Thursday, 26 September 2019 09:58

Fonterra’s new strategy all about NZ milk

Written by  Staff Reporters

Fonterra has unveiled its new strategy, focussed on milk supplied from its 10,000 NZ farmer owners.

Fonterra will complement NZ milk with “milk components” from offshore: the co-op will start rationalising its offshore milk pools.

Fonterra chief executive Miles Hurrell says the strategy, released today, recognises “we are a New Zealand co-op, doing amazing things with New Zealand milk to enhance people’s lives and create value for customers and farmers”.

“It’s a strategy that’s rich in innovation, sustainability and efficiency. It unlocks value and sees us focusing on three goals – healthy people, healthy environment and healthy business.

“This is the right strategy for us, but it requires us to make some hard choices. We’ve looked at the big opportunities and risks for a New Zealand dairy co-op today. We’ve also got clear on what our strengths are and the hard realities we have to face up to. I’m pleased that we now have a strategy that is built from the belief that our farmers’ milk here in New Zealand is the best and most precious in the world.

“Recognising this, while we will complement our farmer owners’ milk with milk components sourced offshore when required, we will start rationalising our off-shore milk pools over time.”

Fonterra will now focus on world-class dairy ingredients for customers around the world, and innovative ingredients that meet nutrition needs right across people’s life stages. 

It will focus on ingredient categories: Paediatrics, Medical and Ageing, Sports and Active, and Core Dairy.

“We will also create new opportunities in new ways for foodservice,” says Hurrell.

This will include building on its foodservice success in China and developing new markets, particularly in Asia Pacific.

“This focus on dairy ingredients and foodservice will see us playing to our strengths and driving more value from the parts of our business that consistently perform.

“We will still be in Consumer and will focus on markets throughout Asia Pacific. The majority of the products we sell in these markets are made from New Zealand milk and are similar to those we sell in our Ingredients business. 

“This creates efficiencies and helps us play to our strengths. It also means we will reduce our consumer product portfolio to those that create superior value.”

Fonterra chairman John Monaghan said the new strategy sounds simple but the best strategies often are.

“Simplicity shouldn’t be confused with a lack of ambition. Our forecast earnings range for FY20 starts at 15-25 cents per share, but the five-year plan is to deliver a target of 50 cents per share.

“Our starting earnings range reflects our change in culture. We will earn the right to make ambitious decisions by first doing the basics right and returning our balance sheet to a position of strength. That will give us options to go for the opportunities that we create in the future.”

As announced at half year, the board reviewed the dividend policy guidelines within the context of the new strategy. Monaghan says the new guidelines better reflect the annual performance and financial strength of the cooperative.

“Under the new guidelines, we would expect the dividend payment to be 40-60% of reported Net Profit After Tax, excluding any abnormal gains, from what was previously 65-75% of adjusted Net Profit After Tax over a period of time. An interim dividend will not be more than 40% of the forecast total dividend and no more than net earnings at half year.

“In addition to the new percentage of earnings, two additional key principles will guide our board when considering the payment of a dividend. A dividend should not require our co-op to take on more debt, and a dividend should not reduce our co-op’s ability to service existing debt.”

More like this

All eyes on NZ milk supply

All eyes are on milk production in New Zealand and its impact on global dairy prices in the coming months.

"Our" business?

OPINION: One particular bone the Hound has been gnawing on for years now is how the chattering classes want it both ways when it comes to the success of NZ's dairy industry.

Farmers' call

OPINION: Fonterra's $4.22 billion consumer business sale to Lactalis is ruffling a few feathers outside the dairy industry.

Wasted energy

OPINION: Finance Minister Nicola Willis could have saved her staff and MBIE time and effort over ‘buttergate’ recently by not playing politics with butter prices in the first place.

Featured

Australia develops first local mRNA FMD vaccine

Foot and Mouth Disease outbreaks could have a detrimental impact on any country's rural sector, as seen in the United Kingdom's 2000 outbreak that saw the compulsory slaughter of over six million animals.

NZ household food waste falls again

Kiwis are wasting less of their food than they were two years ago, and this has been enough to push New Zealand’s total household food waste bill lower, the 2025 Rabobank KiwiHarvest Food Waste survey has found.

Editorial: No joking matter

OPINION: Sir Lockwood Smith has clearly and succinctly defined what academic freedom is all about, the boundaries around it and the responsibility that goes with this privilege.

National

All eyes on NZ milk supply

All eyes are on milk production in New Zealand and its impact on global dairy prices in the coming months.

Machinery & Products

Leader balers arrive in NZ

Officially launched at the National Fieldays event in June, the Leader in-line conventional PRO 1900 balers are imported and distributed…

JDLink Boost for NZ farms

Connectivity is widely recognised as one of the biggest challenges facing farmers, but it is now being overcome through the…

New generation Defender HD11

The all-new 2026 Can-Am Defender HD11 looks likely to raise the bar in the highly competitive side-by-side category.

» Latest Print Issues Online

Milking It

Full cabinet

OPINION: Legislation being drafted to bring back the controversial trade of live animal exports by sea is getting stuck in the…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter