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Keeping the Confidence of the Suppliers

Greetings Readers

Kiwi Coop Dairy’s highly developed characteristic of obdurate negotiation has become well honed over the years. For a time it was tolerated as a charming characteristic of the Taranaki dairy industries makeup, but recent events show that it is now much more pervasive than that.

Kiwi directors are now drawn from broader background but that unfortunate characteristic still prevails. Kiwi’s path to this point is strewn with bitterness and distrust arising from less than happy past mergers. Why should that bitterness have to be carried forward into this last, and inevitable merger?

Difficult negotiations resolved by unacceptable compromises are not negotiations at all.

Will the Kiwi Cooperative blink in this standoff over their favoured CEO? Past performances would say, probably not.

Will NZ Dairy bend – quite possibly? But the disaster is the residual dissatisfaction and distrust arising from a badly managed negotiation

It is easy to dismiss the reported conflict as being a minor problem in the context of the total GlobaCo deal. It is not. Irrespective of the posturing of directors, the CEO is the key individual for the success of the merged company. Vertical integration on this scale is not attempted lightly. Few companies have successfully achieved it and only 20 percent are profitable.

There is a warning to GlobalCo shareholders in the reported lack of international interest in the CEO position. It could be that the package offered is not good enough, but more likely, the magnitude of the task against the expectations of supplying shareholders in a turbulent environment may be the real reason.

A KPMG report (see 30 April news archive ‘Post-Merger Period Critical For Food Industry Success”), which sets out an international perspective on food industry mergers provides an interesting summary of post merger problems that will apply to GlobalCo.

Kiwi’s past successes may have been the product of a hardnosed approach to production management and acquisition. But the new company is playing in a vastly different field and the key management demand will be to succeed at marketing food in a highly competitive world market. Not a task that Kiwi has been responsible for in the past.

But because of the nature or a cooperative an added requirement is the meeting of the milk supplier’s payout expectations and tolerance of capital retentions. Not a simple buy low - sell high trading company.

Putting more than 50 percent of the shareholders offside with the company by allowing disagreement on their perceptions of the qualities of the chosen CEO is not a sensible start.

Order and harmony has been suggested as the cornerstones of a cooperative.

Kiwi and NZDG should not need to be reminded of the reasons for the merger – it is only happening because the majority of shareholders are demanding it.

Directors remain the servants of the shareholders wishes.

Good farming

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