Britannia, NZ firm to invest Rs 110cr each in dairy JV

Veeshal Bakshi

New Delhi, Dec 3: Britannia Industries and Fonterra Co-operative Group of New Zealand, which is the world’s ninth largest dairy company, will invest Rs 110.4 crore each in their proposed dairy products joint venture, which will give them 49 per cent stake each in the new company. A strategic domestic investor will bring in another Rs 4.8 crore for a 2 per cent stake in the JV. The total capital investment will be Rs 225.60 crore of which Rs 11.28 crore will come as preference capital.

The company is projected to generate a turnover of Rs 300 crore in 2002, Rs 500 crore in 2004, and Rs 700 crore by 2006, according to sources.

Since Britannia plans to transfer its existing dairy business to the new JV, the shares to Britannia, Fonterra and the strategic investor are likely to be allotted at a premium, sources said, adding Fonterra, with annual sales of $3.5 billion in over 120 countries, may source some of the products for the global market from its Indian joint venture since milk production in New Zealand has flattened. At present, Fonterra exports 90 per cent of its dairy produce.

Britannia, at present, has manufacturing arrangements with three companies - Dynamix Dairy Industries (Baramati, Maharashtra), Modern Dairy (Karnal, Haryana) and Thacker Dairy Products (Howrah, West Bengal) from whom it sources various milk products.

Sources also said Britannia has roped in Fonterra as it has the financial strength and technological expertise in milk and milk products and is also the world’s largest dairy export-marketing company.

Britannia diversified into dairy products in 1997 with processed cheese and dairy whitener. The portfolio was expanded with the launch of pasteurise butter, pure ghee, flavoured milk in tetrapacks and pasteurised liquid milk. Its dairy division covers over 80,000 outlets across 1,200 towns. However, bakery products still contribute the lion’s share to the company’s revenues and accounted for 90 per cent of its sales during the past fiscal.

Fonterra produces a wide variety of dairy products, including innovative consumer goods. Britannia plans to make use of Fonterra’s strengths in R&D and quality which will help it in reducing products costs, improving profitability and the marketability of the products and service, besides meeting customer requirements.

Fonterra’s main product lines are milk powder, butter, variety of cheese, and milk proteins.