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Farmers Ponder Kapiti Bid

Posted on: Wednesday, 7 December 2005, 15:00 CST

A SMALL group of dairy farmers supplying a niche company say farmers need to think about what dairy giant Fonterra is doing in swallowing up the smaller company.

Manawatu-based dairy farmer Eliot Cooper is the spokesman for a group of 15 Kapiti Fine Foods milk suppliers.

Fonterra has lodged an application with the New Zealand Commerce Commission to buy Kapiti Fine Foods, and is undertaking due diligence.

"I don't think it's healthy for the dairy industry or the national economy and farmers should really think long and hard about the direction Fonterra is taking."

Mr Cooper says Fonterra is an important part of New Zealand's economy, but that does not give it the right to swat out competition.

"The supply to Kapiti was set in 2001, before Fonterra was formed and it showed there could be competition in the local market," Mr Cooper said.

"All the Kapiti suppliers stepped outside of a co-op so they are lateral thinkers and not afraid to take a risk," he said.

Kapiti Fine Foods is owned by Foodstuffs Wellington.

Mr Cooper says it's still early days since the takeover announcement and most Kapiti suppliers have got over their initial shock and stress and are now working through what a buy-out would mean for them.

"It's at the fact-finding stage and we want to explore the possibilities of talking with the two companies and finding out where we fit," he said.

The recent announcement caught farmers by surprise and has raised concerns over future supply contracts and fears farmers may be forced to buy Fonterra shares if the sale gets Commerce Commission go-ahead.

Shares for some suppliers would could cost more than a million dollars.

Unlike Fonterra suppliers, farmers sending their milk to Kapiti do not own shares in the company.

Foodstuffs has New World, Pak 'N Save, Write Price and Four Square supermarkets.

In addition to production sites in Paraparaumu and Palmerston North, the proposed purchase of Kapiti would give Fonterra the rights to supply Pam's brand of fresh milk and cream in the southern North Island.

The Commerce Commission is expected to make a decision around March.

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Source: Evening Standard; Palmerston North, New Zealand

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