The government’s decision to opt agriculture out of the Emissions Trading Scheme until at least 2030 will have no bearing on Fonterra’s Scope 3 emissions targets, chief executive Miles Hurrell says.
Those targets are driven by customers and consumers aim for a 30% intensity reduction in on-farm emissions by 2030 (from a 2018 baseline).
“It has provided a little bit of clarity and removing that ETS backstop will provide a little bit of clarity for farmers,” he said.
“It hasn’t changed our position because it’s driven by the market.”
The target was announced late last year. While it is still early days, farmer-shareholders understand that it is being driven by customers, he said, speaking at Fieldays.
He was also interested to see what direction the government takes around reviewing New Zealand’s policies around genetic engineering and modification, saying it has potential to contribute to that 30% target.
“We’re open minded to that and we think there’s some benefits to be had for our farmer shareholders.”
The issue of GE regulation was ranked second in the list of top 10 priorities in the annual KPMG Agribusiness Agenda released at Fieldays.
Hurrell also gave an update on the strategy change announcement that occurred a month ago. The co-operative has been holding farmer-shareholder meetings across New Zealand to get feedback and answer questions.
“Generally economically, they understand that the three key channels – consumer, food service and ingredients – that over the long run it’s the lower end of those performances from a return-on-capital perspective.”
Most farmers understand that from an economic perspective, he said, though he accepts there is emotional attachment to those brands.
Asked how it has been received, he said: “I think there is general support because they understand the economic drivers. We are driving for long term value in the co-operative and we believe there is better value to be created through a fantastic foodservice and the ingredients business.”
The co-operative has also fielded interest from other businesses looking to purchase the brands and are beginning to appoint advisers for that process.
He emphasised it is still early days in a 12-18 month process.
Hurrell said the strategy shift will have a minimal effect on Fonterra’s R&D with much of it already focused on the business-to-business (B2B) marketplace. This includes advanced nutrition, active living and medical nutrition.
The innovation within its consumer business is done closer to market.
“The true research and development – which is done back in NZ – has been focused on understanding the true science and how we can move some of our products more into active living, healthy aging, medical nutrition – functionalities in the foodservice business in the creams and cheeses in particular. That’s where that true R&D in NZ is spent,” he said.
That will continue in that B2B space, he said.
One of those brands in that nutrition space is Nutiani, which Fonterra launched in 2022.
The brand uses Fonterra ingredients that are put into consumer brands to be sold into pharmaceuticals, hospitals or sports and active lifestyle products.
“It’s a very strong B2B brand, but not one that consumers will know,” he said.
He hit back at criticism that the strategy change would not add value to dairy products.
“Anything above the commodity milk price you could argue is adding value and while consumer does add value – I get that point – we believe there is more value to be created by being more focused on our B2B brands.”
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