Strategist a real romantic

By LIAM DANN

Ah, the power of love.

Without it the dairy industry's most important strategic thinker might still be building roads on the rugged West Coast of the South Island.

Graham Stuart is Fonterra director of strategy and growth: a high stakes job where success or failure could pull the nation's prosperity along for the ride.

Things could have been very different.

On leaving Kings High School in Dunedin in the 1970s, he went out to work on the road gangs - and loved it.

But the desire to marry his girlfriend back in Dunedin convinced him to settle down and study accounting at Otago University.

"I had to get a regular job."

After a first class honours degree, he never looked back.

Today, he is the man to turn Fonterra's grand vision into reality.

So, when Fonterra wants a slice of the Chinese consumer market, it is Stuart's job to make it happen.

For months, he has been overseeing a deal to take a major stake in one of China's top 10 dairy companies - Sanlu.

Fonterra has a big presence in China through sales of bulk milk powder but when it comes to more expensive products that line the supermarket shelves, it is limited to just a few of the major cities.

Sanlu will give it far wider distribution for branded products such as yoghurt and dairy drinks.

In return the Chinese will draw on Fonterra's marketing expertise.

For Stuart and his team, it is a fiendishly complex deal, with the grey areas of Chinese commercial law meticulously examined to ensure Fonterra gets what it thinks it is getting.

It has been on the verge of completion for almost six months but the fine print is not to be rushed.

He is working with Mark Wynn, managing director for Fonterra's consumer product business in Asia.

He and Wynn worked together at the Dairy Board before it became part of Fonterra and the Sanlu project is the culmination of plans the pair dreamed up in the late 90s.

Driving the growth of branded products, which add value to the raw milk powder Fonterra produces, is one of the biggest tasks Stuart faces.

It is only by growing that part of the business that New Zealand's dairy farmers can escape the ups and inevitable downs of the commodity price cycles.

But Stuart says it is just one part of the equation.

Fonterra's grand strategy involves two very different mindsets.

"It's about being a ruthlessly efficient commodity player that absolutely capitalises on New Zealand's natural advantages," he says. "But the other side of it is to be this dynamic value-added business."

As much as Stuart is striving to develop the value-added business, he maintains he cannot afford to ignore commodities.

There are economic commentators who seem to think you can just flick a switch and become a value-added economy, Stuart says. "The reality is that this is hard graft."

Fonterra goals are aggressive for developing the percentage of value-added products it sells. "The aim is to grow value-added at 15 per cent a year and the consumer business by 8 per cent a year," Stuart says.

Despite that, if national milk production continues to grow at 3 per cent a year, in 10 years time Fonterra will still need to move almost the same amount of commodity products as today.

"You look at the growth the industry has achieved in the past 10 years and project that forward another 10 years," Stuart says. "That's a pretty intimidating vision of the future ... but incredibly realistic."

He points out a dollar invested in the dairy industry in 1985 would be worth almost $7.50 today compared with a dollar in the stock exchange which has grown to about$3.

"We've done that despite the fact the payout has gone up and down," Stuart says.

And despite the fact that for at least three years the industry has been distracted by the mega-merger that created Fonterra.

"The potential of this thing is now as great as it's ever been," Stuart says. "And we're in a position now to fully unleash that potential."

After Fonterra was established Stuart spent two years as chief financial officer.

It's a role he still nominally fills - at least until the recruitment of his replacement is completed.

But last December - in one of his first decisive acts as the new chief executive - Canadian Andrew Ferrier reshuffled the management team, appointing Stuart as director of strategy and growth.

It was an awkward title that sounded like a push sideways, but Ferrier was quick to dispel that suggestion and in terms of influence, it was certainly a step up.

"I'm in a really neat position of being able to spend more time than the average executive thinking about the long term," Stuart says. "As CFO you are pretty focused on last month's results and next month's results ... the strategy job is the complete opposite."

Fonterra's grand vision is developed at a board level with input from throughout the organisation.

It is most clearly articulated by Ferrier, Stuart says.

"My job is to take that vision and turn it into strategies and take those strategies and turn them into executable plans," he says.

Accounting for about one-third of New Zealand's export revenue Fonterra is the one local company with the scale to shift the fortunes of the entire economy.

"Every day you are in the dairy industry there is a sense of satisfaction," he says. "You're always aware of the significance of the industry to the pastoral economy and the significance of that to New Zealand."

PROFILE

* Name: Graham Stuart.

* Age: 47.

* Education: Bluff Primary, Kings High School (Dunedin), BCom (honours) Otago University, masters degree from MIT in the USA.

* Career: Roadworker,

Mainland Cheese - chief executive;

Lion Nathan - managing director international division;

NZ Milk - director responsible for mergers and acquisitions;

Kiwi Dairies - general manager finance and strategy;

Fonterra - director of strategy and growth.

* Family: Married with three children.