Mymilk likely to get up noses of Fonterra shareholders

Fonterra has launched a new company called mymilkTM which is specifically designed to attract supply from South Island dairy farmers who don’t currently supply Fonterra. The website says it’s cooperative, but that’s a bit hard to see when the supplier has no obligation to buy any shares within five years and only has to sign a one year contract.

 

The website also says somewhat cutely the company is ‘backed’ by Fonterra, when it is actually a wholly owned subsidiary. This new venture is no doubt directed at tempting Synlait and Westland suppliers to jump ship without having to stump up with any share capital (at least for five years).

 

It promises competitive payment – competitive with whom? Fonterra or one of the others? But it is not clear exactly how mymilkTM will avoid paying the same price or even a higher one (shades of meat industry schedule premiums) to secure a new sign up. Under Trading Among Farmers, it is expressly forbidden for Fonterra to have different classes of shareholders and under cooperative principles equality of payment is sacrosanct.

 

The website proclaims ‘limited spaces’. Seriously? No doubt the volumes will be small, at least to begin with, but the principle is similar to pregnancy. You either are or not, but you can’t be a little bit pregnant! Equally this new venture is either cooperative or it isn’t, not both.

 

Obviously bright new innovations like this don’t emerge after less than a serious amount of strategic analysis and brainstorming, but a look at the very uninformative website suggests it cannot have involved more than a brief planning session at the Mid Canterbury or Southland regional marketing office.

 

After the release of the damning independent report into Fonterra’s handling of the false botulism scare, this looks suspiciously like another example of the criticised silo approach. Did Head Office know what was about to emerge from the brainstorming session?

 

I have no doubt somebody from Fonterra’s PR team will be able to explain to me how and why this new venture is entirely consistent with the company’s cooperative principles, but it’s not me that needs convincing.

 

It will be all those existing North and South Island shareholders who are wondering, particularly in the present times of severely reduced payout, why they have to continue to adhere to the much vaunted cooperative principles when a new class of suppliers can access all the same privileges except the final value added dividend.

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