Expert Says Fonterra Backing Current Strategy With New CEO Appointment
The appointment of Richard Allen as Fonterra's new chief executive signals execution, not strategy, according to agribusiness expert Dr Nic Lees.
Times are tough on farm but Fonterra farmers are ploughing on, keeping a close eye on things they can control.
What they don't need is to be bailed up at the local pub or golf club by an irate contractor eager to gripe about Fonterra's bullying tactics.
In November Fonterra sent a generic letter to about 1000 NZ contractors, asking for more time to pay its bills. But suppliers have complained of bullying, after having their payment times extended to 61 days after the end of the invoicing month.
The suppliers got strong backing from many quarters; some business commentators who usually refrain from bashing Fonterra could not resist having a go at the co-op.
Speaking at the Future Farms Conference in Palmerston North, Waikato University professor of economics Frank Scrimgeour said the co-op's move was appalling and disappointing given it is the country's largest company.
Scrimgeour made it clear that in the past he has withheld negative comments about Fonterra but was speaking out now.
"I observe people in Waikato who have supplied services to Fonterra for more than 20 years, then they get 'a Dear John' letter; it's not even personalised.
"They get told the bills will not be paid for 90 days and that the co-op demands a price cut of 10%; that's not the way you do business.
"If you want to renegotiate a contract you face up to the supplier and talk 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 that are not of its own making. Life's already difficult but Fonterra must play the game within the rules.
The message got home: at last week's half-year results announcement the Fonterra chairman read a prepared speech at the opening. He admitted Fonterra could have done a better job.
"We could have had better discussion with our vendors; we never intended to put any of our small businesses in a difficult situation."
But the damage is done; this is another clear example of Fonterra failing to get its message across to the masses.
Farmers want their cooperative to be a good corporate citizen. Such a heavy handed approach does little help to Fonterra's reputation.
Fonterra and its farmers prop up economies in regions and small towns nationwide; as the world's largest dairy exporter Fonterra has around 16,000 contractors worldwide. It has a social and moral responsibility to the country; bullying small rural contractors isn't the way to go.
