Lactalis is a global dairy group headquartered in Laval, France.
In Australia, it has about 500 farmer-suppliers across New South Wales, Queensland, South Australia, Tasmania, Victoria and Western Australia.
Lactalis processes raw milk into dairy products such as fresh milk, cheeses, chilled yellow spreads and yoghurts, as well as dairy ingredients such as milk powders. It supplies products to retail and food services businesses through brands such as Pauls, Vaalia and Kraft.
The ACCC found that Lactalis and Fonterra were not particularly close competitors in any dairy product category, with the exception of cream.
The ACCC also found that rival processors and suppliers of dairy products are likely to provide an effective competitive constraint on the merged firm across all categories.
Australian Dairy Farmers (ADF) President Ben Bennett said the Australian Competition and Consumer Commission (ACCC) had left farmers vulnerable in giving the green light to Lactalis’ proposed takeover of Fonterra’s Australian dairy business.
Mr Bennett said the decision risked further weakening processor competition in Victoria and Tasmania – two of the country’s most critical dairy regions.
“Combining two major buyers reduces choice and bargaining power for farmers,” Mr Bennett said.
“That’s a major threat to farm-gate prices, especially in a shrinking milk pool.”
The ACCC concluded that the merger would not substantially lessen competition, citing different product mixes, import competition and retail buyer power. However ADF maintains farmer options are already limited, particularly in western Victoria and northern Tasmania. Post-merger, some regions may only have one major buyer.
The Australian Dairy Farmers body was also concerned that market concentration would grow, reducing pricing tension.
Fonterra and Lactalis may target different contract types, but still influence prices across the same regions, Mr Bennett said.
The ADF is calling for court-enforceable undertakings to protect farmers.
“Without enforceable protections, we risk further processor consolidation that hurts farmers and undermines supply security,” Mr Bennett said.
ADF is urging the Federal Government and regulators to strengthen the Dairy Code of Conduct and ensure any deal maintains fair competition and protects the interests of local farmers.
