Stanhope plant a game changer
The re-opening of Fonterra’s Stanhope plant is a game changer for the dairy industry. In a volatile global environment, it has strengthened the company’s strategy of diversified sales and in turn lifted farmgate prices to its suppliers. It has invested $130 million to secure its place in the world market, and secure additional supply in Australia. It has based its investment decision on growth areas both in a geographic and consumer sense. Fonterra chair John Wilson told those at the launch that the company’s cheese, whey and nutritionals strategy, based in Australia, “is critical to the growth and drive in demand that is required from an increasingly demanding consumer base globally”. The new plant has enabled the company to offer a diverse portfolio of products into retail, food service and ingredients. The company has said it won’t repeat its past mistake of offering prices to farmers it can’t afford and with its diverse product lines should be able to withstand market storms. It has put its Australian suppliers through great pain over the past 18 months so sustainable pricing is the least they can offer. While Fonterra’s rebuild is complete, Murray Goulburn has been forced to close factories to cut costs and ensure those remaining run as efficiently as poosible. Although its hand has been forced, MG Managing Director, Ari Mervis, told a briefing on the release of its annual results that it didn’t need to be big to maximise profits. It was aligning its strategy and concentrating its milk on where it would be most profitable. This is good news to those who openly questioned the former management’s decision to align with Coles on drinking milk. It was also working on correcting an “unfocused growth agenda” created by previous management While a strong Fonterra is good for its suppliers, a competitive Murray Goulburn would be good for the whole industry.