Between the lines: Sad end to a timely vision

Tomorrow the Dairy Industry Restructuring Bill dies, and buried in the legislative graveyard alongside it will be hopes of a 90s-style dairy company mega-merger.

You may remember the rhetoric and big round numbers that were tossed around all last year.

The merger of up to eight manufacturing co-operatives and the exporting Dairy Board was to turn the $7 billion industry into a $30 billion one in 10 years.

Integrated and focused, the new-look company would become one of the top three global dairy traders - by gobbling up top players in other countries and re-branding them in New Zealand colours.

It was to be a lot simpler, more efficient and faster way to the top than peddling the home-grown product in a market until it became significant - so-called organic growth.

As well as positioning the industry for the future, the new mega co-op was to immediately benefit the country's 14,000 farmers.

Without divisive and costly inter-company rivalry, it was to make annual gains of at least $300 million from a combination of savings, and productivity and efficiency gains.

The restructuring bill, which will lapse on September 1, was installed by the previous Government to progressively kick out the industry's supportive statutory struts once the mega co-op was up and running.

But it never even crawled after the two biggest dairy companies, New Zealand Dairy Group and Kiwi Dairies, snarled their way to limboland. No mega co-op, no clear way forward.

The acrimony continues.

Even the passing into oblivion of the bill that the two companies had rendered useless by their failure to merge has been cause for sniping.

Dairy Group said it would have been happy to ask the Government to extend the bill's life, but Kiwi wouldn't agree.

Kiwi said Dairy Group alone had that view.

Kiwi was advised to work with the new Government on a fresh bill which tackled new issues.

Since the March collapse of the merger talks the Dairy Board has forged ahead with an overseas mergers and acquisition programme.

Kiwi has done the same with its proposal to take over Australian company Peters and Brownes and merge it with domestic company Mainland.

By comparison, Dairy Group's light has dimmed.

Its payout to farmers was low, prompting some of them to half-seriously suggest they would welcome a Kiwi takeover, never mind a merger.

Its domestic company, Dairy Foods, has struggled and stalled plans for Australian ventures.

The cultures of the companies remain different.

Possibly the only compromise - a key one - is that both now espouse the view that an integrated industry is, indeed, the only way forward.

But progress is being made in minuscule steps.

Only last week, the Dairy Board and two company chairmen said in a short, enigmatic statement that they had agreed in principle to develop a commercial structure "to facilitate the implementation of the industry's strategy."

No detail followed.

A consultant to the industry, Andrew Grant of McKinsey, believes faster progress would have been made if the changes to the structure had been driven by grassroots farmers.

In the wool industry, which McKinsey also recently advised, the message for change won enthusiastic farmer support, and Mr Grant believes that keenness ensured the process was not hijacked by political interests.

He remains hopeful, though, that the dairy industry will achieve its goal.

"They always get to the right answer, they just take twice as long as they should."

The scale of the dairy industry's change has the potential to make it New Zealand's Nokia - the former Finnish gumboot manufacture, now one of the world's largest cellular telephone makers.

But can the rest of New Zealand wait?