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.
Fonterra Shareholders Council chairman Duncan Coull says the co-op signalled to shareholders in May that this was happening as part of a longer term plan.
“Contrary to some commentary, we don’t feel this is a reaction to a low milk price. It’s about becoming more efficient and agile in the way Fonterra conducts its business.”
The co-op last month said 523 staff would leave this month, and more job losses are on the cards.
Coull agrees there is a personal cost for employees. “In my interaction with employees, I know many are passionate about working in Fonterra; we need to be respectful of that personal cost to them and ensure they get the support required.”
Lift Performance
Fonterra is on notice from shareholders to improve its performance, says Coull.
He says shareholders will need to work with the board and management to ensure this happens.
Fonterra’s performance is based on two things: the milk price and the dividend from its value added business, Coull says. “It’s well documented by council that Fonterra’s performance needs to improve. It is highly critical in a year such as this that the strengths
of the co-op shine through and we see the full benefits of vertical integration.”
Coull says the Australian business remains an issue for the co-op. “Fonterra has been reasonably transparent about its Australian business which is good. We have told the board we would like to see clear pathways to resolving those issues.”
