Fonterra CEO search likely to come down to 3-5 candidates

Fonterra chief executive Theo Spierings is expected to leave towards the end of the year. Picture / Jason Oxenham

Fonterra's search for a replacement for outgoing chief executive Theo Spierings is likely to come down to between three to five candidates, employment experts said.

The co-op, after announcing a $348 million bottom line loss for the first half, said on Wednesday that it started a process last November to identify potential candidates and was now shortlisting candidates.

The decision to announce the succession plan was brought forward from April in order to avoid speculation.

Former Fonterra insiders said there were no obvious internal candidates for the position, which in Spierings case carried with it a $2.46m base salary.

Max Whitehead, principal of Whitehead Group employment specialists, said the process would normally involve a short list of three to five candidates.

"There is a lot of work to be done to ensure that they are of the calibre required," Whitehead said.

John McGill at Strategic Pay said the process normally involved a directive from a board's remuneration committee.

In Fonterra's case, he expected the Fonterra Shareholders Council to have some input. "I suspect that they would be well into the process by now," he said.

Fonterra said Spierings, who joined late in 2011, would leave towards the end of the year.

John Wilson, who became Fonterra's chairman in 2012, and directors Ashley Waugh and Nicola Shadbolt are due to retire by rotation.

It will be up to them as to whether they stand again in the co-operative's director elections later this year. Analysts noted that a change in chief executive often goes hand-in-hand with a change of chairman.

"So I would not be surprised to see those changes together," he said. "It often leads to a change in direction for company when those two positions change.

"I would be pretty interested to see how that shapes up over the next 12 months."

Federated Farmers national vice-president Andrew Hoggard said an ability to connect with farmers would be a useful attribute for the successful candidate, but that it should not be the only criterion.

Hoggard, noting that Spierings' predecessor Andrew Ferrier came from the sugar industry, said the successful candidate might not come from the dairy sector at all.

The Manawatu farmer, who is a Fonterra supplier, has in the past has criticised Spierings' ability to communicate with farmers.

He said the new CEO's ability to "connect" would be important.

"There is a fine balancing act," he said. "A CEO needs to be able to connect with farmers but you don't want them to waste their time by having them milk the cows.

"It's just one of the things in the mix that they need to look at.

"I think they would be making a terrible mistake if they chose someone solely on their ability to ability to deal with farmers," he said. "There are a whole range of skill sets."

Farmers would be willing to overlook any shortcomings if a new CEO "delivered us a truckload of cash".

But an incoming CEO would face a raft of challenges, such as increased competition for suppliers in the dairy heartland of the Waikato.

In terms of land area, growth in dairy had stopped and some parts of the country were "re-reverting" from dairy back to beef production.

That meant dairy production was likely to become static after several years of strong growth, he said.

ANZ rural economist Con Williams expected the successful candidate to come from foodservice and consumer product category - with an ability to create new brands.

"It is still very important that they remain manufacturers of milk given the global supply chain, so the next chief executive will need some experience there as well," he said.

Commenting on Spierings' tenure, said: "It's a big and complex business - when you drill into it, so to manage that is pretty difficult," he said.

"But there have been some things that have been unacceptable, so you have to go back and to the gross profit and ebit chart," Williams said. "It's been volatile but it has been disappointment," he said. "It has not gone down, but it has not gone up either."