Lactalis-Nestlé, an unusual joint venture

Hey guys!

I hope everything goes well for you, even if we are entering in the coldest period of the year…

This week in business, and maybe for the last time (at least as long as Regan will not be teaching the business class), we are posting some interesting business articles. 

This week, we are focusing on Mergers, Acquisitions and Joint ventures. What do you know about this specific subject? I guess most of you are thinking they are just different words with a unique and common meaning. But, even if this 3 words seem to be similar to each other, in fact, there are some slight but important differences.

Very quickly, for your main culture:

-        Acquisition: one company is taking over another company; it means the big company swallow up the small one. This former small company loose its identity, and deeply belong to the big one.

-     Merger: creation of a common company following a fusion between different firms. Both firms are loosing their former identity and they are creating a new and common identity/culture.

-      Joint venture: quite similar to a merger, unlike that the 2 companies are not creating a common one, but a third one. This new company could be operated by only one company or both of them, but, in all cases, expenses and profits (and most of the knowledge, know-how, technology…) are shared by the 2 companies (usually at 50-50).

As an example of a joint venture, I would like to introduce LACTALIS NESTLE PRODUITS FRAIS (aslo and surely most known as LNPF or LNUF). This joint venture was created in the late 2006 by Nestle (food industry world leading company, Vevey-based, Switzerland. For more information, click here) and Lactalis (dairies product world leader, Laval-based, France. For more information, click here).

This joint venture is a little bit untypical because it’s not equally owned by each partner, but belongs at 40% to Nestle and 60% to Lactalis. This operation gave Lactalis the dairies fresh products European leadership (2013) and the challenger position (2nd) in the world. For all that, Nestle is not loosing in this deal. Indeed, Nestle is benefiting of the whole knowledge of making dairies fresh product via Lactalis, helping them to keep and even restore their market shares against the French Danone and the US Deans Food. The 2 Groups are sharing crucial and complementary activities as industrial, logistic, commercial and marketing. 

In my opinion, the joint venture is really successful. Indeed, usually, this kind of partnership lasts just a little time, maybe 2 or 3 years in average. In the LNPF case, this operation is still running (over the last 8 years) and I don’t think they plan to stop this really lucrative business. Moreover, they have covered 9 European countries like France, Switzerland, Belgium, Luxembourg, the UK and Ireland, Italy and the Iberia peninsula (Spain and Portugal). And they will likely gain lots and lots of new markets in the near future. They are also operating common brands, following a co-branding partnership, like Nestlé, La Laitière, Yoco, B'A, Bridélice and Sveltesse brands in France and Belgium ; Ekabe in Luxembourg, Ski and Munch Bunch in the UK ; Longa Vida and Yoggi in Portugal ; La Lechera in Spain ; Fruttolo and Mio in Italy ; and Hirz in Switzerland. All of this allows an annual turnover of €1.5 bn and permits the employment of over 3,300 people.

Finally, I remain confident in this joint venture and keep thinking they will improve their respective leaderships thanks to this common entity.