Tatua head outlines frustration at industry

By PHILIPPA STEVENSON

Standout dairy company performer Tatua has painted a grim picture of dairy industry leaders at loggerheads.

The chairman of the Waikato co-operative, Dr Alan Frampton, said in his annual report that the 1999-2000 year had been disappointing and frustrating.

The widely supported and energy-sapping mega co-op proposal had come to nothing and other industry forums had also suffered dissension.

"The chairmen's forum has continued to meet monthly but has been unable to resolve major issues," Dr Frampton said.

New pricing mechanisms introduced to better signal to the manufacturing cooperatives the profitability of their dairy products sold internationally "have not had the hoped-for results."

"[They] have resulted in time-consuming and often acrimonious debate at the chief executive officers' forum."

Dr Frampton said the failure of Kiwi Dairies and New Zealand Dairy Group to merge and restructure the industry must mean that the industry strategy which led to the proposed mega co-op, "was not convincing or compelling enough to allow the appropriate structure to be formed."

The merits of the strategy needed to be questioned, reviewed and possibly modified.

The strategy outlined how the industry could evolve from a $7 billion industry to one worth $30 billion within 10 years, saving $300 million worth of costs each year along the way.

"In recent months it has become clear that the Dairy Board has resumed a leadership role and has 'taken over' aspects of the strategy and started to implement it with joint-venture and partnerships proposals in Australia and USA.

"Whether this leadership role can be sustained will depend crucially on whether the differences ... existing between Kiwi and the New Zealand Dairy Group can be resolved."

Tatua continued to believe its future lay outside the mega co-op and had tried to negotiate new commercial arrangements with the Dairy Board, which had turned them down.

The board had said it could not enter a new deal with Tatua until the industry's final structure was known - "despite the obvious fact that large ongoing business contracts and arrangements are being negotiated with others all the time," Dr Frampton said.

Regardless, Tatua would further develop its standalone capability during 2000-2001, possibly including staffing and financing an international marketing operation.

Chief executive Mike Matthews detailed some of the efforts Tatua had made towards operating on its own, including rebranding work and registering the company name in world markets and buying computer software to handle export documentation, costings and modelling.

Towards the end of the year, the company had recruited new sales and marketing staff for its expanding export business.

Tatua, which has 136 shareholding suppliers, had record volumes of milk during the year.

Its 95.7 million litres was more than 12 per cent up on the previous season, and 4.2 per cent greater than its previous best in 1995-96. It paid the farmers $4.20 a kilogram of milksolids.

In contrast, neighbouring Dairy Group's 7800 farmers supplied 6.8 billion litres of milk and were paid $3.75/ a kilogram.

Tatua's revenue for the year was $75.7 million, 11.9 per cent up on the previous year's $67.6 million.