Review aims to supercharge Fonterra
A review into Fonterra’s management would improve interaction between shareholders and management and lift the co-operative’s performance, Waikato dairy farmer Garry Reymer said.
Reymer said the review was discussed at the most recent round of shareholder meetings but management and board representatives did not go into specifics. These meetings were often heated as farmers wanted answers from the board over the dramatic fall in milk price.
Fonterra recently lowered this season’s forecast milk price to $ 4.40/ kg milk solids and announced an opening forecast for the 2015/2016 season of $5.25/kg MS.
The review was indirectly announced by Fonterra in April when Jacqueline Chow was appointed as Fonterra’s chief operating officer velocity. This role would see her work alongside the management team to accelerate performance across the cooperative.
In an emailed statement, Chow said she would lead a team, which includes internal and external expertise to work with Fonterra’s management to boost performance across the co-operative and deliver more cash to farmers.
‘‘ Everything is in scope and we’re taking nothing off the table. Velocity is a re-set of our business focusing on performance, creating value faster and generating more cash for our farmers.
‘‘We will do this by stepping up our game and the way we work, improving efficiency, lowering cost and duplication where we can, and improving effectiveness and agility.’’
The review’s progress would be presented to farmers at Fonterra’s annual meeting in November.
Reymer warned a review would not be without risk.
‘‘When you do a review like this, you start dealing with people and individuals and that in itself can be destabilising as well.’’
The Cambridge farmer said that could affect morale within the company if that occurred.
The review was to be undertaken by consultancy firm McKinsey & Company.
Fonterra Shareholders Council chairman Ian Brown said the review was about having an outsiders’ perspective looking over the business.
‘‘It’s good practice, it’s prudent, and having an external set of eyes looking over something you’re familiar with, they may pick up something you don’t see,’’ Brown said.
Waikato University Professor of Agribusiness Jacqueline Rowarth said she understood McKinsey had been involved with Fonterra since it was formed.
However, she said the cooperative had ‘‘ put a veneer on this saying it is about [the project] Velocity and are we nimble enough and all that sort of thing’’.
Any big restructure ought to ‘‘be a consideration of whether one company can do everything it’s currently doing’’.
‘‘Those of us involved in the farming side see more and more risk being put onto the farmer, and cost.
‘‘The whole difficulty of running a company this size as a cooperative – it’s too difficult clearly otherwise they’d have made a better fist of it.’’