Swiss food giant Nestlé has announced that its Australian unit will cease manufacturing milk powder, while it has also sold a powdered milk factory in the Netherlands.

The company said the moves were further steps in the implementation of its strategy of progressive withdrawal from basic commodity processing. In large parts of Latin America, as well as in several European countries, the group has already sold its basic milk powder plants or brought them into a series of joint-venture operations with Fonterra, the New Zealand-based dairy company.

As a result of an agreement with Fonterra, Nestlé Australia will buy a range of powdered milk products from Fonterra, which will take over the collection of milk from about 420 farmers in Victoria State and acquire the Dennington milk factory. The transaction will be completed by the end of July 2005.

Simultaneously, Nestlé will also restructure its Tongala (Victoria) milk factory, cease its milk powder production and continue to manufacture only liquid milk products. Both transactions will result in a number of redundancies, Nestlé said.

In the Netherlands, Nestlé said its Gorinchem powdered milk factory was acquired by a Dutch entrepreneur, Jaap Vreugdenhill, effective 1 June 2005. The factory, with a workforce of about 140 people, produces milk powder, mainly for export to Asia, Oceania and Africa. Nestlé will continue to source part of its semi-finished milk powder requirements for export from the Gorinchem unit and about 1000 farmers will continue supplying milk to the factory.