Time long past for chewing the cud

By Philippa Stevenson

It took just four months to nail the deal to merge four American dairy co-operatives and form a mega co-op nearly double the size of the New Zealand industry.

Contrast that with the four years since such an idea was first mooted here, and almost an entire 12 months of talks which have failed to deliver anything more than promises to keep talking.

This week is crunch time. Kiwi Dairies chairman John Young and Dairy Group chairman Henry Van Der Heyden have promised to announce "an agreed position" to their shareholders.

Woe betide them if they agree to disagree and go their separate ways, or commit to even more talking.

Dairy farmers are impatient for progress. Having bought the rationale that an industry integrating manufacturing and marketing is essential for survival, most now equate progress with the mega co-op.

Some differ, especially in the Waikato, where the seeds of corporatisation found fertile ground. Others are cautious about sacrificing too much money now for the sake of plans that may not deliver promised rewards. All want to see some real figures.

But the sentiments expressed last week by former Dairy Board chairman Sir James Graham are widely felt.

He said Dairy Group and Kiwi's fight over company valuations was "of less importance to me than the damage of not achieving a unified industry which concentrates on its marketing realisations, its cost reductions, and as a result an improved return to all its shareholders."

Enmity and distrust can be overcome. American lawyer Mike Fayhee, who acted as facilitator in the formation of $US8 billion Dairy Farmers of America co-operative, said attitudes could change amazingly fast.

"We get along marvelously with the Russians now. And the Germans and the Japanese are our best friends."

The key to overcoming old rivalries in the American merger was common recognition of the challenges the industry faced.

It was then a case of understanding "what you want the new organisation to do, and why it will be in a position to do it better than the existing organisations. The whole must be greater than the sum of the parts."

The American industry faces the same challenges in the US market as the New Zealand industry does globally.

Farms are growing in size and shifting from traditional dairying regions. New technology in transporting and product formulations means there is no necessity to source and sell regionally.

Consolidation of retailers is hastening the move to a national market.

There are differences between the two industries, too. The Americans did not need to sell off a money-maker like local market company Dairy Foods to satisfy a Commerce Commission.

But with fresh thinking they successfully re-invented themselves.

This week will determine whether similar freshness will blow through the New Zealand industry.