New Fonterra man upbeat and ready to learn

By PHILIPPA STEVENSON agricultural editor

The new leader of New Zealand's biggest company plans to get down and personal, whether in Waikato or Washington, the Beehive or Brussels.

Fonterra chairman Henry van der Heyden, 45, promises a style that is open, honest and relaxed, and a tone that is conversational not lecturing.

The down-to-earth manner will apply whether he is discussing dairy industry issues with a fellow farmer or bending the ear of politicians and officials in the US and Europe.

Van der Heyden told the Business Herald he intended to follow the example of past industry notables such as Dairy Board chairmen Sir James Graham and Sir Dryden Spring and press New Zealand's case among key world decision-makers.

"Particularly, what the Europeans do with export subsidies is critical to what happens to our payout. I've really got to get back out there."

His 13-member board would also look to build better relationships with joint venture partners such as Nestle and Dairy Farmers of America.

But van der Heyden's talk of treading the world stage is meagre compared with his emphasis on delivering results to Fonterra's 13,000 farmer shareholders.

The former chairman of one of Fonterra's formation companies, New Zealand Dairy Group, became chairman of the new, $14 billion co-operative following Thursday's first annual meeting.

Inaugural chairman John Roadley announced his resignation last month and will leave the board in December.

Shareholders have had two strong messages for the company, van der Heyden said.

Riled by revelations of million-dollar executive salaries, a head office cost blowout of $64 million and a consultants' bill of $72 million, farmers want costs kept under control.

They are also anxious about being disenfranchised by the company's huge size.

He said both issues could be addressed by his two priorities - delivering good performance from beyond the farm gate, and making sure the company lived up to its obligations on the farm. That included the basic function of picking up the raw milk.

Van der Heyden admitted the company "dropped the ball" on milk collections at the start of this season, and reporting its annual accounts, including a $34 million discrepancy. Both were examples of the tough job of integrating Fonterra's three formation enterprises - Dairy Group, Kiwi Dairies and the Dairy Board.

"It was just so bloody hard to do - different systems, different people, the different way we did things. We are just having to find the Fonterra way."

A tight focus would go on Fonterra's costs, especially in delivering the benefits expected from the merger. Farmers had now been told they could grow from the forecast $300 million a year to an annual $400 million.

He would be disappointed if consultant costs were not reduced enormously.

"There is still duplication in the business. There have been a lot of one-off costs with redundancies, etcetera, but now it is time to take the costs out of the business."

He was confident the board would unanimously endorse a global strategy - dubbed Project Galileo - by the end of the year. It would be a mixture of acquisition and consolidation.

"We've got to get this business running like a Swiss watch, but there's also got to be the growth that is actually adding value to our farmers' milk."

Van der Heyden is adamant the former inter-company rivalries are no longer a feature of his board.

Once membership changed to nine farmer and four appointed directors with Roadley's departure, neither former company had a controlling group.

There would be five former Dairy Group directors, four from Kiwi and four independent directors.

"We've got such a nice balance, it is so easy to get unity around the board now."

Common sense, logic, judgment and commercial rationale prevailed, he said.

"Everybody's acutely aware of the issues we have and we've just got to go about building it and delivering on what we promised."

He said the person chosen to fill the seat of the fourth appointed director would have strong auditing and accounting experience.

Van der Heyden has been visiting all the directors and reviewing the membership of board committees.

His recommendations to the first board meeting he will chair next month will include his nominees for deputy chairman, the make-up of existing committees, and that another be set up to oversee representation to Washington and Brussels.

Greg Gent, who van der Heyden leapfrogged to gain his new seat, is currently deputy chairman.

No discussion was planned over the large board because there was no appetite for change among shareholders, he said.

"This is the size of the board. This is the make-up of the board. The energy will go into making it work rather than changing it."

There is a high degree of faith among farmers that van der Heyden is the man to deal with a lot of Fonterra's issues.

He and others have described him as a no-nonsense Dutchman. He is proud of his Dutch heritage, believing it to be at his core personally and in business.

His parents arrived in Putaruru from Holland in 1955 to be dairy farmers and to build a future for their family. Van der Heyden is the second son of a family of four boys and three girls. All but one of the seven is in the dairy industry. Some share farm investments and there was a time when they shared cars and even bank accounts.

"Family, Putaruru, dairy farming - those are the things that really matter to me," he said.

His father, Harry, inspired him with talk of family unity and working together. "So that really works into the co-operative spirit. To me it's all the same thing," he said, adding "milk runs through my veins."

He has four dairy farms and is in partnership in a fifth with his brother Michael.

But now he and his wife Jocelyn live in Hamilton to be near children at school and university. He hopes to get back on the farm one day.

A 1990 meeting with then Dairy Board chairman Sir James Graham started van der Heyden on the path off the farm that has culminated with his heading the world's fourth-largest dairy company.

Graham said the van der Heydens had taken much from the industry and it was time to give something back.

In 1992, when Dairy Group was in tumult over the controversial departure of high-profile chief executive Mac Calvert amid allegations of backhanders, van der Heyden stepped up to the plate in a ward election.

Farmers from his area recall him as green but hardworking and calling regular meetings in his home to give them the latest information from board meetings.

They are among those who have the most faith that he is the right man for the much bigger job.

"It's nice when people have confidence in you but you've got to deliver," van der Heyden said after hearing the opinion of him.

He described himself as a competitive person who did not like to come second - a streak, he's been told, related to his family position. Now, the second son is the top Fonterra dog. But nothing has changed about his goals for his company.

"The two things that I said in my letter [in the 1992 election] were [I wanted] to maximise payout - which is performance - and through communication make farmers feel part of this co-operative. Those two fundamentals are still there today."

Fonterra's future looks bright. The global demand for dairy products is picked to outstrip supply despite pending European Union enlargement being expected to unleash farm productivity in some of the eight eastern European countries to join the union, along with Malta and Cyprus, in 2004.

Fonterra, like the existing EU countries, believes it will gain from an associated rising affluence among new EU members, but will also have to handle growing competition from Australia and South America.

Van der Heyden is upbeat - "I'm very positive about the future of this industry" - and ready to absorb lessons close to home.

The much smaller but top-earning Tatua and Westland dairy companies served as a benchmark for Fonterra and he expected a greater emphasis in Fonterra's product mix of the high-tech, high-returning products with which Tatua had known such success.

He acknowledged that shareholders still had strong feelings about their regional company heritage "and I'll be judged on whether the regions have been unified.

"And that will come down to whether we deliver on the commercial performance, and make farmers feel part of the co-op. That's what I want to be remembered for."