Posts Tagged ‘Theo Spierings’

Fonterra – right question, wrong answer

November 21, 2018

Fonterra’s trials and tribulations have led to a rising crescendo of criticism of the cooperative’s performance since the release of the 2018 annual report. Declining share value and dividend payments, fluctuating milk price, inadequate return on capital, failure to match international and domestic competitors’ financial performance, failed investments, rising debt ratio and overpaid staff are the most notable criticisms. (more…)

Ham-fisted definitely, incompetent possibly

March 25, 2016

Fonterra’s succession of ultimatums to its suppliers smack of ham-fisted bullying and incompetence. The company’s first ultimatum was to push payment terms out to 90 days for a ‘small percentage’ of its New Zealand suppliers in line with its global practice , followed by an invitation to attend Dragon’s Den type negotiating sessions in which it has served notice it will demand 20% price reductions. (more…)

Fonterra’s restructure more about poor strategy than milk price

August 6, 2015

When Fonterra was formed back in 2001, there was a great sense of optimism about the potential for a New Zealand dairy company to compete on a truly global scale. The industry’s infighting and parochialism would be a thing of the past and the clear intention was to use the greater efficiencies and scale to create a substantially better performing business model. (more…)

Milk powder scare will cause long term disruption

October 11, 2013

It may be a statement of the obvious, but the effects of Fonterra’s botulism scare will last much longer than originally hoped or imagined. Its impact on New Zealand’s international trade reputation gives the impression of being more disastrous than an outbreak of foot and mouth disease, always assumed to be the biggest disaster that could possibly happen. (more…)

Fonterra problem highlights danger of being a one trick pony

August 6, 2013

It’s a change for the dairy industry to capture the negative agricultural headlines instead of the meat or kiwifruit sectors. Unfortunately for everybody in New Zealand the dairy industry has become such a critical and large part of our economy that the whey protein botulism scare has already caused, and will continue to cause, major concerns for our global dairy trade.

 

Only last week Fonterra was again the star of the economy with a $3 billion boost to farmers’ earnings because of a 50c lift in the payout. Yet this week the company’s very scale has been called into question. People are now asking whether Fonterra can survive its third health scare in five years.

 

Even if this is unnecessary scaremongering, another question which would have been unthinkable a week ago is being asked. Is Fonterra too big for the country or, to quote the Waikato Times, its gumboots? This ought to make those calling for one mega meat company hesitate for a moment, before they find that they are asking for something which may contain the seeds of its own destruction.

 

Fonterra is one of New Zealand’s few businesses of global scale, if not the only one, so it seems unduly critical to question its size. After all if only we had some more companies like it, it wouldn’t stand out as such an exception. Within the dairy industry worldwide, Fonterra is only one of a number of big companies, alongside Nestle, Kraft, Danone and others, but there are some key differences which make its and New Zealand’s position more sensitive to problems like this.

 

In spite of having substantial parts of its business in South America, Australia and China, it remains essentially a New Zealand company, synonymous with this country. The vast majority of the milk it processes comes from its New   Zealand farmer shareholders.

 

Unlike the other major dairy companies listed, Fonterra is not particularly well diversified, deliberately so. It has specialised in being a supplier of ingredients to food manufacturers rather than creating consumer products and brands, apart from its domestic brands like Anchor and Mainland. To the outside observer this has appeared to be both a successful and logical strategy less demanding of scarce resources than trying to match global FMCG companies like Nestle, Kraft and Danone.

 

Another weakness is the increasing importance of China as a market with its special emphasis on infant formula. Each of the three health scares, Sanlu melamine scandal, DCD residues in milk and the latest possible presence of botulism, is seen as a serious threat to the lives of Chinese children. Each time New   Zealand dairy produce and its clean, green image have been compromised.

 

Fonterra’s handling of its public relations has not been as surefooted as it should have been. The melamine problem was not Fonterra’s fault, but the last two issues have both suffered from inexplicable delays in fronting up and admitting there is a problem. With DCD the repetition of the phrase ‘there is no food safety risk’ tended to be swamped by the perception of a cover-up because, between Fonterra and MPI, disclosure was delayed for four months.

 

But this latest scare has been traced to a problem with a pipe more than a year ago and tests have been going on for several months until the problem was disclosed last Friday. The Chief Executive Theo Spierings has flown post haste to Beijing to manage the Chinese fallout, leaving the Gary Romano, MD of New Zealand Milk Products to handle the constantly moving PR situation.

 

This may be the most appropriate division of responsibility and, to be fair, Romano has always been available to talk to the media. But there has been contradictory information emerging at various times and MPI’s Acting Director General has also been making statements without having all the information he might have wanted.

 

In addition Fonterra’s Chairman John Wilson has been conspicuous by his total silence which has led to calls for his resignation from some dairy leaders.

 

The overall impression is of a company which is in complete control neither of its production processes nor its public relations. This is not good for New Zealand, quite apart from the damage it will have done to Fonterra and its customers, and raises questions about the appropriateness of one company being allowed to have such a disproportionate impact on the country’s global reputation.

 

Fonterra is by no means the only business to suffer damage to its business or its reputation. Danone subsidiary Nutricia and many other manufacturers of infant milk formula, indeed all New Zealand dairy related businesses, will be adversely affected.

 

The question has to be asked whether it’s good for New Zealand to be so reliant on the dairy industry and also whether Fonterra itself is in danger of becoming a one trick (or product) pony.

Fonterra’s progress on TAF like wading through quicksand

May 3, 2012

 

The process of getting farmer and legislative approval for the introduction of Trading Among Farmers must seem frustratingly slow to Sir Henry van der Heyden, directors and management of Fonterra. They have been working on it for almost two years now and even got just under a 90% vote from shareholders in favour of it when it was last put to the vote in June 2010. (more…)