Sugar, milk and hot water

Andrew Ferrier can sell sugar and water heaters, but why did Fonterra pick him to run a dairy co-op? ANDREW WILLIS reports from Canada.

Andrew Ferrier knows sugar. He had a sweet 13-year run to the top at Canada's second largest sugar refiner, Redpath Industries, winning the business of major grocery chains away from an arch-rival on his way.

And Ferrier knows appliances. During his three years as chief executive, water heater manufacturer GSW was one of Canada's best performing stocks, gaining 106 per cent - a significant achievement for a small Canadian company that was up against huge industrial conglomerates.

But does the incoming CEO of Fonterra, one of the world's largest dairy companies, know anything about cows?

"I think Andrew knows one end of a cow from the other. I'm quite certain he knows that much," says John Barford, the chairman of GSW and Ferrier's old boss.

Says Casey Gaik, treasurer of Redpath and a former colleague: "I'm a bit surprised to see him jump into the dairy industry. I'm even more surprised to see him off to New Zealand."

Was Ferrier hiding secret bovine knowledge, a hidden fascination with milk and cheese, that made him the ideal skipper for the largest company in the country, at a time when Fonterra faces storms from many quarters?

In a brief conversation - he wants to wait until he gets to Auckland in September before talking to the media - Ferrier laughed and said: "At the moment, I know next to nothing about cows."

But the friends and former colleagues who expressed their shock at Ferrier's new responsibilities also say he's more than up for the job.

Ferrier has made his name finding and exploiting profitable niches in low margin markets.

He's done this as a branch manager for an international food concern - Redpath is owned by Britain's Tate & Lyle.

And he's flourished working for a family; GSW is a 156-year old company now controlled by a Toronto entrepreneur.

"If you step back, sugar and water heaters are commodity businesses. So is dairy," says Barford.

"Andrew's skills are in getting the business running well, then figuring out where to best focus his efforts. He's going to do outstanding things at Fonterra, and we wish him the best."

There's no denying that the jump to Fonterra is a big one. The board of directors hired an executive who was at the helm of GSW when it was worth C$80 million ($100 million). That pales beside Fonterra shareholders' equity of US$2.5 billion ($4.36 billion).

The scale of the game is different, and so are the potential rewards. As GSW's chief executive last year, Ferrier made $466,000 (C$375,000) and a $20,000 bonus. That's a far cry from the $2 million pay cheque cashed by departed Fonterra CEO Craig Norgate.

The 44-year-old who is picking up the task of stitching together the sometimes feuding cultures of the Kiwi and Dairy Group co-ops, plus the Dairy Board and making the whole thing prosper is from the largely French-speaking city of Montreal, Quebec.

Ferrier learned to speak Canada's official languages at a Jesuit high school that educates the children of Montreal's English-speaking elite.

In 1976, he left Montreal for Canada's east coast, where he studied business. He completed his undergraduate degree at the University of New Brunswick in 1980, worked for three years, then went for more study, gaining his master in business administration at Montreal's Concordia University.

Ferrier wasn't all business at school. "Andrew was a huge rugby player at university, he really loved the game," Gaik recalls.

He was also an avid dinghy sailor in summers spent at a country cottage, so he is well-versed in two sports dear to many of his new colleagues.

Corporate life and advancing years now keep Ferrier off the rugby pitch, but he is still a chippy ice hockey player at weekly winter games in the Toronto suburb of Oakville, and an aggressive runner.

Married for 18 years, he and his wife Danielle have two sons and a daughter. The family plays tennis and ski at a small private club notable for being on the smallest hills in Canada. The slope totals less than 100m.

Ferrier's rise through the ranks at Redpath started on the purchasing side, buying sugar cane and other materials, largely from international suppliers such as Cuba.

That experience proved useful when Ferrier fought, and ultimately lost, a long diplomatic battle with the American Government, which banned all imports of materials with Cuban origins.

At the time, Ferrier's main complaint was the cost of that US embargo would have to be borne by American consumers.

After five years as a buyer, he took over sales and marketing, a job where success is measured by the ability to win over the few large retail chains that dominate the Canadian grocery business.

Competitors - Redpath has two major domestic rivals - noticed the difference.

"This has been a dog-eat-dog industry for many many years, and now a bad situation has gotten worse," grumbled William Brown, president of BC Sugar Refinery, five years ago after losing a contract from one of the largest chains to Ferrier's team from Redpath.

Ferrier became president in 1994 and promptly started a C$35 million ($43.5 million) renovation of Redpath's 46-year-old main factory on the Toronto waterfront.

Like Auckland, Toronto is built around a harbour. Redpath is one of the few factories that remain on the docks.

Surrounded by up-market hotels, tennis clubs and million-dollar condos, the company's four enormous sugar silos and processing plant are a link to the city's industrial roots.

But in a nod to the lakefront tourist trade that came during Ferrier's time as president, the company decided to paint the side of its factory with a block-long seascape mural featuring two life-sized humpback whales.

Said Redpath's Gaik: "Andrew's a tremendous leader, thoughtful, easy to get along with, and strong on foresight, on seeing where the business should be going."

In 1998, the business went the wrong way for most of its Canadian executives.

The Redpath head office in London decided to rework the reporting lines in its foreign subsidiaries. Ferrier and most of his team left.

Barford recalls meeting the displaced president after this "intensely political period" and being impressed, through a summer-long series of meetings, with his operational and strategic skills.

Early in 2000, Ferrier joined GSW as president and chief executive.

At GSW, this year's 15-per-cent rise in the Canadian dollar against the American greenback was a major competitive challenge.

The company, which makes water heaters and building products such as vinyl siding, made 80 per cent of its sales in the United States.

Ferrier had a currency hedging programme which helped cushion the financial hit that faced many Canadian exporters.

On an operational level, GSW tried not to let a weak currency mask weakness in manufacturing.

"We don't need the weak dollar to be competitive," Ferrier said this year. "It's not disastrous for our business when it rises, because we try to focus very significantly on being competitive without the help of a weak Canadian dollar."

GSW doubled revenue and its stock price, turning a small loss into a $10-million profit during Ferrier's first two full years in charge.

A year after he arrived, the new CEO completed the acquisition of a major competitor in Tennessee.

But Ferrier will not be at GSW to see how his plans work out long term.

He will be in New Zealand, running a dairy company which does business all over the world.

Bring on the cows.