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Fonterra Backs Away From Growth Objectives

Greetings Readers

Fonterra’s goal of $30 billion in revenue per annum by 2010 has been discarded and replaced with a more sustainable growth strategy.

It seems that Fonterra will be focusing on growth of existing assets rather than major acquisitions. It is a harsh reality that the rather heady objectives bandied about 2001 are now being ruled by the competitive nature of the international marketplace.

It is probably not that there is insufficient financial resource available to push on with an acquisition policy, but more likely there are insufficient companies suitable for takeover at a suitable price. Confirming what should have been understood by the promoters when the $30 billion plan was first mooted. Competitors may be quite willing to accept a far lower return on their capital than the level required by farmer shareholders of Fonterra.

Fonterra’s new business strategist Mike Moore seems to have come late to the special demands of the dairy cooperative. His resurrection of the lack in growth comparison between Fonterra and Nestlé displays his lack of understanding of the priority relationship between producer shareholders and their cooperative company,

The first objective of a producer cooperative is to sell the producer/shareholder’s product for the best price available.

In spite of the belief of economic theorists that the unbundling of price and capital return was in the best interests of the industry it is clear that producers have not, in their own minds, unbundled the farm gate payments from Fonterra.

The apparent shift in Fonterra's strategic policy to one of sustainable growth, while not satisfying the world and dairy market dominance theorists is much more likely to be in the long-term interests of dairy producers and their capital growth.

Good Farming

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