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.
As part of their cooperative’s training programme, Dietrich and Parkin got the task of examining how dairy co-ops operate in New Zealand, so they approached Cooperative Business New Zealand for assistance.
Particularly interested in how Fonterra operates, they want to compare this with the Ontario Supply Management system which markets milk by a quota system and pays farmers different prices for butterfat, protein and other solids.
The two are keen to learn to what extent New Zealand co-ops are successful in looking after members’ interests, and whether the direction taken is responsible for their success. An important aspect of their study is a comparison of the legislative and business circumstances of Canada and New Zealand, and what result this has on the strategic directions dairy co-ops take.
To what extent, they also want to know, have cooperative values and principles guided the development of dairy cooperatives, and how has this differed in the two countries. They are also looking at external influences on dairy cooperatives, such as what happened when New Zealand dairy products lost guaranteed entry to the UK in 1973.
Formed in 1958 and owned by a quarter of Ontario’s dairy farmers, Gay Lea Foods Cooperative makes products from which its 2011-12 revenue was C$539 million. Farmer members own three shares for every 1000L of milk produced and get a ‘patronage’ payment of C$0.90 per hectolitre on top of the milk price.
The Gay Lea Foods delegate body is large – 60 members elected in four zones. Meeting quarterly they elect two delegate members to each of three board committees: audit, governance, and training and development. Don Dietrich is a delegate to the governance committee.
With the slogan, ‘Better Together’, Gay Lea Foods promote themselves strongly as a cooperative. They measure success not just in financial terms, but as a reflection of an approach which leverages cooperative principles and values to create what they describe as ‘a winning combination’ of employees and members, products in the market place, customers and vendors, as well as the charities, other co-ops and the co-op associations they support.
The Gay Lea ‘Leadership in Governance: By Farmers For Farmers’ programme, in which Dietrich and Parkin are taking part in an inaugural advanced level programme, was recognised with a Cooperative Governance award at the recent Canadian Cooperative Association annual meeting.
The question that came to mind after talking with Dietrich and Parkin, however, is: what can New Zealand’s dairy cooperatives learn from Gay Lea Foods?
• Ramsey Margolis is executive director of Cooperative Business New Zealand.
www.gaylea.com
