Fonterra chief still sees NZ as dairy world envy

Fonterra chief executive Theo Spierings. Photo by the NZ Herald.
Fonterra chief executive Theo Spierings. Photo by the NZ Herald.
When Theo Spierings first joined Fonterra as its chief executive, he described Fonterra - and possibly New Zealand - as the envy of the dairy world.

Two years and nine months later, Mr Spierings said he still stuck by those words, as he reflected on his tenure to date with the co-operative and also looked to Fonterra's future, while addressing the opening day of the South Island Dairy Event in Invercargill yesterday, an event which has attracted a record 546 delegates.

In 2011, he saw its strengths as being pasture-based farming, the low-cost model and systems in New Zealand, efficient factories, an excellent supply chain, fantastic brands, a customer base in more than 100 countries, great people and talent, and a world full of opportunities, with a huge need for dairy nutrition and food service.

While he looked at the strengths and opportunities, he also looked at perceptions of Fonterra around the world.

In the three months between signing the contract and starting work in September 2011, he identified a few issues which included the consumer price of milk - it was not accessible to the young in a country that was the biggest exporter of dairy around the world, which was ''not acceptable'', he said.

He also saw ''all sorts of issues'' around stock exclusion and waterways.

There was also perception around a ''closed circle of farmers'' and it not being accessible to other people when it came to sharing wealth.

All those perceptions did not lead to a reputation that both Fonterra and the New Zealand dairy industry deserved, he said.

After three years, which felt like being ''in the scrum'', he believed Fonterra's strategy was well on track and understood.

Fonterra was doing a lot of good things but it also had to focus on the things that really made a difference, like Milk for Schools, fencing waterways and nutritional programmes.

Higher value needed to be created on a litre of milk.

New Zealand was 30% behind the world on value creation on a litre, and Fonterra's strategy had to address that.

It had opportunities, good innovation and IP and strong markets, so could do that, but it had to follow its strategy, he said.

Fonterra intended reducing the amount of cheese it produced and might shift that milk to what it was good at producing - milk powder products and food service.

He was not really interested in making a whole lot of cheese, when the Europeans were strong at cheese, and putting it on the GlobalDairyTrade platform.

Food service was looking to double in the next four to five years - 80% of all pizzas in China were topped with Fonterra cheese - and it intended focusing on key markets like China, Brazil and South East Asia.

When it came to sustainable growth, Fonterra farmers had done great work.

Two or three years ago, there was not a lot of evidence or facts when it came to sustainability through the whole value chain - on farm, in factory, on vessels, on the road, in market - but the pace had since been stepped up.

There were now ''world class numbers''. Stock exclusion from waterways had lifted from 42% 15 months ago to 94%. Farmers had put up 22,000km of fencing and effluent issues had been reduced by 23%.

Rail use had been increased by 7% in three years, bigger trucks meant 10% fewer trucks on the road, energy consumption per tonne of product was down 13%, the Darfield drier was 12% more efficient than older driers and you could drink the wastewater discharge at the Stirling site ''and that's how it should be'', Mr Spierings said.

Facts were needed all across the value chain to say Fonterra was a sustainable player and that was a ''really good achievement''.

What could be expected from Fonterra from 2015 and beyond was transitioning it from a proud New Zealand co-operative to a globally connected and relevant co-operative.

It only had 3% market share around the world and that was how it had to behave, not big and arrogant. He acknowledged work had to be done on reputation.

Opportunities around the world were coming in faster than what Fonterra expected a few years ago. It had to take opportunities. If it did not, competitors would.

In New Zealand, it would grow and retain its market share of the milk pool and it would ''go after every litre of milk''.

The aim was to move by 2025 from being the world's largest exporter of dairy to a co-operative that made a difference in the lives of two billion people, he said.

sally.rae@odt.co.nz

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