Fonterra shaves 50c off forecast milk price
Fonterra has dropped its forecast milk price mid-point by 50c as a surge in global milk production is putting downward pressure on commodity prices.
This startling admission by Fonterra chief executive Theo Spierings to the recent Dairy Womens Network conference came with further details.
"We need to sit close to our customers, sit close to the market," he said.
"You need not only to please your customers, but know what they want. We have good people in the market but they are kind-of 'hosts' or 'hostesses' for the customers.
"They don't translate [customers'] needs properly back to our innovation centre in Palmerston North and our factories."
Spierings says at present all the knowledge and innovation is deployed to invent something and push it out to the market. "We say 'you can buy it, but if you don't want to buy it, then don't buy it'. We need to sit closer to our customers and bring their needs back."
Spierings was outlining aspects of his planned market strategy at the conference on March 21, ahead of consideration by the board and a public release last week of the new strategy and the half year results.
He said Fonterra had the best customer base in the world, but "could not be everywhere". It needed to work out where it wanted to be in the world and to "increase its philosophy."
"We need to think how we can make dairy a driver of health in the world." How to deliver best nutrition for mothers and children, and for ageing people, how to meet demand for healthier choices and to deliver better, healthier convenience foods: these were key targets.
He says we "invent great things, and craft them well" but do not ask ourselves "can we win?" against the competition. We would be better supplying ingredients to big players in China such as Nestle rather than compete with them on product, Speirings says.
Instead of plant for products, New Zealand must think of the next generation of processing plant, such as spray dryers and packaging equipment.
Spierings warns we need to help China with its own milk production or risk losing business.
"We must link with the Chinese and build something with them together on the ground, based on their local milk – safe and good local milk.
"We must help them otherwise they will shut the door on imports of ingredients."
Ingredients demand from China will last 20 years at least, while the West – which drove global growth from 1980-2000 – is "now in trouble."
Trends that began in 2000 in the West, and are on track for 2030, include lower growth, higher unemployment, children who could be poorer than parents, and plateauing life expectancy.
Globally there will be increased connectivity, volatility, high capital and resources costs and increased problems for governments.
But Asia has an emerging middle class of 300 million people who want to buy our products.
