Faster traceability major focus

 The co-op is able to trace products back to its factories within 48 hours, but Spierings says this is still not best practice: the ideal would be three hours and the co-op is working to implement this by 2017.

He made the comments at the Fonterra Shareholders Fund annual meeting in Auckland last month. The fund represents investors who bought units in Fonterra shares, given up by farmer shareholders.

Fonterra was stung in August last year by the false botulism scare involving 38 tonnes of WPC80; eight global wholesale customers who used the product were forced to recall food including infant formula.

Spierings says traceability “was probably one of the biggest problems” it had with WPC80. “We had 38 tonnes in the end going to 40 markets with different customers; we were unable to trace it back and provide information within a short time. 

Right now we do it within 48 hours, but that’s still not best practice; it has to be within three hours.”

Spierings points out that the media, consumers and customers want answers in three hours, but this standard will demand upgrading systems and capabilities including those of staff.

The co-op’s new head office under construction in Auckland will house a dairy excellence centre that will help connect with consumers and customers through social media, improving traceability.

“Our commitment is to have three hour traceability by 2017; this requires investment in systems, people and capability. It’s easily said, not easily done.”

The false botulism scare impacted Fonterra’s business in the lucrative Chinese market. As the scandal broke, Spierings and chief financial officer Lukas Paravacini went to China to apologise to Beingmate, its biggest WPC customer in the country.

Spierings says during the WPC80 crisis, Fonterra and Beingmate started talking about a global partnership. Fonterra this year announced it was buying a 20% stake in Beingmate for $600 million. The co-op hopes to use Beingmate’s infant formula sales networks to boost sales of its Anmum brand.

The deal connects Beingmate to Fonterra’s global milk pools; it gets whey from Europe and infant formula from the Darnum plant in Victoria and New Zealand.

Euro milk pool expansion

FONTERRA IS looking at more investments in the growing milk pool in Europe.

Chief executive Theo Spierings says it is looking for more partners in “the green belt of Europe”— Ireland, southern England, northern Germany and Poland. “We believe that’s where the milk growth will take place.”

Last year the co-op announced a joint venture with Netherlands-based A-ware Food Group to build a new cheese plant and dairy ingredients plant in Heerenveen, northern Netherlands. A greenfield site is being developed where A-ware will operate a cheese plant and Fonterra will operate a dairy ingredients plant alongside it.

Milk supply in Europe is expected to grow when EU quotas come off next year.

Spierings says growth in Europe means extra cheese. “Extra cheese means whey and we can use that whey,” he says.