Fonterra restructures NZMP, MD goes

3.00pm

Fonterra today restructured its main subsidiary -- the heart of its global operations -- and lost its deputy chief executive in the process.

Fonterra has re-absorbed NZMP, the world's biggest dairy ingredients business, downgrading it from a stand-alone unit.

NZMP managing director Chris Moller, who was offered a replacement job as chief operating officer, has decided to move on, Fonterra said in a statement. Mr Moller was also Fonterra's deputy chief executive.

Until a chief operating officer is appointed, Fonterra chief executive Craig Norgate will run NZMP's operations, which include milk collection from 13,000 suppliers, the manufacture and packaging of more than 1000 product specifications and the operation of a global supply chain linking production plants in New Zealand and offshore to customers in more than 100 countries.

Mr Moller -- who was competing last year with Mr Norgate for the chief executive's job -- welded the former Dairy Board's ingredients business, plus components of Anchor Products, Kiwi Dairy Products, Food Solutions Group, New Zealand Dairy Ingredients, Transport and Milk Quality and the Dairy Board's global operations division into one company to collect milk, process it and manufacture ingredients.

Mr Norgate said Mr Moller "was offered the new role but has decided, after 15 years in senior roles in the New Zealand dairy industry that his preference is to move on".

Mr Norgate said Fonterra would now make NZMP the centre of its own structure, in a reorganisation "that will reduce duplication and costs and create an integrated structure aligned to the co-operative's future direction".

"In our first year since the merger we have operated as a small corporate centre with two strong business units in NZMP and New Zealand Milk and a collection of other activities grouped under Fonterra Enterprises," he said in a statement.

"This was appropriate in the first year and ensured we delivered the required performance, but it did mean some duplication.

"It's now time to deal with that duplication so we can reduce costs and, more importantly, become a single integrated team behind a common Fonterra vision."

But other industry observers said the main effect of the change was to cut out Mr Moller and give Mr Norgate hands-on control of the levers most directly connected to the company's shareholder farmers.

Mr Moller was one of only half a dozen executives in Fonterra reporting directly to Mr Norgate, and in August, while Mr Norgate was in Washington, had to mollify farmers aggrieved over a series of problems with tankers failing to collect milk.

Mr Moller acknowledged at the time that farmers were expressing their frustration, and said the company was working as quickly as it could to resolve the issues.

His comments followed loud complaints from the company's shareholders' council protecting Fonterra's 13,030 farmers, which demanded it sort out problems with the tankers, documentation of the milk collected and feedback on the milk's quality.

Today, Mr Norgate said Mr Moller had made a significant contribution to the industry, leading NZMP through a very challenging year.

"He has earned a great deal of respect from the dairy industry during the past 15 years. We wish him and his family well in the next stage of his career," he said.

Mr Norgate will hold the COO position until a permanent appointment is made.

He said NZMP's finance, human resources, strategy, and merger and acquisition functions would now all report through "corporate function heads with a dotted line to the chief operating officer (himself)".

Mr Norgate said New Zealand Milk, Fonterra's fast moving consumer good business whose main operations were in sales, marketing and distribution nationally and globally, will remain as a separate business.

"There are benefits in building a distinct culture in our consumer business," said Mr Norgate, "but we will be ensuring that culture is clearly aligned with that of the wider Fonterra Group".

The only real change to New Zealand Milk would be moving its merger and acquisitions operations into the group merger and acquisitions unit, reporting to the group director.

Mr Norgate said in a statement the changes announced today focused on reducing duplication across Fonterra "and creating a single, strong team well placed to capture the opportunities identified for the company".

- NZPA