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Fonterra
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Fonterra is New Zealand’s largest multinational company with revenue exceeding NZD $19.5 Billion. As a co-operative, Fonterra is owned by over 11,000 farmers, it is also the 6th largest dairy company in the world.
erra was established in October 2001 through a merger of the two largest New Zealand dairy cooperatives and the New Zealand Dairy Board. The purpose of the merger was to create a single company to manage the supply chain for a significant proportion of the New Zealand dairy industry.
The company has an annual turnover of around US$8 billion.
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Encyclopedia
Fonterra is New Zealand’s largest multinational company with revenue exceeding NZD $19.5 Billion. As a co-operative, Fonterra is owned by over 11,000 farmers, it is also the 6th largest dairy company in the world.
History
Fonterra was established in October 2001 through a merger of the two largest New Zealand dairy cooperatives and the New Zealand Dairy Board. The purpose of the merger was to create a single company to manage the supply chain for a significant proportion of the New Zealand dairy industry.
The company has an annual turnover of around US$8 billion. Its core business consists of exporting dairy products under the NZMP brand (95% of its New Zealand production is exported). It also operates a fast-moving consumer goods business for dairy products, Fonterra Brands. Fonterra has a number of subsidiaries and joint-venture companies operating in markets around the world.
In 2005 the company purchased a large factory in Dennington, Victoria, Australia from Nestlé, after they moved out of the collection of milk from farmers and the manufacture of powdered milk in Australia. Also in 2005 the company made moves towards purchasing Australian companies Dairy Farmers and National Foods. It also converted its 50 per cent stake in Victorian dairy producer Bonlac to full ownership. At this time $1 billion of Fonterra's revenue was from Australian sales, which was 14 per cent of the dairy products it sells around the world.
In November 2007 after a lengthy capital review the company's board recommended to farmers that its assets, liabilities and operations be split from the co-operative and listed on the New Zealand Stock Exchange. Under the plan, which had been rumoured for months, the co-operative would retain two-thirds of the company, 15% would be given to farmers (which they could sell or retain), and 20% traded freely. Doug Woolerton, a New Zealand First MP, branded the plan "a disaster for farmers and for our economy as a whole", but other commentators said it would breathe life into the sector and the New Zealand economy as a whole. The announcement started a two-year review. If the board's plans are adopted, Fonterra is expected to be New Zealand's largest listed company.
Fonterra have recently suggested that they will move their US headquarters from Harrisburg, Pennsylvania to Chicago, Illinois adjacent to the Chicago O'Hare International Airport for close proximity to a wide range of international flights, proximity to public transportation, their dairy suppliers and clients (Kraft Foods Inc. and General Mills Inc.) in the Midwest.
In June 2008 the company acquired the yoghurt and dairy dessert business of Nestlé Australia.
Proposed changes to capital structure
In November 2007 the board of directors announced a two-year consultation programme regarding their preferred capital re-structuring option: putting the business operations in a separate listed company, with the co-operative maintaining a controlling interest. The aim was to give more access to funds for global growth.
Praised by some as a bold move which would allow better access to outside capital, the proposals encountered significant opposition from both farmer shareholders and the government (who would be required to pass enabling legislation). Despite including a range of safeguards, farmers were clearly concerned at the risk of losing control; in what was sometimes described as a demutualization.
The board responded in 2008 with a request for consultation and discussion.
Brands
Key brands
Brands in New Zealand
- Anchor (milk)
- Anlene
- Tip Top and Kapiti (icecream)
- Country Goodness
- Yoghurt-2-Go, De Winkel, Fresh and Fruity, Anchor Symbio (formerly Metchnikoff), and Slimmers Choice (yoghurt)
- Anchor Calciyum
- Primo (flavoured milk), Primo Extremo
- Mainland, Kapiti, Ferndale and Galaxy (cheese)
Brands in Australia
- Brownes Calcium Plus
- Bega Cheese
- Peters and Brownes
- Riverina Fresh
Business units and subsidiaries
Consumer goods business
- Fonterra Ingredients
- Fonterra Global Trade
Dairy ingredients supplier to the globally traded market
Hospitality supplies
- Fonterra Group Manufacturing
Fonterra's food processing and manufacturing operations
Collect and Distribute milk from farms
Finance, Communications, M&D, Human Resources, Strategy and Information Services.
- RD1 - a wholly owned rural retail supplier. RD1 was formed at the end of 2001 through the merger of RD1.com and the Town & Country Agri-centres, Fonterra's two rural supply companies. With revenue exceeding $440 million, RD1 is New Zealand's largest retailer of agricultural supplies to dairy farmers. It operates 51 stores throughout New Zealand.
