Long list of questions as farmers kick the tyres on board’s new strategy.
Fonterra’s proposal to exit its consumer brands business and quit Australia has left farmers with many questions, says Fonterra Co-operative Council chair John Stevenson.
The council learnt about it at the same time as everyone else and is still working through the details to understand what it means.
“It’s really big news around the future of our co-operative,” Stevenson said.
Councillors are out gathering feedback and questions for Fonterra’s board.
Barely 24 hours after the announcement by chief executive Miles Hurrell, Stevenson already had a long list of questions about what it means.
“I’ve certainly heard from plenty of farmers and have a long list of people to call,” he said.
One of the main concerns is over losing the strong connection farmers have to historic brands such as Anchor and Mainland, which are among the brands that may be sold.
“I certainly come from a family of very proud cheese eaters and milk drinkers. There is a strong sentimental connection between many of our farmers and those brands,” Stevenson said.
He said they raised concerns about whether losing the brand means losing a connection to consumers.
“When we raised this with them, their response was that [they would be looking to wrap a long-term supply agreement in] any sales agreement … so the milk was still coming from Fonterra farmers, but when you trade out ownership you do trade out control as well.”
The flipside is that the council and farmers continuously challenge the co-operative to deliver a strong return on the capital that has been invested in their ownership.
Fonterra’s leadership team said it will simplify the business and allow it to focus on the engine room of the business – ingredients and foodservice.
What exactly that means is also a question needing answers, he said.
Fonterra’s consumer brands is the smaller of its business channels, using 7% of its milk solids, and while it is performing reasonably well, there have been ups and downs in that market and it is capital hungry.
The council will be undertaking an independent analysis of the business case put forward for the new strategy by the board.
“We’ll be looking to understand that in much more detail.”
The council wants to know how these changes will grow more value in the long term and what the structure of the business will look like afterwards, he said.
“We have heard some comments that this is Fonterra walking away from value-add. Our understanding of what the Fonterra board has told us is that it will allow for more innovation in that advanced ingredients space and in the foodservice space. We will be looking to understand what that looks like.”
He also wants to know what being a business-to-business company means post divestment.
The divestment process is long at 12-18 months and could either be a segmented or a single sale. He has confidence Fonterra will properly engage with its farmers over that time, he said.
If a sale is to occur, he expects it will require shareholder approval through voting at a special general meeting.
You can now read the most important #news on #eDairyNews #Whatsapp channels!!!
🇺🇸 eDairy News INGLÊS: https://whatsapp.com/channel/0029VaKsjzGDTkJyIN6hcP1K
