In this way it would be moving closer to a merger with Nestlé, although reports are unclear

Fonterra paid 202 million dollars for a 43 percent stake in Soprole, thus obtaining a 99.44 percent controlling interest in the Chilean dairy company. This will also give Fonterra an 86.19 percent interest in the Soprole subsidiary, Prolesur, which owns the milk processing plants located in Temuco, Los Lagos and Osorno.

The New Zealand company said to the newspaper El Mercurio that “while the parties had reached an initial understanding last October, this understanding was subject to a number  of approvals, the last of which was only recently secured." As we informed in a previous article (The Pope's yoghurt), one of the most important approvals was that of the Catholic Church in Rome.

“An alliance with Nestlé is not in Fonterra’s plans,”¹ Eduardo Teisaire, Fonterra’s representative in Chile, said in reference to Nestlé’s alliance proposal to Soprole in May 2006. “After the stock purchase, our goal is to device the best strategy to expand Soprole and strengthen its exporting potential. Over the last couple years, there has been a transformation in the market and in the company as well, and we are now facing a very different scenario from the one in 2006,” Teisaire explained. The senior officer ratified Soprole’s commitment to producers, indicating that “over the last four years we have built an excellent relationship based on mutual trust, and we will continue working together to increase exports in Chile’s dairy industry.”

But dairy producers, grouped under Fedeleche, are wary of the transaction, as they believe that it will open the door for Soprole and Nestlé to carry out their intention of creating a new joint venture. Almost two years ago, with that aim in mind, they filed a consultation with the Tribunal for the Defense of Competition, which was withdrawn a few months later. Fedeleche President Enrique Figueroa stated that “this company’s past relationship with its suppliers, added to the risk that still exists of a potential alliance with Nestlé, makes us wary of the changes that are underway and therefore alert to how things will unfold.”

According to the general manager of the Milk Producers Association (Aproleche), Michel Junod, the acquisition has left them “very expectant over the new developments.” Regarding the possibility of resuming negotiations towards a merger with Nestlé, he expressed once again his categorical rejection to “any attempt [by these companies] to even partially join their operations.”

According to figures from the Bureau of Agricultural Studies and Policies (ODEPA), milk reception in the year 2007 totaled 1.87 billion liters, with the leading buyers being:

A merger between Soprole and Nestlé would mean that a single company would be buying 834 million 730 thousand liters a year, that is, 44.6 percent of all milk production. This situation is further aggravated by Nestlé’s decision to choose the Osorno region to install a milk-drying tower that will enable it to increase production by 20 thousand tons. The construction will require a 25 million dollar investment and it is expected to begin towards the end of the year.

Meanwhile, the workers of both companies, and the labor organizations that represent them, must remain alert. In Colombia, in the year 2003, CICOLAC (a subsidiary of Nestlé) fired its workers, and disappeared as an industrial powdered milk processing company, being replaced by Sociedad DPA Ltda.

With the intent of denying that an employer substitution had taken place, DPA Ltda. appears on paper as having acquired only the assets (machinery, goods and properties, etc.), instead of the company as a production unit. At the same time, it is hiring new workers through agreements with the so-called “associated work cooperatives” (which were established by law and currently number over 2,600 in Colombia). In this way it evaded the continuity of the collective bargaining agreement or contract, compromising the very existence of the union.

Curiously enough, when Nestlé launched DPA Ltda. it hailed it as a strategic alliance with Fonterra, created to ensure the continuation of the dairy production process in Colombia, but none of the documents filed with the Colombian Chamber of Commerce feature Nestlé as a partner.

With this prior record, Fedeleche’s precautions and arguments are perfectly justified.