increase font size
Fonterra has 20,000 suppliers globally, of which 8,200 are in New Zealand.
Fonterra chairman John Wilson says changes to its vendor payment system could have been handled better.
Wilson told Dairy News that Fonterra shareholders have brought the issue up with him.
"Farmers are very aware we are trying to get all the money we can into farmers' hands," he says. "But they acknowledge the significant input Fonterra has across the wider New Zealand community."
In November Fonterra wrote to about 1000 large suppliers in NZ, asking for term of payment to change from 20-30 days to 60 days. Wilson says this policy is appropriate and reflects the reality of the business.
He says Fonterra has 20, 000 suppliers globally, of which 8,200 were in New Zealand.
"We have asked about 15% of our vendors to change from 20 to 30 payment term to a 60-day payment term."
But he says it was never the intention of the co-op to treat any vendors unfairly.
"It's about ensuring that we run the business as prudently as possible and get the best return for our farmers. But we never intended to put these small businesses in a difficult situation."
Waikato University professor of economics Frank Scrimgeour says it's an appalling move and he was disappointed with the country's largest company.
Speaking at the Future Farms Conference in Palmerston North recently, Scrimgeour said in the past he had not made negative comments about Fonterra but he was speaking out now.
Scrimgeour says Fonterra should treat its suppliers with respect and follow standard commercial processes.
"I observe people in Waikato who have supplied services to Fonterra for more than 20 years and they get 'a Dear John' letter; it's not even personalised.
"They get told the bills are not going to be paid for 90 days and they face a demand to cut their price by 10%. But that's not the way you do business; if you want to renegotiate a contract you face up to them and talk to them face-to-face. This is very bad modelling, very unhelpful for the cause of dairying, very unhelpful for the reputation of Fonterra."
Scrimgeour says the dairy industry has to face many challenges not of its own making. Life's already difficult but Fonterra must play the tough game and within the rules.
Wilson says Fonterra has started one-on-one discussion with the vendors concerned.
"Yes, we could have rolled it out better; right now we are in discussions with our vendors. And our people having those discussions are being supported with better information so that there is a better understanding of what we have done."
OPINION: There is zero chance that someone who joined Fonterra as a lobbyist, then served as a general manager of Fonterra's nutrient management programme, and sat on the board of Export NZ, a division of lobbyist group Business New Zealand, doesn't understand that local butter (and milk and cheese) prices are set by the international commodity price.
Waikato is home to a diverse range of lakes, and experts say they urgently need better management and restoration.
Kiwis love their butter, and that's great because New Zealand produces some of the best butter in the world. But when the price of butter goes up, it's tough for some, particularly when many other grocery staples have also gone up and the heat goes on co-operative Fonterra, the country's main butter maker. Here the co-op explains why butter prices are so high right now.
An A$2 billion bid for Fonterra's Oceania business would be great news, according to Forsyth Barr senior analyst, equities, Matt Montgomerie.
The world's largest dairy company may be in pole position to acquire Fonterra's Australian assets.
Farmer lobby group Federated Farmers has announced it is supporting a new Member’s Bill which it says could bring clarity to New Zealand farmers and save millions in legal costs.
DairyNZ has announced the date for its upcoming Milksolids Levy vote.
Federated Farmers says climate protest group Greenpeace is manufacturing outrage and attempting to scare New Zealanders with headlines that have no basis in science.
New Zealand Food Safety (NZFS) says it is supporting importer Goodfood Group in its decision to recall Food Snob and Mon Ami brand French Brie and Camembert cheeses.
New Zealand's dairy industry is right to call out Donald Trump over the damage the additional 15% tariff the US is imposing on our exports but also imposition on lower tariffs on our competitors.
Applications are now open for the Agri Futures Scholarships, helping young Kiwis from rural backgrounds kickstart careers in agriculture and rural sports.
OPINION: Milking It reckons if you're National, looking at recent polls, the dream scenario is that the elusive economic recovery…
OPINION: Sydney has a $12 million milk disposal problem.
