Fonterra mulls options - sale or IPO
An outright sale of Fonterra’s global consumer business is more likely than a float, says Forsyth Barr senior analyst equities, Matt Montgomerie.
“Without being certified and in a family like Fonterra other dairy farmers would struggle to get a record result,” Hoare told Dairy News.
“Those in the Fonterra team need to be congratulated.”
The dairy co-op’s organic farmers have become the first in the country to receive a double digit milk payout: its 60 organic suppliers, last season, have set a record price for cow milk in New Zealand at $10.19/kgMS.
Fonterra’s global business manager organics Andrew Henderson says the final price was driven by a combination of factors – including organic protein sales in the US, a favourable exchange rate and a number of efficiency improvements right across the supply chain.
He says the record result is a culmination of work put in by a wide group of people.
“It starts with the effort of our organic suppliers to meet and exceed organic certification standards,” Henderson told Dairy News. “Then it’s the endeavours of our transport, manufacturing, sales and marketing teams who all help make the most of that milk to drive returns and deliver value to the co-op.”
Hoare, a former chief executive of Organics Aotearoa, is contracted through Buy Pure NZ to undertake OANZ’s 2020 Organic Market Report. The results of this will be published in early 2021.
“We expect this result to remain positive and continue to demonstrate that organic is the fastest growing multi-food sector in the world,” he says. “NZ is extremely well placed to truly capitalise on this opportunity.”
He cautions that being from NZ is an advantage but says this alone is not enough.
“Global customers are demanding authenticity and measured outcomes,” Hoare adds.
“Communicating clearly that being certified organic from NZ actually means you are also certified: grassfed, non GMO, hormone and antibiotic free, follow additional animal welfare standards, contribute to critical factors like biodiversity are all what customers and buyers want to hear and be assured of.”
Hoare believes with a payout of $10.19, there will be plenty of interest from other farmers. However, he adds that it is important to stay focused and get it right.
“While the sector truly welcomes renewed interest in our healthy soil, food and people maxim we have been espousing for 70 years, we have real work to do to go to scale and get the transition strategies right.
“For example, we have the Organic Products Bill to work through. It affects the whole supply chain, so will take the right leadership to maintain momentum now and well into the future.”
Hoare claims that in countries like the US, family farming has been decimated and overtaken by corporate models. Organic is no exception.
“This does not sit well with buyers’ customer base who recognise that the true cost of food supports family farmers to get good returns for honest work that protects the social fabric of rural communities and the environment they gleam their livelihoods from.
“Being certified organic assists this and a Fonterra being a cooperative gives value back to its shareholders – in this case dedicated, certified organic farming families.”
Record payout
❱❱ Fonterra organic milk payout 2019-20- $10.19/kgMS
❱❱ 2020-21 forecast payout- $8.50 to $9/kgMS
❱❱ 74 suppliers this season
❱❱ Fonterra’s organic suppliers are based throughout the North Island, with most of the milk processed in Waikato.
