Strong brands should prove overseas lure

By PAULA OLIVER

Dairy industry leaders have formed a group to handle the controversial sale of half of New Zealand Dairy Foods as the battle surrounding next week's crucial farmer mega-merger vote heats up.

Half of Dairy Foods must be sold to satisfy competition concerns in the domestic market if GlobalCo goes ahead. The stake looks likely to be sold to an international player.

The holder of the valuable Anchor brand, Dairy Foods, is now half-owned by the New Zealand Dairy Group and half by its farmer shareholders.

If the GlobalCo proposal gains approval next week, the mega cooperative plans to take on the Mainland brand now owned by Kiwi Dairies. Its stiffest local competition is hoped to come from a newly independent Dairy Foods, but some industry insiders doubt how strongly Dairy Foods will be able to compete.

Concerns centre on the fear Dairy Foods would be dependent, at least initially, on milk supplied by GlobalCo.

Industry officials yesterday revealed details of a steering committee formed to handle the sale of half of Dairy Foods. It will be headed by Brian Ellison, a former director of the NZ Dairy Group who resigned in January because he did not support the GlobalCo concept.

Other members of the six-man committee include Dairy Group chairman Henry van der Heyden, Dairy Foods chief executive Peter McClure and chairman John Storey.

Mr Allison said the sale was critical in ensuring that Dairy Foods continued to thrive and remain a vigorous competitor. He would not yet elaborate on how the sale process will work.

Dairy Foods discussed listing on the Stock Exchange last year but did not go ahead because of concerns over the value that would be placed on its shares.

Potential buyers will be attracted to Dairy Foods' valuable Anchor brand, last week rated Britain's favourite brand by a panel of experts.

The company also holds the Fernleaf and Fresh 'n' Fruity brands, and will continue to be half-owned by some 7000 farmer suppliers. The farmers received 70 million shares in 1999, then valued at about $120 million.

Australian reports suggest that National Foods may consider the Dairy Foods opportunity.

The Dairy Group, part of the GlobalCo merger, worked to build up a sizeable stake in National Foods last year. It is also likely that dairy companies further afield than Australia will be interested.

Meanwhile, McKinsey and Company's New Zealand head, Andrew Grant, yesterday said that opponents of the mega-merger were misinterpreting the company's work.

Mr Grant said that the Farmers for a Better Dairy Deal group, which appeared to fight the merger just days ago, was making incorrect statements.

He said McKinsey's work recommended that it was strongly in farmers' interests to vote "yes."

The co-leaders of Farmers for a Better Dairy Deal said they had detected real unease among farmers at a series of Waikato meetings.

They offered to receive proxy votes for dairy farmers who could not attend Dairy Group or Kiwi meetings on Monday.