Growth had significantly slowed since the global financial crisis and the dairy co-operative needed to make changes to its organic operations, group director supplier and external relations Kelvin Wickham said yesterday.
Fonterra was meeting organic farmer suppliers this week to outline a plan to bring the loss-making business into a break-even situation.
It involved:Concentrating North Island organic suppliers in one hub around its key certified organic processing site at Hautupu, which would reduce the number of organic suppliers.
Decreasing the amount of product processed at the co-operative's other two certified organic sites at Waitoa and Morrinsville.
Prioritising the product range to focus on cheeses which provided the best returns.
Focusing on emerging Asian and Australasian markets, where there were stronger returns and growth potential.
Fonterra would honour all organic contracts through to their formal termination dates, which in some cases were four to five years away, and would work with farmers as they made the transition out of the organics programme, Mr Wickham said.
The announcement was disappointing and left organic suppliers "in the lurch", Federated Farmers Dairy organic spokesman Gray Beagley said.
"We need to ask how hard Fonterra has worked to develop new markets locally and internationally.
"Only last year, Fonterra said publicly that the only way for organics was up even in the current economic climate.
"It even rescued suppliers from the defunct Taranaki-based New Zealand Organic Dairy Farmers Co-operative, so it's all a bolt from the blue," he said.
There was a need for a "what next" session for affected farmers. Federated Farmers would work in the interests of its organic members and that would include talking with Fonterra, he said.
Federated Farmers was also concerned about the way the announcement was handled, with some affected suppliers not told before the media release was issued.
"We'll be calling on Fonterra to please explain this announcement. It didn't come up once at a summit meeting we held with them only last week," the organisation's dairy chairman Willy Leferink said.
Fonterra Shareholders Council chairman Simon Couper understood the economic realities behind the decision but said that would be of little comfort to those affected, while Green Party agriculture spokesman Kevin Hague said the move would "cripple" New Zealand's organic dairy sector.
