KEY POINTS:
Fonterra has announced the resignation of key executive Sanjay Khosla, who has overseen a significant rise in sales of the co-op's branded goods.
Khosla - who heads the consumer brands and food service business - will leave at the end of January after two years at the company.
Fonterra praised his contribution in what has been a controversial area.
In September, the Fonterra shareholders' council heavily criticised last season's value-added performance, which includes returns from branded consumer products.
The council said increasing value-added earnings was a core rationale for forming Fonterra but "meaningful" earnings of this type continued to elude the co-op.
It was, however, encouraged by a forecast predicting an 80 per cent lift in the value-added proportion of payout for this season.
A Fonterra spokesman said yesterday Khosla's departure had nothing to do with performance but was for "genuine family reasons".
Khosla was in India and not available for comment.
Chief executive Andrew Ferrier said he was "naturally disappointed" to be losing someone of Khosla's experience but the co-op respected his wishes to be closer to his family.
"He has taken an underperforming consumer business and put in place a long-term strategy that is now paying dividends.
"He has built a strong consumer team that has made the hard callson underperforming brands and markets."
The "winning through brands" strategy Khosla introduced led to an improvement in sales and profits of the brands business worldwide.
Ferrier said he was finalising succession options for the brands business and expected to make an announcement in January.
Shareholders' council chairman John Monaghan also praised Khosla's contribution, saying he had helped to bring a strong focus to improving performance.
In Fonterra's annual report for last season, Khosla said the brands business strategy was starting to deliver results, with the co-op exceeding sales and profit targets. Fonterra Brands' operating surplus was up 9 per cent to $288 million.
Meanwhile, Dairy Farmers of New Zealand chairman Frank Brenmuhl expressed some concern about a new scheme under which Fonterra will pay a one-off premium of 50c/kg of milk solids for "extra" milk produced between March and May next year.
The premium is designed to stimulate extra production so Fonterra can take advantage of higher commodity prices.
Brenmuhl was concerned some farmers - particularly those under financial pressure - could try to get the premium by using feed supplies that would normally be set aside for winter and later next season. He urged farmers to look at the knock-on effects when deciding whether to chase the premium or not.
The premium will be paid on production between March-May that is above a base level related to last month's production. An example of 800kg "extra" production provided by Fonterra would equate to just $400 in premium payments.
The co-op warned there was potential for farmers to try to "game" the system - such as putting cows from two farms on to one - and said it would monitor "unusual" changes to production.