Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
And customers are snubbing suppliers who do not meet their sustainability requirements.
“There are increasing expectations from customers and consumers about where their food comes from and the environmental impact it leaves,” Fonterra says.
The co-operative made the comments while responding to questions from the Fonterra Co-operative Council, which represents its shareholders.
The council released its quarterly update to members last month. The nine-page report looks at Fonterra’s performance and also contained Fonterra’s board’s response to three questions from the council.
One of the questions related to new and emerging challenges facing Fonterra and how the co-operative is handling these challenges.
Fonterra says it is making continued progress on its operational response – manufacturing decarbonisation plan and water treatment and efficiency upgrades.
It is also increasing R&D to look for solutions for the on-farm methane challenge.
It also continues to support and recognise farmers in managing their sustainability performance through the Co-operative Difference framework.
"Broadly, these challenges will be responded to by staying on strategy, focusing on our strengths and what's within our control," the co-op says.
"The strategy refresh recognises increasing consumer expectations around environmental performance and the increase in alternatives available to them.
"It also acknowledges the fast pace of change in people's nutrition consumption trends."
The co-operative is also maintaining a diversified portfolio in markets around the world.
Strategy Gets A Kick
Fonterra shareholders are strongly backing the co-operative’s new strategy to enhance the value of New Zealand milk.
The Fonterra Co-operative Council wrote to the board in September commending it for the recent progress.
“Our research indicates that 82% of our members are more comfortable with the overall direction of our co-op than they were two to three years ago,” the letter says.
“Complementing that data, we have accumulated considerable feedback that members are very supportive of the transformation in culture they have perceived within Fonterra.
“Our members have indicated they are comfortable with the new strategic focus on enhancing the value of New Zealand milk.”
