By PHILIPPA STEVENSON
agricultural editor
The dairy industry establishment board has surprised no one with a business plan showing annual gains from a mega co-op of at least $300 million.
The plan, which will be central to the industry's mega-merger application to the Commerce Commission, has been worked on for the past two
months by a 20-member team, including the top executives of the Dairy Board and the Kiwi and Dairy Group companies.
As widely predicted since a preliminary version went to the companies in February, the outcome of the much-delayed plan mirrors several other studies done over the past six years on the potential benefits to the industry from integrating manufacturing and marketing.
An initial study in 1995 predicted annual savings of up to $296 million and a more detailed follow-up report later that year forecast benefits of $270 million to $370 million.
Establishment board chairman Graham Calvert said yesterday that a conservative approach had been taken and he was confident annual gains of at least $306 million were achievable at three levels.
Immediate gains of $105 million could be realised from cost savings from the likes of buying power, administration and staff overheads.
Benefits from improved production planning and co-ordination between manufacturing and marketing were estimated to be $81 million.
The benefits of an integrated industry over the current system would realise a further $120 million.
Mr Calvert said that would add a further 20c a kilogram of milk solids to the payout to New Zealand's 14,500 dairy farmers, but the Kiwi and Dairy Group companies have warned their shareholders the effect would not be immediate.
Dairy Group suppliers were told costs in the first two years, including staff redundancy payments of at least $81 million, meant they would get only an extra 2c a kilogram in the first year and 17c in the second year. The full 20c - about $10,000 for an average farmer - could be realised in the third year.
