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.
Foreman describes her newly published autobiography, In the Arena, as a toolkit for entrepreneurs and budding business people. In it she takes a big swipe at Fonterra based on her personal dealings with the cooperative including the attempted sale of her ice cream company New Zealand Natural.
About 15 years ago Foreman invested in an organic milk processing plant in the South Island and contracted supply from an organic dairy herd. By her own admission she didn’t realise there was such a thing as a ‘flush’ of milk.
“Although we had done our budgeting and business plan on the type and amount of milk coming through the door, what we weren’t expecting was the flush. All of a sudden we had this ginormous amount of milk and nothing to do with it so we were looking at how to process it and add value to it which was when we started making ice cream. As far as the ice cream business went there was nothing sophisticated about it: we just had an oversupply of milk and we had to look at a product that we could use that milk for and ice cream was the answer,” she says.
From that start in Christchurch, Foreman moved the business to Auckland where she bought a processing plant and a small company to acquire the NZ Natural brand and incorporated this into her Emerald Foods Empire. This franchise had 650 stores in 24 countries but was eventually sold by Foreman to a Chinese buyer a few months ago.
But when she got the offer from the Chinese buyer, Foreman tried to approach Fonterra to see if the co-op would be interested in buying it.
“The response was no. What I don’t understand is why a brand like NZ Natural, which is incredibly strong, would appeal to a Chinese textile manufacturer out of the middle of China and not to Fonterra.
“He could see the value of the brand and wanted to take it to Asia. We were already in Asia and had about 55 shops in China, but his view was to have 6000 shops and it just seemed strange to me that Fonterra didn’t want to have a dream like that.”
Fonterra says it was approached by Foreman who offered her company for sale. But a spokesperson says she did not supply sufficient information for them to make a decision.
Fonterra supplies raw milk to New Zealand Natural under DIRA to make ice cream.
Foreman says Fonterra was arrogant and claimed she didn’t give them enough information, but she says they never asked for any.
“I emailed one of their directors who didn’t reply and I subsequently got one of my professional advisors to contact them and they emailed a response to my professional advisor to the effect that they had taken some soundings and there was no interest. This very much surprised me and it seemed incredible that they would let a brand like NZ Natural go offshore. I’m a business person and I have to take the best opportunities that come my way; I was surprised that Fonterra didn’t even want to engage in a process.”
Foreman says she believes one of Fonterra’s problems is its sheer size. She says a small company like hers can make decisions quickly, but says it’s hard for a large company to be nimble.
China has no secret plan for NZ
Foreman says the Asian market is hungry for the products we produce.
She says a lot of good work has been done by government agencies in developing the Chinese market, but she’s surprised at the lack of strong NZ brands there. It takes passion to take a brand offshore and she’s not sure some of the people running large companies have that passion.
She acknowledges that Fonterra has some great people working for it, but believes it could do much more to increase the value add of its products.
“There are huge opportunities in China. When we first got into ice cream, people said ‘you will never sell it in China because the people there are lactose intolerant’. A whole generation later they are not lactose intolerant. They actually love dairy food; you can see it by the way the Chinese people are growing. They are growing taller and stronger because they are eating much more dairy. The opportunity is phenomenal.”
On Chinese investment in the NZ dairy sector Foreman sees no secret plan to take over NZ.
“But they are going to come down here and milk our cows and send product back to China, it’s as simple as that. If we are silly enough not to get the value from it before we sell it, that’s our loss and they’ll take it and get the value,” she says.
