Divestment means Fonterra can focus on its strengths
OPINION: Fonterra's board has certainly presented us, as shareholders, with a major issue to consider.
Chairman John Wilson told the co-op’s annual meeting in Hawera this month of a scheme to enable young farmers to be fully share-backed owners.
Fonterra’s milk supply is being squeezed by independent processors. In Waikato, New Zealand’s second-largest processor Open Country Dairy (OCD) wants new suppliers for a plant it is building at Horotiu.
To supply Fonterra farmers must own one share for every kgMS; but OCD suppliers don’t need to own shares. For young farmers, paying for Fonterra shares can be difficult.
The co-op collected about 82.4% of NZ’s milk production in the 2016-17 season, down from 84.1% in 2015-16.
Wilson says Fonterra will continue to defend and grow market share in NZ and, importantly, grow offshore milk sources that complement NZ farmers’ milk.
“We will continue to develop new financial tools for all our farmers... to provide flexibility for succession within our industry. And we will... protect the cooperative’s capital structure.”
Wilson told about 150 farmers at the meeting that Fonterra must remain a co-op but must continue to evolve.
“It is vital that we stay strongly committed to our co-operative principles and steadfast on strategy. But we must also continue to innovate and evolve our cooperative.”
He noted that the pace of global change is seeing the deterioration of some of the world’s largest organisations.
The average lifespan of a company listed in the Standard and Poor’s index of leading US companies has dropped from 67 years in the 1920s to just 15 years.
In October Fonterra celebrated its 16th birthday.
Wilson says the board will challenge, mentor and support the management team in innovating across the supply chain.
“Not every change we make will be successful. If we fail we will pause quickly, take the necessary learnings and then continue to drive our cooperative forward.”
