Laying the ghost of NZ's dairy past

By PHILIPPA STEVENSON

Between the lines

Five years ago a pan-New Zealand dairy mega cooperative would have been the seventh biggest dairy company in the world. If it formed today it would be ranked 14th.

The slippage shows that while the New Zealand industry dithers, overseas dairy companies have got the message - get bigger or die.

Across the globe firms with histories of intense rivalry have overcome differences to merge, like MD Foods and Klover in Denmark and the four co-operatives that now make up Dairy Farmers of America.

In Denmark, independent professionals assisted each company to produce fair and comparable evaluations that could be agreed to by both negotiating parties.

Merger talks took four months and the Danes also overcame Commerce Commission objections.

MD Foods has now moved on to form Europe's first transnational boundary dairy co-operative by merging with Sweden's Arla Dairy Co-op and is looking at Finland's largest co-op, Valio.

In America, the four rivals used an independent arbitrator to reach a merger decision in just four months.

Food companies with huge dairy divisions like the Italian giant Parmalat are taking over smaller fry at the rate of about 100 a year.

Meanwhile, like two bulls in a paddock snorting and pawing the earth, New Zealand's big two seem more inclined to hide behind noise and dust clouds than come clean with some facts.

Last week's call by Dairy Group chairman Henry Van Der Heyden for fast tracking the mega co-op business plan so shareholders could get an idea what the mega co-op would be worth, and how much it could pay them, has to be an indictment on all industry leaders.

Dairy Farmers of NZ chairman Charlie Pedersen was appalled that the figures were not being computed at speed. If not, "what on earth is going on?" he asked.

The answer must lie in the companies' culture clash, and behind that personality conflicts.

Traditionally, these two old bulls have done things their way and always come out on top but what has worked with weaker rivals is not working now. They are attempting to build something for the new century with methods from the outgoing one.

Their rejection of an arbitrator suggests that ego may also be a problem as industry leaders hang in there in hopes of claiming credit for a deal, or retaining that top job.

Perhaps the solution lies in the season of goodwill.

In Dickens' classic A Christmas Carol an arbitrator, in the form of the ghosts of Christmas past and future, did the trick on Ebenezer Scrooge.

A few home truths, a look at the possible consequences and Scrooge became the good man of the hour and his name became famous.