Fonterra and Nestle have dropped plans to extend their South American joint venture into Chile.
The two dairy giants formed their Dairy Partners Americas venture in 2002, to processes and market milk and consumer dairy products in Brazil, Ecuador, Venezuela, Colombia and Argentina.
Both also have separate dairy operations in Chile. Fonterra's Chilean subsidiary, Soprole, is that country's biggest dairy consumer products business.
Fonterra and Nestle applied to Chile's competition authority last year to merge the liquid milk and chilled dairy parts of their businesses into a 50-50 joint venture.
They have since decided to withdraw the application, after opposition from local dairy farmers who argued the proposed deal would reduce competition in the milk purchasing industry and limit their choice of who they sell their milk to.
Fonterra chief executive Andrew Ferrier says Soprole will now focus on continuing to expand its consumer business in Chile, where it's had strong growth in recent years.