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Current as of 29/05/17 07:40PM NZST

Liam Dann: Strategy an opportunity too good to ignore

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Fonterra directors have asked farmers to back them in a bid to create the kind of multinational company that New Zealand has never seen before.

That is, one that siphons profits into this country - not out of it.

By listing on the stock market, Fonterra will be handed the resources and the mandate to invest more aggressively in the booming dairy industry around the world.

We'll see it buy more farms and more production facilities in countries such as China or Uruguay.

It'll use the increased milk supply and global reach to take on the likes of Swiss giant Nestle and deliver bigger dividends for shareholders - which for the first time will include non-farmers. This bold strategy has the potential to dramatically boost New Zealand's wealth. We already rely on dairy for 20 per cent of our national income so even a small improvement will have a big impact.

It will also allow Fonterra to keep growing once New Zealand runs out of new land for dairying - a situation we are approaching at a rapid rate.

There is always a catch, of course. The strategy adds risk in the short term. Credit rating agency Standard & Poor's warned yesterday that the company's credit rating - currently a very solid A+ - would be downgraded if the proposal went ahead.

But the risks of doing nothing may be greater in the long term.

NZ has been gifted an opportunity too good to ignore. For better or worse dairy has emerged as a future food for the world. And we have a historical legacy that has made us the world's most efficient producers of the stuff.

Dairy farmers are well aware of that legacy and aren't about to squander it. That's why they want to mull the idea for two years.

But with 65 per cent of the shares held by their co-operative and laws preventing any other shareholder owning more than 10 per cent, the company will remain safely locked up for the next generation.

Fonterra chairman Henry van der Heyden will be geared for a hard-sell, but he will be banking on the fact that farmers understand the global stakes.

While farmers may be culturally conservative people, they are anything but when it come to business.

They make huge decisions every year about how they will use their land and how much stock they'll buy, and they live with debt levels that would make Graeme Hart - New Zealand's richest man - nervous.

While some will have been surprised at the extent of the listing proposal, most now understand the need for some change.

Farmer reaction out of Hamilton and Christchurch was largely positive, indicating van der Heyden may have made a good start on his sales job.

For New Zealanders who've grown up in a land overflowing with cheap butter and cheese it's hard to digest the extent of the global dairy revolution.

But in Asia, where consumption is soaring, dairy is promoted as health food for its calcium and protein content.

Fonterra is a world leader - in R&D, marketing, distribution and, of course, farming.

As one supportive farmer said yesterday: "If we don't do this now some one else will."

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