Fonterra chairman John Wilson said the carrying value of Beingmate, which was bought for $755million in March 2015, was now assessed at $244million, meaning the most recent impairment was $405million.
Fonterra's shareholders and unit-holders would be ''rightfully disappointed with this outcome'', he said.
''Beingmate's continued under-performance is unacceptable. The turnaround of the investment is a key priority for our senior management team,'' Mr Wilson said.
During the half-year announcement, Mr Wilson announced the chief executive for the past seven years, Theo Spierings, would leave Fonterra later in the year.
The announcement followed growing speculation that Mr Spierings or Mr Wilson would face pressure to resign because of the poor performance of the co-operative's 18.8% investment in Beingmate, BusinessDesk reported.
Mr Wilson said the decision was not a reaction to the co-operative's performance.
The board had decided to bring forward the announcement of Mr Spierings' departure, saying during his tenure he had ''delivered extraordinary value'', Mr Wilson said.
Units of the Fonterra Shareholders' Fund, which have fallen 6.3% during the past year, fell 0.2% to $5.82 after yesterday's announcement.
Revenue for the half climbed 6% from $9.24billion to $9.83billion, before-tax profit fell 177% to a $377million loss and after-tax profit was down 183%, with the reported $348million loss.
Fonterra raised its forecast farm gate milk price for the 2017-18 season to $6.55 per kg of milk solids, from $6.40 and announced a full-year forecast dividend range of 25c-35c a share, with an interim dividend of 10c per share. That compares with 20c a year ago.
Craigs Investment Partners broker Peter McIntyre said the key issues emerged as expected - the underlying profit being down materially - and ''big one-off'' item of Beingmate.
''The board needed to deal with this issue and it looks like they have done so,'' he said.
The next step was towards restoring Beingmate's performance, which looked difficult given its ''negative brand momentum'', Mr McIntyre said.
Forsyth Barr broker Damian Foster said the $405million Beingmate writedown was slightly larger than he expected, of $370million.
''Despite the one-off nature of these impacts, Fonterra has slashed its interim dividend from 20c per share last year to 10c per share,'' he said.
The cut highlighted the ''disconnect'' between Fonterra unit-holders, who received cashflow only from dividends, and the farmer shareholders who would benefit from the higher farm gate milk price.
Mr Foster said the ingredients business performed ''solidly'', even though sales volumes were 11%. Normalised earnings before interest and tax (ebit) was up $48million to $558million, which
helped offset some weakness.
The consumer and food service ebit was down 38%, having performed ''very poorly'', with slightly lower sales volumes, down 2%, compounded by margin squeeze, he said.
Even though sales volumes fell, Fonterra's China Farms losses halved, to $12million compared with $24million a year ago, on the back of rising global milk prices, Mr Foster said.
