Professors Alan Renwick and Tim Hazledine argue that this pivot could lead to a major problem: the commoditization of Fonterra’s milk. Without a strong consumer brand, dairy ingredients can become easily substitutable, potentially leaving Fonterra’s products with no unique selling proposition or brand visibility to the end user. This could undermine the co-operative’s position and profitability in the future, as it loses its direct connection to consumers.

A specific long-term risk noted by Renwick is the 10-year supply agreement with Lactalis. He questions what will happen when this agreement expires, suggesting that Lactalis might find it more efficient to source its milk from other countries in the future, leaving Fonterra with a massive oversupply and no guaranteed buyer. Hazledine expresses a sense of loss, lamenting the sale of Fonterra’s valuable and well-established brands.

On the other hand, the sale is not without its benefits. It will provide a significant capital injection for dairy farmers, which can be used to pay down debt or reinvest in their farming operations. A portion of the capital will also be retained by the co-operative for future investments. Professor Michael Lee of Auckland University suggests that the sale could be a success if Fonterra can effectively reinvest this capital into becoming a top-tier international ingredient supplier known for premium quality.