Farming industry evolving to stay ahead of the herd

Farmers once supplied dairy factories just down the road. Now they are to be involved in the country's biggest company. WARREN GAMBLE talked to people who have lived through the changes.


At the old Te Aroha butter factory GlobalCo is a world away.

The faded, wooden building on the edge of the Waikato town is far from this week's gleaming arrival of New Zealand's biggest company.

Only rusting equipment and a stainless steel tanker body parked in the grass next to the Waihou River remain from its dairy heyday.

But for 73-year-old Alan Cooper the factory his grandfather built in the early 1930s - and the one he closed half a century later - is part of GlobalCo's heritage.

Its rise and fall mirrors the cooperative and competitive urges which have seen the dairy industry evolve from hundreds of small farmer groups - 474 in the mid-1930s - into one huge national company.

Cooper, who still lives on the Te Aroha farm his grandfather bought at the turn of the century, voted for the merger this week between the Hamilton-based New Zealand Dairy Group and Taranaki's Kiwi Dairies.

He simply believes it will be better for farmers' business, allowing them to compete in a world market populated by multinational heavyweights.

It is the fifth merger he has been involved in during 30 years - including 20 on the Dairy Board - of dairy company politics. Any farmer will tell you it is the most bruising brand there is.

He sees GlobalCo as a logical evolution of the dairy cooperatives farmers like his grandfather, Herbert Osmond Cooper, began in the 1920s.

Cooper senior founded the Te Aroha-Thames Valley Dairy Company in 1930.

He had settled in the district 30 years earlier, one of his 11 children being born during the horse-drawn buggy ride from Thames.

Alan Cooper took the reins at the family farm in the 1960s and became a director, and eventually chairman, of the company.

His first merger happened in the early 1970s when the Te Aroha-Thames Valley company took over its isolated Mercury Bay counterpart.

In the late 70s he was faced with the tough call of closing the Te Aroha factory his grandfather built. Twenty jobs were on the line, a large employment chunk in a small town.

To keep pace with the rival Morrinsville butter factory it needed modern equipment.

"In the end we were not prepared to spend more money on capital for a plant which would not have been big enough to be competitive," he says.

And in the end, that is the same reasoning which swayed farmers to go for GlobalCo this week.

But Cooper does not want some of the advantages of competing smaller cooperatives to be lost in the industry giant.

A bonus of the Waikato dairy rivalry was the move to added-value products in the 1970s and 80s, he says.

Because the bigger firms such as the New Zealand Dairy Group (then the New Zealand Cooperative Dairy Company) had the size and cost advantage in the basic milk and butter products, the smaller independent firms went for newer, higher-value extracts.

Among them were caseinates, milk proteins which now have a multimillion-dollar export market for use in health, sport and baby foods and drinks.

Cooper says the other advantage of smaller cooperatives was the direct - at times uncomfortably so - accountability to farmers.

His wife Nolene recalls one meeting in the district when a neighbour stood up at the back of the hall and told her husband: "Alan, if you don't pull your socks up you won't be here next year."

The final payout for milk solids, made on July 20 each year, was the bottom line.

"All the play and rumour mongering was done in that last month," Cooper says.

"If you were below [your rivals] you would lose supply. You had to keep on the ball product-wise and cost-wise or you were dead in the water."

Across the green Waikato plains to the south-east, Ralph Dearlove shared a similar farming lineage.

He has deeper concerns about what could be lost in the corporate devouring of dairy companies.

Dearlove, who has lived in Auckland for the past five years, grew up on the family farm at Te Poi, near Matamata.

Before the arrival of tankers in the late 1950s, he recalls his father's old Chevrolet truck taking 20-gallon cans of milk to the quaintly named Sunny Park dairy company in Te Poi.

The factory was the focus of the community's 100 or so farmers; everyone knew each other and knew the factory's management.

Dearlove worked on the factory floor for a year, skimming casein into canvas bags that were then pressed under cans of water before being dried.

The first of five mergers began in 1963, with nearby Hinuera joining Sunny Park.

Dearlove, who became a director of the company a decade later, echoes Cooper's experience of accountability.

"Every farmer knew his director. We were only a telephone call away. That to me is one of the things GlobalCo is going to lose. The farmers are out on a limb to my mind.

"We really had to front up and it was good."

The farmer pressure also meant companies had to stay ahead of their rivals, particularly the voracious New Zealand Dairy Group, known simply as the "big company."

Like Te Aroha-Thames Valley, that meant moving into added-value products such as caseinates.

It also meant more mergers to compete with its large neighbour. In 1982, to win a Dairy Board contract for cheese, Sunny Park-Hinuera merged with the newly joined Cambridge-Te Awamutu companies, forming the Waikato Dairy Company.

That led to the closure of the Sunny Park site, and relocation of most operations to Hautapu, near Cambridge.

Expansion of that site left the company with heavy debt, a factor prompting the late 1980s merger with the Morrinsville-Thames Valley cooperative to form Waikato Valley.

That made it the sole challenger to the New Zealand Dairy Group in the region.

In a bitter 1990 battle amid allegations of unfair influence, the Hamilton-based firm got its way, absorbing Waikato Valley.

From then on, Dearlove says, GlobalCo was inevitable and he would have voted in favour for that reason alone.

He believes the downside of not retaining competition, either Waikato Valley or an earlier proposal for four regional Waikato companies, is a loss of innovation.

The pressure from the grass roots to achieve maximum payouts forced directors to think laterally and try new things.

"You can pay a manager a big salary now but it doesn't make him innovative."

As an example, he believes the extra volumes of milk now flowing from converted dry stock farms is being wrongly used for bottom end commodities rather than added-value products.

He also worries about the loss of the cooperative spirit forged by the dairy pioneers in the 1920s and 30s when pooling resources ensured survival. Farmers were now so far removed from the head office that many did not know what was going on.

"If the [new] board can manage the business, can put the measurements in to show whether management is doing the job, yeah, it's the ultimate cooperative. But when you look at some of the other big businesses in New Zealand, they are absolute disasters.

"I have some real fears about having everything in one basket. If you get a crook chief executive or a board that can't handle it, or one that is out of touch with owners, they do that at the risk of the total industry. That's really scary."

Cooper hopes a proposed council representing farmer interests will keep the pressure on directors to perform.

One company will stop the duplication of production, making New Zealand more responsive to international market demands. It will also stop the game-playing at national level between NZ Dairy and Kiwi which had tainted the 10 years, and stalled product development.

Alan Cooper thinks his grandfather would have agreed. In his day the dairy export market was controlled by the silver-tongued dealers of London's Tooley St, and size was bargaining strength.

"He was pursuing a very cooperative approach, and that's what came out from farmers last Monday."