Fran O'Sullivan: Major restructure welcomed

Theo Spierings has confirmed the review will result in a refocusing of some staff into sales roles.

Hard-pressed dairy farmers will be pleased to learn of the major restructure being spearheaded at Fonterra by chief executive Theo Spierings and consultants McKinsey.

Plummeting global dairy prices have taken the shine off the New Zealand dairy industry. This has resulted in greatly reduced farmer payouts and a tougher business environment with up to one-third of dairy farmers expected to post losses in the next year.

Not surprisingly, Fonterra - which is the dominant dairy co-operative in New Zealand - has been strongly affected by the trend.

Its farmer suppliers have urged the company to reduce its head office overheads.

Spierings has confirmed that the review will result in a refocusing of staff into sales roles and also increase more in-market jobs to drive up returns.

Hundreds of head office and other support roles are expected to go.

The Fonterra board will discuss the initial topline results next week before a plan is developed to put in action from August.

The dairy sector is being impacted by major volatility after a period of record earnings.

But while current conditions are tough on the farm for those with major debt exposures, the long-term outlook is still positive.

Bankers are assisting their clients through this period.

While some farmers have major exposures, the low interest rates and a lower exchange rate are relieving some of the pressure.

At the annual Fieldays - which got under way at Mystery Creek yesterday - the general mood was still relatively positive. Farmers have been through volatile times before.

There was still a sense that while there is now greater global competition, the long-term story for NZ dairy is still good given the appetite for first-class proteins from growing numbers of middle-class consumers.

At a breakfast briefing to launch KPMG's Agribusiness Agenda 2015, report author Ian Proudfoot talked about how it was necessary for NZ's agribusinesses to "put themselves in the customers' shoes".

It was also essential to look at where the value accrues in the value chain and try to move closer to where the customers are, instead of "concentrating assets in stainless steel".

A number of those present at the KPMG Agribusiness Leaders breakfast were concerned at Fonterra's ability to hold on to all its suppliers.

Particularly in an environment where well-capitalised competitors could offer competitive returns.

In next week's The Land, I'll have a report on the information gathered at Fieldays.