Fonterra model not best for milk or meat

Does Fonterra need to change?

Waikato University’s Professor of Agribusines Jacqueline Rowarth told Nine to Noon Fonterra was trying to do everything – supplying as well as branding and marketing – and there should be a major rethink of the structure.

“It’s too difficult to be milk supply, processing, branding and then the marketing of the brands at once, as well as expanding overseas.”

Past president of Federated Farmers’ Southland Russell MacPherson told the programme the business needed to be better run and simplified. . .

Fonterra is often cited as a good model by people wanting reform of the meat industry.

I don’t think it’s the best model for milk or meat. That the milk industry is following the meat model with more new processing companies being set up shows the single dominant company isn’t what all suppliers want.

There is competition for raw milk and the growth of new companies shows farmers want it.

Would there be so much criticism of Fonterra if the milk price was higher? Possibly but they wouldn’t be as strong.

Fonterra’s dividend was lower last year because the milk price was higher. The milk price is well down this year but losses on stock processed from last year’s high priced milk that was sold on this year’s market has eroded the dividend this season.

That is difficult to argue with that reasoning.

But the measure of a business is how it performs in tough times and it is fair to ask why Fonterra isn’t doing better.

2 Responses to Fonterra model not best for milk or meat

  1. Gravedodger says:

    As a confirmed and accredited cynic from decades of enduring the dreams of farmers come wannabe commercial gurus getting their posteriors handed to them by craftsmen of commerce I have always been sceptical that such a dominance would be the ultimate.
    That said I stand condemned as a socialist by some of my peers for being a very strong supporter of “Wool Acquisition”

    Yes Tatua has a small geographic advantage, Westland Dairy has a larger but similar physical natural advantage and intelligent people might be asking how those two could with their disadvantages of scale be so illuminating as measures of comparative outcomes.
    Synlait on the surface has also achieved some success in delivering in the heartland of Fonterra’s SI monopoly.
    I note that Westland dairy has a concentration facility at Selwyn District Council amazing Izone Industrial park as an adjunct to their Coast operation at Hokitika.

    Random Questions
    Why has Fonterra declined to address the cost of collection from some now very remote small residual suppliers that remain from changing land use and changing times.
    Why has Fonterra allowed its monopoly to maintain the almost total adherence to bulk commodity trade.
    Why does the Head Office need to be in downtown Auckland with its high costs when it could just as efficiently work out of The Tron or even Oamaru.
    Does Fonterra not see how Whitestone, Kapiti, Barrys Bay, Waiata et al and all the high value cheese producers can make a return on the bulk raw milk they source from The Giant.

    There is considerable arrogance and over reliance on mediocrity.
    Recently I attempted to organise two trips for two different groups to visit the New Facility near Darfield, the first was met with a stonewall of refusal and what was moving to a success with a second effort crashed to a full stop following the threat of sabotage in the mail.
    Now I would have thought that if the Giants procedures were in danger from a bunch of old farts or a service club then they are indeed paranoid . Gee whiz the Lufthansa subsidiary failed to control the very real threat from an employee, and Fonterra see public relations can not be managed by their staff in situ.

    Old private Frazer might be excused for suggesting ” Its doomed I tell ye, Doomed I say”.


  2. Paranormal says:

    GD, I can sympathise with those at the Darfield facility charged with arranging tours.

    My wife is a liaison person for a large industrial concern. She is constantly bombarded with requests for tours. Only a very few worthy or connected groups actually get a tour. The issue is not the tour group per se, but the health & safety concerns of having non-inducted people on an operational industrial site. If something, even a minor something, happens its just not worth the paper wall that follows.

    The internal and external bureaucrats win the day again.


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