Fonterra and Nestlé call off dairy merger in Chile

The highly controversial proposed merger between Fonterra’s Chilean subsidiary Soprole and Nestlé Chile has been abandoned. The application to merge Soprole and Nestlé Chile’s dairy business and create a joint venture under the DPA banner has been withdrawn by both companies.

DPA (Dairy Partners Americas) is the 50-50 joint venture between Nestlé and Fonterra, currently operating in Argentina, Brazil, Colombia, Ecuador and Venezuela.

The proposed merger had generated considerable resistance from producers and politicians, based on concerns over increased consumer prices, damage to competition in Chile's dairy sector, and the negative impact on dairy farmers. The two companies already control about 30% of the Chilean dairy market.

The unions at Nestlé and Soprole (Federación de Nestlé-Macul and FENATRAL-Soprole), affiliated to the IUF, issued a statement in December 2010, expressing concerns over the proposed merger, based on the experience with DPA and other joint ventures and mergers in Latin America which have led to plant closures and job losses. They also expressed their doubts as to whether the major savings to be achieved through the growth and concentration of the businesses, would really be passed on to consumers and benefit workers, rather than only the shareholders. But above all, they expressed their concerns about job security for all workers involved.

Clearly, the proposed joint venture would have only benefitted Nestlé and Soprole, and we can be certain that both companies will make a fresh attempt in the near future.