Farmer loyalty Bonlac's aim

By LIAM DANN

He might be Fonterra's man, but new Bonlac chief executive Bruce Donnison says his first priority is to look after his Australian dairy farmers.

Appointed by Fonterra after it lifted its stake in the Victorian dairy co-operative to 50 per cent, Donnison now faces the daunting task of turning around Bonlac's poor performance.

This month Bonlac announced its annual profit had fallen 51 per cent to A$18 million ($20 million).

Though he has been in the job just a few days, Donnison has been involved with the restructuring project for months - so when Bonlac farmers finally approved the Fonterra deal things happened fast.

Staff numbers at the head office in Melbourne have been slashed from 113 to 44.

Of the affected positions, 25 went across to Fonterra, 17 were attrition and 27 were direct redundancies, Donnison said.

Savings would involve obtaining all possible synergies with Fonterra, he said. Big savings would also come from a deal in which Fonterra took over the sales and marketing of Bonlac products.

Bonlac will remain a legal entity in its own right and will retain its own brand in Australia but its primary focus will now be as a supplier and processor of milk.

Fonterra will take over Bonlac's domestic ingredients business.

"Within ingredients we will be looking to bolt the seven plants that Bonlac has to the 23 that Fonterra has in NZ," Donnison said.

"That gives us the ability to have the right product on the right plant and produce it at the right time."

The advantage from a customer perspective was that Fonterra and Bonlac would now be able to go into a dual supply, he said.

"That enables us to better serve our global customers. It gives Fonterra and Bonlac an advantage over and above other companies in this region."

One of the biggest challenges Donnison faces is to secure an increasing milk supply and ensure a supply loyal to the company.

The Bonlac co-operative has lost farmers in the past few years as its payouts have dropped relative to its rivals.

As a result the milk supply has dropped, and some of its plants have been under-utilised.

The only way to get loyalty was to achieve some significant increases in farmer payouts, Donnison said.



"We are here to make sure that the Australian farms are getting the best result for their milk," he said. "Fonterra is owner of the business but we look after the Australian dairy farmers first."