Between the lines - Obstinacy destroys future of dairying

By ROD ORAM

Dead are the ambitions of retaining a New Zealand-owned, internationally competitive dairy industry. The losers are farmers and the country at large.

The death notice was delivered yesterday by Graham Calvert, the man unlucky to be the last to try to bang sense into heads of dairy industry leaders.

Come tomorrow he will pull the plug on the life-support system keeping alive hopes of a merger between the Dairy Group and Kiwi co-ops.

Forget the long odds of a last-minute reprieve. Even if the co-op chairmen did shake hands on a deal by Friday, it would be far too late. The merger has been brain-dead for some time thanks to the intransigent, poisonous positions of industry leaders.

The easy part of mergers is the initial agreement. High on hopes for their combined future, the parties jump willingly into bed. The hard part is making a merger work. How will the company be structured? Who will be on the board? Who will take plum executive roles? What's the strategy? Where will it be headquartered?

The issues are endless and can be settled only through compromise and common intentions of the merger partners. Moreover, they have to be thrashed out while the first flush of enthusiasm runs strong. The new organisation has to be up and running within three months. Give it six months and the old rivalries resurface and begin to undermine the venture.

Yet the dairy industry has dickered for years over just the merger agreement, even though the common sense and financial benefit were staring it in the face. On average, farmers' incomes would be boosted by $24,000 each thanks to cost savings and synergies.

That's what farmers wanted but leaders failed to deliver. Why? Because decades of inbred rivalry made the leaders incapable of realistic appraisal of their businesses. They were so arrogant they couldn't even bring themselves to call in an arbitrator.

The warring factions will now go their own ways, trying to survive as minnows in a pool of sharks. Nestle, the Swiss-based group, already has dairy revenues three times the size of the New Zealand industry's.

The minnows will also fight over the common assets. Crucially, how will they carve up the Dairy Board? However they do it, the Dairy Board will be seriously weakened in the international marketplace.

No doubt Kiwi and Dairy Group will find international partners but they will be junior parties with much diminished negotiating positions. The farmer owners could even earn a better living out of being allied at last with sensibly run businesses.

But it won't be as good as the mega co-op could have delivered. And the dairy farmers of the Waikato, Taranaki and elsewhere around the country will be dancing to a foreign tune.