According to a leading professor of agriculture and economics at Lincoln University, this strategic pivot could prove problematic over time. The academic argues that while the sale price is attractive, Fonterra is giving up its value-added consumer business for a focus on ingredients and foodservice. This, he says, is akin to “putting our eggs in one basket,” moving away from a more diversified business model that included direct-to-consumer relationships and brand loyalty.

The core concern raised is the inherent difference between a branded consumer product and a commodity ingredient. A brand like Anchor has built-in loyalty and consumer recognition, making it difficult to substitute. In contrast, the professor points out that milk ingredients are far more interchangeable. Consumers buying products like chocolate won’t necessarily know or care if the milk is from New Zealand, making Fonterra more vulnerable to market fluctuations and competition as an ingredients supplier.

The sale is a clear indication that Fonterra plans to streamline its operations and concentrate on its core competencies. However, critics suggest this hyper-focus on ingredients and foodservice could leave the co-op exposed in the future. The question remains whether the immediate financial windfall for farmer shareholders is worth the potential loss of future earnings and the resilience that a diversified portfolio of branded consumer products provides.