Dairy giant Fonterra faces industrial action from thousands of employees with last-ditch mediation planned for next week.
New Zealand Dairy Workers Union national secretary James Ritchie said a collective bargaining agreement covering about 4500 people was the most serious negotiating situation the union had with Fonterra in the company's history.
"So it is serious in the sense that we welcome mediation, we'll do our absolute best to find a settlement next week but it is reflective of some hard bargaining and some deteriorating industrial relations that we've got to this point," Ritchie said.
The dispute was mainly over pay, with the agreement covering employees at major milk processing plants and about 1200 tanker drivers, he said.
The union had issued a strike notice for limited action starting on November 17, which would include not working more than 12 hours a day, not covering absenteeism of other employees and strict adherence to procedures.
"So very limited action to do our absolute best not to inconvenience the suppliers or waste any milk but to try and put some pressure on Fonterra to try and settle the document," Mr Ritchie said.
The last major strike in the industry was in 1989, he said.
"From our point of view we're moving from very good industrial relations with Fonterra to rapidly deteriorating industrial relations."
Fonterra director of milk supply Barry Harris said the strike action notice was disappointing and could have significant and serious financial and environmental consequences at the peak of the dairy season, including potentially spoiling milk.
"We have acted in good faith during the negotiations over the [Dairy Workers Union] collective employment agreement and we've been focused on getting a fair and appropriate settlement throughout," Mr Harris said.
Fonterra had offered a pay increase of 5 per cent plus a 2.5 per cent lump-sum payment, while the union was asking for 8 per cent, he said.
"Discussions with the union are continuing, and we will be working hard to reach a resolution that gives certainty to the company and a fair settlement to our staff."
Mr Ritchie said Fonterra had withdrawn an employee bonus worth on average a 2 per cent annual lump sum during the past five years, while the company's offer of a 2.5 per cent lump sum was for this year only, followed by a consumer price index pay increase and a 1 per cent lump sum in year two and an index plus 1 per cent pay rise in year three.
Federated Farmers Dairy chairman Lachlan McKenzie said the priority was to get an agreement.