Fonterra, the world’s leading dairy supplier, has become one of the first Australasian food companies to permanently cut-off its business dealings in Russia following the latter’s invasion of Ukraine.
Fonterra, a New Zealand co-operative with extensive Australian operations, will close its Moscow office and walk away from its 49% stake in Unifood, a joint venture with St Petersburg-based Foodline, one of Russia’s biggest food distributors.
The decision was made after Fonterra suspended exports to Russia in February after more than 40 years trading with the country. It joins hundreds of businesses including McDonald’s, oil giants and banks which have paused or ended Russian operations, despite authorities threatening to seize and nationalise assets of companies who leave.
Fonterra Chief Executive Miles Hurrell said Russia accounted for only 1% of the co-operative annual exports, which comprised of mainly butter. Mr Hurrell was confident that it can redirect the products to other markets. He said, “Following careful consideration of the impact on our people and our long-term plans for the Russian market, we will now close our office in Moscow, redeploying staff where possible, and withdraw from our joint venture Unifood.”
Russia’s invasion of Ukraine presents significant upside price risks for energy, fertiliser, and agricultural commodities, which will have a spill-over impact on feed costs, feed availability, and ultimately on dairy commodity prices and farmgate milk prices.
The volatility however may force Fonterra to delay a potential A$1.2 billion (US$890 million) IPO of its Australian business.
