Overseas suppliers may get stake in co-op

Speaking at the NZ Co-op business leaders forum in Auckland recently, Wilson did not rule out a co-op linkage with farmer suppliers in other countries.

“The opportunity to form some sort of cooperative linkage we certainly believe is possible,” he says. “It won’t be easy – surprise, surprise – but is certainly possible. My view is that those opportunities are becoming more real today than in the past.”

Wilson told the forum that of the 23 billion L of milk processed by Fonterra last year, NZ farmers supplied 17.5b L. The rest is collected and processed in Australia, South America, China, Sri Lanka and Europe.

The average farmer shareholder in NZ has $880,000 invested in the co-op.

Wilson points out that Fonterra has “very strong control and ownership mechanisms”.

The forum heard there is an appetite among overseas suppliers to own Fonterra shares but capital could be an issue.

Fonterra director Nicola Shadbolt told the business leaders forum that in her travels around the world she is often asked by farmer suppliers about the possibility of owning Fonterra shares.

“The ‘belonging’ is the bit they are missing,” she says. But this also means coughing up $880,000, so there’s “a slight cost” involved, says Shadbolt.

“But if there are other ways of structuring that, the belonging can still happen at no capital cost.... Some co-ops in the Nertherlands have class A and class B members. Class B members don’t have all the rights of class A members, so there are ways but this is an evolving issue.”

Shadbolt says Fonterra needs more milk to grow the business. “As demand for dairy grows, we need to have stickability with dairy farmers in other parts of the world. We don’t want not to have the milk.”

Federated Farmers dairy vice-chairman Chris Lewis says it’s a decision for Fonterra shareholders.

“If the directors and management of Fonterra can come up with an exciting proposal then farmer shareholders can debate and decide.”

Australian farmers some years ago expressed keenness to join as Fonterra shareholders.