When the milk payout went down farmers expected Fonterra to shed any fat in its operation.
I don’t think this is what they were expecting:
Business owners have been left feeling bullied by Fonterra over changes they say mean cutting their prices and waiting longer to get paid.
A letter from Fonterra’s chief financial officer Lukas Paravicini was sent to contractors and suppliers around the country in October detailing the changes that were being made.
The vendors were asked to find efficiencies across their operations to reduce their prices by 10 percent and submit a proposal on how they would do so.
And, rather than sending payments on the 20th of the month following the invoice date, some contractors were told payments would now be sent 61 days after the end of the month of the invoice.
A number of contractors spoken to were infuriated by the changes, but too afraid to speak up and risk losing business.
Wanganui National Party MP Chester Borrows said he had been contacted by some contractors from the Taranaki region, but many were uneasy about commenting on the situation.
“I think it’s classic bully-boy tactics from a big company who is using the leverage of fear against its contractors to drive down the price and to obtain free credit,” Borrows said.
“I’m talking to one particular company that employs 90 people, Fonterra’s quite a big chunk of their work. If Fonterra decides to push them around like this then these guys are afraid that they’re not going to be able to pay their suppliers.”
Alterations to the payment of contractors is the latest in a number of changes by Fonterra, who have made more than 700 staff redundant since the middle of the year. . .
One of the attractions of dairying, unlike most other types of farming, is that suppliers get regular monthly payments. Contractors, many of whom will be small businesses, would expect their bills to be paid each month too.
Asking suppliers to sharpen their pencils is normal business practice but expecting small businesses to effectively bank you is not.
Fonterra is New Zealand’s biggest business fish and it looks like it is being too tough on the minnows it contracts for goods and services.