By PHILIPPA STEVENSON agricultural editor
A dairy industry mega co-op is inevitable, and delaying its establishment is only costing farmers money, an American academic and agribusiness adviser says.
Cornell University professor of business management Bruce Anderson, the director of the university's co-operative enterprise programme, said the integration of New Zealand's manufacturing co-ops
with their Dairy Board marketing arm was "most definitely" the best way forward for the $8 billion industry.
Professor Anderson, an adviser during industry merger discussions, who appeared before the Commerce Commission at the industry's request, was in New Zealand last week.
He told the Business Herald that from his first involvement with the dairy industry he regarded the formation of a mega co-op as "only a question of when."
The driving reason was the same as that behind the consolidation of the US and European processing and manufacturing industries - the rapid consolidation of retailers.
Some executives called the worldwide merging "the co-operative Big Bang."
Last week Professor Anderson confirmed the trend was continuing as manufacturers looked for ways to deal with powerful, multinational retailers.
However, he said he understood the attitudes of the big companies, New Zealand Dairy Group and Kiwi Dairies, were closer than they had been before, and that once the Dairy Board had completed its deal for a 25 per cent stake in Australian company Bonlac the merger of the New Zealand companies was likely.
By the industry's own reckoning more efficient use of plant and reducing duplicated overheads would save it $300 million a year.
But since merger talks broke down in March, company executives have denied money was being lost, arguing instead that although integration would position the industry to make money, the companies were operating efficiently.
But Professor Anderson said failing to integrate was undoubtedly costing the industry money.
"When co-ops are not exploiting their total efficiencies they are leaving money on the table that farmers could have had ... every year that goes by there's money left on the table."
Professor Anderson said it was typical of co-operatives to not strike while the iron was hot.
"Unfortunately in co-ops it takes something negative in one organisation to realise it is time. They wait too long," he said.
A vertically integrated co-op like the one being contemplated in New Zealand would end a very political situation, Professor Anderson said.
