale.

Last week Fonterra also bought a 6% stake in Bega Cheese, causing the Australian dairy business’s shares to lift 9.75% in early trade.

Fonterra said in a statement it had purchased 9.3 million shares in Bega at $4.95 a share, equating to a total cost of $46 million. Bega is one of three businesses locked in battle for Warrnambool Cheese and Butter Factory.

Fonterra managing director Judith Swales said the two companies had worked closely with the administrators to push through a difficult period for the Tamar Valley Dairy and its founders.

“The founding family has created a business with strong capability and innovation, known for producing new yoghurt formats and formulations, and in a relatively short timeframe they have built a national brand in Tamar Valley Dairy,” Swales said.

Details regarding roles for employees and the transition of company operations are still to be refined. However, Fonterra, which currently operates the Nestlé SKI brand, has confirmed the Tamar Valley Dairy site will be fully integrated into Fonterra’s Tasmanian and Australian manufacturing operations.

This will enable the business to create “greater efficiencies and scale, while ensuring that Tamar Valley Dairy’s innovation and its Tasmanian origin continues”, the company reported.

Fonterra has announced it will invest in manufacturing assets, as well as upgrading quality and safety systems. It also reported it will invest in people and further innovation in the yoghurt product range.

Tamar Valley Dairy went into administration in late September, with Deloitte Restructuring Services partners Glen Kanevsky and Tim Norman appointed.

The 17-year-old business was established in 1996 near Launceston, Tasmania and has 170 employees.

At the time Kanevsky said the business operated in an “extremely competitive sector” and that it had been challenged due to a “slowdown in sales and pressure on margins”.

Tamar Valley Dairy produces a variety of yoghurt products including classic, low fat and Greek varieties. It has been stocked in major retailers including Coles supermarkets, with its own brand and private label offerings.

In April this year the business was reported to have financial challenges, with founder Archie Matteo confirming with The Australian that his family company owed creditors and suppliers several million dollars as part of a “short-term liquidity problem”.

Fonterra operates two manufacturing facilities in Tasmania, and reports that it is responsible for processing over half of Tasmania’s milk. It collects almost 500 million litres of milk from almost 260 dairy farms each year, and employs 220 people.

Over the last two years, Fonterra has invested $20 million in these operations.