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Fonterra’s ‘Cooperative’ Amalgamations

Greetings Readers

The news today that the Westland Coop Dairy directors will rebuff Fonterra’s approach for merger discussions without even bothering to refer the offer to shareholders gives some indication of the continuing unease with Fonterra that seems to reside in the minds of some producers in the dairy industry.

Individual dairy farmers have notorious reputation to oppose by exercising their right of control simply because the shareholder vote is available. However in this instance the directors of Westland will be going out on a limb in a manner that could be considered reckless if there is no substantial plan to look after Westland’s dairy resources and dairy farmer incomes.

Fonterra will inevitably instigate a very competitive NZ producer environment in spite of the legislated restraints. This “cooperative iron fist’ approach has never been far from the surface in all of the previous industry amalgamations. Even the current batch of directors and executives could be said to be quite familiar with aggressive management techniques that can be applied within the industries rules.

Two hundred and eighty ex Tui suppliers did their best to redress a perceived wrong from their messy merger with Kiwi in 1996. They failed because they perceived a wrong promoted by Kiwi when their anger should have been directed at the failure of their own Tui directors and executives to manage head on competition in the local market.

Westland will need an excellent strategy for its lonely development or else some very generous alliances with parties yet to be identified to avoid facing the fickleness of supplier anger at some future date.

Good farming

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