Dairy Crest signs 5-year marketing deal with NZ's Fonterra

July 3 Thu Jul 3, 2014 4:56am EDT

July 3 (Reuters) - Dairy Crest Group Plc, Britain's largest dairy food company, said it signed a five-year deal with New Zealand-based Fonterra Co-operative Group Ltd to market and sell Dairy Crest's infant milk formula ingredient.

Dairy Crest said Fonterra, the world's largest dairy exporter, will receive a commission to sell all of Dairy Crest's demineralised whey powder that it produces at its Davidstow cheese factory to China and other global markets.

"That's kind of confirming what market had expected in a way, but it's a good news particularly as it's a high-value-added product," analyst Charles Pick of Numis Securities told Reuters.

Fonterra will also provide technical and engineering support, Dairy Crest said.

Reuters had reported on Wednesday that Fonterra planned to procure demineralised whey from Dairy Crest.

Dairy Crest also said it would invest 20 million pounds ($34 million) at its Davidstow site to manufacture galacto-oligosaccharide (GOS), a lactose-based prebiotic that is used in infant formula.

The company said it would form a joint venture with UK-based Fayrefield Foods Ltd to produce GOS, which would also be marketed and supplied by Fonterra.

Shares in Dairy Crest were up 0.8 percent at 473.6 pence 0850 GMT on the London Stock Exchange. ($1 = 0.5877 British Pounds) (Reporting by Aastha Agnihotri in Bangalore; Editing by Gopakumar Warrier)

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