The world's largest dairy company is testing the waters for a push into the West Coast in a direct challenge to Westland Milk Products.
Fonterra has put feelers out for West Coast farmers' attitudes to switching allegiance, sending letters to a large number of Westland suppliers.
The move comes weeks after Hokitika-based Westland Milk Products firmed up plans to invade Fonterra's turf, by building a milk concentration plant at Rolleston by 2012, and openly poaching suppliers in Canterbury. It also announced plans for a $100 million value-added product factory in Canterbury in 2013.
The Greymouth Star yesterday received a copy of a letter from Fonterra general manager of milk supply, Steve Murphy, sent to West Coast farmers this week, asking for expressions of interest in switching supply.
"Fonterra always seeks to provide a competitive cash payout, while still being able to retain earnings for future investment and strengthen the co-operative ... Strong financial performance is just part of the story.
Farmers benefit from the stability of a large organisation when they supply Fonterra," the letter said.
Fonterra is building a $150 million processing plant at Darfield.
Farmers surveyed yesterday morning about the Fonterra move stood by Westland Milk, saying its lower share price would give it an advantage in a battle over suppliers, and that the West Coast co-operative's payout would have to be poor, compared with Fonterra's, for them to decide to shift companies.
Historically, Fonterra's end-of-season payout has been higher than Westland's.
West Coast Federated Farmers president Katie Milne, who farms at Rotomanu and supplies Westland Milk, said it could be that Fonterra was just flexing its biceps, "but then again, there's obviously got to be some validity to it, if they've sent this letter out".
"It would be devastating to the West Coast if it led to Westland Milk Products' demise."
Westland Milk Products chief executive Rod Quin released a statement yesterday (see below), responding to the Fonterra move.
In his letter to Coast farmers, Mr Murphy said Fonterra was interested in providing them with a competitive option for their milk supply.
Yesterday, he said the company had been encouraged by the response received so far.
"There are lots of options available to us, and how we proceed will depend on the final response we get."
Fonterra picks up 89% of New Zealand's milk, but sends 4% of that to other dairy companies, under Dairy Industry Restructuring Act regulations.
- Matt Kersten
• Company's approach 'unwelcome'
