BRAZIL – Dairy Partners America’s joint owners, Fonterra and Nestle have engaged with Brazilian Administrative Council for Economic Defense (CADE) to advise Brazil’s competition regulator to block the sale of DPA Brazil to French dairy company Lactalis.

Fonterra and Nestlé created DPA in 2003 to manufacture and commercialize dairy products throughout Latin America. Fonterra holds a 51% stake and Nestlé 49% in the DPA Brasil.

In 2014, the joint venture refocused its activities on Brazil and chilled dairy.

“We are aware that Brazil’s competition authority has raised potential competition concerns relating to limited parts of the DPA Brazil business and has referred the matter to its Administrative Tribunal for decision,” a Fonterra spokesperson said.

“We are engaged with the regulatory authorities to gain a fuller understanding of their concerns, as part of the regulatory process.”

Fonterra and Nestlé announced that they had agreed to sell their Dairy Partners Americas Brazil joint venture to Lactalis for BRL 700 million (approx. $133 million), at the end of 2022.

Administrative Council for Economic Defense (CADE) officials also received two requests for intervention from interested third parties, Vigor Alimentos and Danone.

The officials looked at the impact of combining the companies’ activities in the national markets for fermented milk, yoghurt, petit suisse, dairy desserts and requeijão, a Brazilian-style cream cheese. 

It also looked at the vertical integrations between milk collection in the states of São Paulo, Pernambuco, Paraná and Minas Gerais, the supply of milk powder, and the supply of whey powder as inputs for the production of refrigerated dairy products.

Among other things, it concluded there are significant barriers to entry in the dairy refrigerated market which includes fermented milk, petit suisse and dairy desserts.

It also pointed to a limited number of rival companies and the impact of the extensive combined portfolio of brands from Lactalis and DPA. 

In evidence included in the file, Danone argued the resulting company will have high market shares, exceeding 40% in yoghurts, fermented milk and refrigerated dairy desserts. 

CADE officials, meanwhile, did not identify any competition risks in the requeijão and milk collection markets.

Documents show it noted concentration in the yoghurt market, but said its analysis suggested “there is sufficient remaining competition” to mitigate. 

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