Environmental performance
Fonterra has a number of initiatives relating to environmental protection. Its environmental policy states that "Fonterra shall demonstrate a global commitment to protecting the environment. Sustainability, good environmental practice and environmental improvement are cornerstones of Fonterra’s environmental commitment."
In 2003 Fonterra was a signatory to the Dairying and Clean Streams Accord, which sets a timeframe for the improvement of water quality on farms. In February 2008 the inaugural Fonterra Environmentalist of the Year was announced at the Beehive.
In 2006 Fonterra was asked to 'clean up it's act', instead of obtaining consent to discharge 8,500 cubic metres per day of wastewater into the Manawatu River.
In 2007 Fonterra won the following in the Energy Efficiency and Conservation Authority, Energywise Awards:
Transpower Project Innovation Award
Winner: Fonterra Co-operative Group - Whareroa heat recovery loop
Contact Energy Management Award
Winner: Fonterra Co-operative Group - Energy efficient project management team
Fonterra is leading the way with the development of biofuels in New Zealand with waste Whey being used to make Gull Force 10. This utilises a waste source that would otherwise be disposed of by dischargeing onto land or into the sea, so it does not lead to less food being created or rainforest destruction like many other biofuels.
Sanlu milk scandal
In September 2008, one of the biggest dairy companies in China, the Shijiazhuang Sanlu Group, 43% owned by Fonterra, recalled more than 10,000 tonnes of infant milk powder after a food safety scandal involving contamination by melamine. Several children have died and thousands of others have fallen ill with kidney and urinary problems after drinking the adulterated formula: a 5-month-old boy and an 8-month-old girl from Gansu Province on 1 May and 22 July respectively—long before the incident become public.
Fonterra became aware of problems on 2 August 2008. The company notified the New Zealand government on 5 September after failing to secure a public recall. Three days later, Prime Minister, Helen Clark had Beijing officials alerted directly. Clark said: "I think the first inclination was to try and put a towel over it and deal with it without an official recall."
On 21 September 2008, an editorial in the New Zealand Herald questioned the "moral courage and leadership" of Fonterra chief executive Andrew Ferrier. Citing Fonterra's number one corporate value, the journal question why it took nearly a month after it had become aware of the contamination before it notified the government. It said that Fonterra's press release had been "minutely scrutinised by lawyers and spin doctors, and that the company was far less interested in 'moral courage and leadership' than it was in preserving its own position." The next day, Helen Clark, the Prime Minister agreed that the company had been too slow to speak out: "...no doubt their shareholders will want to hold the company accountable for that. Ferrier was also condemned by Business Day for his "silent hand-wringing", when he should have immediately blown the whistle. Ferrier denied that Fonterra had any knowledge of revelations that Sanlu lied for eight months to hide complaints about its melamine-contaminated baby formula. Chief executive Andrew Ferrier said, "Clearly there are very painful lessons here for Fonterra," "If one partner did not tell the truth to the other ,you have a critical breakdown in that relationship". He added later that: "Fonterra is gun shy over the whole thing." He claimed that people deeper down in their organisation in China could have been "fooling us". However, Access Asia, a Shanghai-based consumer consultancy, said Fonterra was a classic example of western executives in China "believ[ing] advice in business books that they must avoid making their local partners 'lose face' at all costs." It suggested that Fonterra paid a heavy price in write-offs, a wrecked business and public condemnation.
On 24/9/2008, Mr van der Heyden, Chairman of the board, during a press conference, said the scale of the tragedy has been "truly shocking".
"As a direct consequence of the criminal contamination of milk in China, Fonterra has recognised an impairment charge of $139 million against the carrying value of its investment in SanLu.""Following this impairment charge, Fonterra's best estimate at this point of time, of the book value of its investment in Sanlu is approximately $62 million." which is 69 per cent below its previous carrying value.
Mr Ferrier said the Sanlu brand cannot be saved but the company assets perhaps could.
On 17 September 2008 Fran O'Sullivan said: "Fonterra is setting up a 3000-head dairy farm in China itself to provide quality product and demonstrate best practice."
On 20 September 2008 Fran O'Sullivan:"Clark (former NZ Prime Minister) should be ordering an official inquiry into why it took a full month from the time our diplomatic staff in Beijing were first informed about the product quality issue to when the whistle was blown."
On 10 October 2008 chief executive Andrew Ferrier announced on Beijing Fonterra will "donate NZ$8.4 million to the Soong Ching Ling Foundation over five years for a co-operative charity project to provide medical care and advice to pregnant women and the mothers of infants in rural communities." Andrew Ferrier said Fonterra is "shocked by the degree of tragedy" and the donated fund is set up to "help over the long-term in infants and maternal mother health."
Andrew Ferrier said Chinese consumers have lost confidence in Sanlu, not Fonterra, and Fonterra is working towards rebuilding a safe supply chain of dairy products.
See also
External links
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