Rural Delivery: Fonterra's future strategic for all

By WARREN PARKER*

I hope Fonterra exceeds its goal of being a $30 billion company by 2010 - a two-fold increase on present turnover.

Over the past few months there has been a media feeding frenzy on Fonterra's shortcomings and performance.

But there has been surprisingly little commentary on Fonterra's strategic importance to all New Zealanders, let alone its dairy farmer owners. As the sharp fall in payout this season has shown, if Fonterra gets the flu, New Zealand gets a cold.

Ministry of Agriculture and Forestry modelling suggests the forecast payout of $3.70 a kilogram for milk solids, down on last season's $5.30, could affect our GDP up to 1.9 per cent.

In the context of annual national GDP growth of 2 to 3.5 per cent over recent years, this clearly shows we all need a prosperous and vigorously growing dairy industry.

While there have been problems, not unexpected in a merger of this scale, there have also been substantial achievements over the past 15 months.

A good proportion of the work in transforming three large companies into a single large, focused multi-national has been done. Senior staff are in place, systems and processes to underpin a large and complex business have been designed and implemented, and farmers' milk (with the exception of the early start to this season) has been collected, processed and marketed.

Cultural differences such as those between the three founding companies are commonly understood to take three years or more to realign. Old habits die hard in big companies too. Early alignment on goals and core values is essential in establishing a united, performance-oriented culture.

fxdrop 2, 60 T HE clock cannot be turned back for those who pine for the old days, a two-company model or some other industry configuration.

Fonterra is here to stay and unbundling it would destroy huge value for farmers and diminish the many advantages a large, smartly run company offers. There is no point wasting energy pontificating on what might have been.

Bluntly, Fonterra needs to work.

Fonterra is important to New Zealand business, the export community and smaller dairy companies such as Tatua and Westland.

It has the size to participate in and influence international trade discussions; attract world-class talent to bring new knowledge on how to do better business and use technology; provide exciting career pathways for our best graduates; and forge new markets that provide complementary opportunities for other New Zealand exporters.

It can be a global icon New Zealanders are proud of, and say we did it our way, without subsidies, tariff protection, the G8 heads of state or fanfare.

FARMERS have a vital role to play. From among them must come the next generation of leaders who can perform with distinction in international business. They will need to continue to adopt new technology and management systems to keep on-farm milk production globally competitive, and use their capital wisely to create cash value rather than one-off gains at some distant point.

Those of us in research have a critical role to play, too.

We need to find, foster and keep the scientific talent that generates breakthrough technologies and products along the value chain; smarter ways to increase profitability from existing resources; systems that enable intensification of dairying without compromising the environment; and ways to keep harmony between the development of urban and rural New Zealand.

Fonterra got some special dispensations at establishment and, because of its uniqueness to our economy, has high visibility in the way it conducts its affairs and provides leadership. The fishbowl experience is not likely to be welcomed but it is a reality staff and board have to manage to advantage.

It is time to look up and ahead, and focus on how to invigorate Fonterra and the wider dairy industry to achieve its dream. It is just seven years until 2010 and much remains to be done.

* Dr Warren Parker is science general manager, AgResearch Ruakura Research Centre.