The Australian Competition and Consumer Commission (ACCC) has announced it will not oppose the proposed acquisition by French multinational dairy group Lactalis BSA S.A.S. (Lactalis) of Fonterra Co-operative Group’s Australian consumer, dairy ingredients, and foodservice operations.
Following a detailed investigation, the ACCC concluded that the transaction is unlikely to result in a substantial lessening of competition in any relevant market, despite the fact that both parties are significant purchasers of raw milk in Victoria and Tasmania and are prominent suppliers of dairy products nationwide.
Careful Scrutiny of Milk Markets
ACCC Deputy Chair Mick Keogh acknowledged industry concerns about increased consolidation, particularly in Victoria and Tasmania. However, the regulator determined that competition in raw milk procurement would remain viable.
“In regions such as Gippsland, the Murray, and Western Victoria, a number of alternative buyers of raw milk would continue to exert competitive pressure on Lactalis post-acquisition,” Mr Keogh said.
Although Tasmania’s dairy sector is already concentrated, the ACCC found that Lactalis holds only a limited presence in the state. The acquisition, therefore, would not significantly alter existing market dynamics. Major competitors such as Saputo, and to a lesser extent Mondelez, would continue to provide competitive constraints.
Differentiated Business Models Limit Overlap
The ACCC’s analysis also found that Lactalis and Fonterra differ significantly in their end product focus, meaning their demand for raw milk often targets different farmer profiles. This reduces the degree to which they compete directly.
“Very few farmers have historically switched between Fonterra and Lactalis, reinforcing the conclusion that they are not each other’s closest rivals,” Mr Keogh said.
Limited Impact on Wholesale Dairy Markets
The ACCC further determined that the acquisition would not substantially lessen competition in the wholesale supply of dairy products such as pasteurised drinking milk, cream, cheese, chilled yellow spreads (including butter and margarine), or dairy ingredients like milk powder.
Due to the limited overlap in production between the two firms, and the presence of strong downstream buyers such as Coles and Woolworths, competitive pressures in wholesale markets are expected to persist. The ACCC also noted that these supermarkets possess significant bargaining power and, in some cases, the capacity to sponsor new market entry or vertically integrate, as demonstrated by Coles’ recent acquisition of Saputo’s milk processing assets.
Background and Next Steps
The ACCC commenced its public review of the transaction on 2 May 2025, engaging with a range of industry stakeholders including dairy farmers, producer groups, retailers, and foodservice customers.
Lactalis operates several major brands in Australia, including Pauls, Vaalia, Oak, Président, and Lactalis Foodservice. Fonterra, headquartered in New Zealand and owned by approximately 8,000 farmers, operates local brands such as Western Star, Mainland, and Perfect Italiano, and distributes foodservice products through its Anchor Food Professionals line.
While the ACCC has cleared the proposed acquisition on competition grounds, the final outcome remains subject to Fonterra’s commercial decision regarding Lactalis’ offer.
Further details are available on the ACCC’s public register: Lactalis (BSA S.A.S.) – businesses within the Fonterra Co-operative Group.
