Blog: Dean BestFonterra's farmers need to look at the bigger picture

Dean Best | 18 February 2008

Be bold. Be brave. That was the message from Fonterra chairman Henry van der Heyden to the company’s farmer members in November when he unveiled his vision for the dairy giant.

And he needs to repeat that message with ever-more passion and enthusiasm, after opposition from farmers forced the New Zealand company to delay its plans to overhaul the business.

The co-operative's management wants to list its business operations, with a 20% stake available to the public. Fonterra's farmer shareholders would maintain full control of the company's milk supply business and own about 80% of the listed unit.

However, some of the 11,000 members that own Fonterra have voiced their unease at the prospect of outside investors having a stake in the world’s largest dairy exporter. And that disquiet has forced van der Heyden to postpone a vote on the issue.

But, let’s be clear, van der Heyden’s plans represent a great opportunity for the company. This move is vital to Fonterra's future. Dairy consumption is booming in many of the world's developing markets, particularly in Asia, and Fonterra needs capital to ensure it can keep pace with the rapid growth of dairy, particularly in China.

What’s more, van der Heyden and his colleagues have structured their proposals to alleviate concerns among Fonterra's farmer members that a float would lead to them losing control of the company.

“Fonterra needs to grab the ball and run with it,” one analyst in New Zealand told me last year.

Indeed.

The global dairy industry is in a state of flux right now. Prices are booming. Once lucrative traditional markets are stagnating and consumers from China and Uruguay are turning to dairy products in their droves. Fonterra's float will give the company the best chance to tap into that growth. Its farmers should favour that.


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