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.
Speaking at the co-op's annual meeting in New Plymouth this month, the Canterbury farmer notes that Fonterra's future is dependent on the efforts of its farmer shareholders.
She also urged Fonterra leaders to be humble or risk losing the good work done in the past few years to turn the co-op around.
"I will flag a risk, to both board and management. Recent performance has been very good. Often success is the hardest thing to manage forward.
"The day any of us considers ourselves individually responsible for good outcomes, we risk running aground," Guiney says.
She points out that domestic competition shouldn't distract the co-op from a focus on its global exposures and opportunities.
"The competition will eat our lunch if our overheads aren’t further reigned in, and if farmers don’t retain their ability to ride the cycles with a competitive position on the global cost curve.
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“But enough good brains with business acumen and experience and the right reasons for being there – which is to serve – will help management get the most important decisions right for the owners.
“To that end I encourage the next generation of farmers to step up and be there to lead in future. Fonterra’s future is dependent on its business- savvy suppliers, with skin in the game, being prepared to determine your own future.”
Guiney, who served nine years on the board, is the first and only incumbent in Fonterra’s history to be removed by any means other than a farmer vote. She served between 2014 to 2017 but then failed to gain approval to stand again through the co-op’s selection process. However, the following year, she stood again and was elected by farmer shareholders. Guiney finished her tenure at the coop’s annual meeting this month.
Guiney says she’s not worried about Fonterra’s future.
“Not in this wonderful temperate climate that enjoys outstanding comparative advantage in the production of very highquality sustainable protein. Complemented by our sharemilking system that attracts entrepreneurs to our industry and our scaled co-op with genuine advantage in ingredients innovation, foodservice and market access. I am personally so very happy to be a NZ dairy farmer.”
Guiney says she’ll miss the privilege of steering something that is so important for the outcomes of farmers and NZ
She thanked farmers from Northland to Southland for backing her and trusting her intent.
“I will also miss every one of my colleagues. I am so very happy for Fonterra that I can say that, because it speaks of a culture that will keep delivering for all our stakeholders.”
Guiney says Fonterra is in a good position today.
“The growing confidence in Fonterra that I observe from farmers and the business community, I consider to be well placed.
“It’s been a journey to get Fonterra to that place, and it is imperative that Fonterra has learned where we went wrong in the past.
“A focus on the appearance of value at the expense of actual value was at the root of our poor past outcomes.
“Add to that a strategy misaligned from our core advantages, and an absence of risk-adjusted thinking in investment, made for expensive errors.
“Most businesses will make some poor decisions. Good governance owns its errors in a timely manner thereby minimising further damage to shareholders’ equity. Fonterra did not do that in the past and that was a governance failure we cannot repeat.”
Guiney also thanked her husband Kieran and children for their sacrifice and support.
