Liam Dann: National Foods just a sideshow to selling milk

There is a Rastafarian proverb which popped into my head last week while I was chatting to Fonterra chief operating officer Jay Waldvogel: "Mi come ya fi drink milk, me no come fi count cows."

The proverb literally translates to: I came here to drink milk, not to count cows - meaning, I came to partake in an activity, not to get involved in the politics behind it.

It's an apt proverb for Fonterra's leaders, who must constantly juggle the demands of collecting, processing and selling billions of litres of milk, with ongoing diversions such as restructuring the business, debating capital structure and fighting corporate battles.

Waldvogel - a native of the great US dairying state Wisconsin - is a genial bloke.

He stopped by to say hello while I waited up on the top floor of Fonterra's Auckland tower fortress to meet chairman Henry van der Heyden.

Its Waldvogel's job is to ensure Fonterra's core business gets done -- and done well.

He's the man who has to worry about everything from commodity prices and the level of the currency, to factory maintenance and getting trucks to the right places on time.

In passing I said that now the battle for National Foods was over we might be able to catch up and a write a good old-fashioned story about the nitty gritty of Fonterra's commodity business.

Don't bet on it, said Waldvogel (who obviously doesn't mind getting on with his job away from the media spotlight).

Sure enough, the next morning - before I had even finished writing "production statistics" at the top of my notebook - I was chasing the news that South Island corporate farmer Synlait was pulling out of the co-operative to do its own thing.

Overall, Synlait won't be a big competitor for Fonterra. Its production at present represents less than half a per cent of all the milk Fonterra collects.

But its decision to break away from Fonterra is significant.

The company plans to compete in the value-added "functional" foods sector.

If it succeeds it will be a very real competitor for the likes of Tatua and for that small but growing part of Fonterra's business.

Its arrival is not the beginning of the end for Fonterra - as some critics have suggested. It is something which was anticipated by those who designed the Dairy Industry Restructuring Act.

In fact, if anything, the extra competition should be a good thing for Fonterra - reinforcing the need to avoid complacency about its local dominance.

When I finally caught up with van der Heyden last week he was surprisingly relaxed.

He was clearly not a man who is interpreting the events of the last few days as some sort of disaster for the co-operative.

Of course, it's not like him to give anything away.

He denies that Fonterra has been overly conservative in walking away from National Foods.

Fonterra has been conservative. But that is the way most farmers and the board of directors prefer to play it.

Their arguments for moving slowly are compelling.

Yes, there are risks in not breaking out of the commodity business. But that business is enormous and profitable and it is unlikely to collapse overnight.

Fonterra believes it has time up its sleeve to develop its consumer business and for now it looks like we'll just have to trust them on that.

The media circus that follows every move Fonterra makes probably creates a false impression of urgency to the casual observer.

For better or for worse that sense of urgency is not something you feel when you talk to the people running the company.

But when you consider that Fonterra accounts for about 20 per cent of the nation's exports, it's reassuring that there are guys like Waldvogel to stay focused on keeping those export dollars coming - and for whom the National Foods battle was really just a sideshow.