Winston Peters questioned<\/a> how long Fonterra would remain a supplier of milk to Lactalis after the sale.<\/p>\n\u201cIs Fonterra\u2019s \u2018long-term agreement\u2019 for three, four or 10 years? Whatever the number, the clock will stop and New Zealand\u2019s milk will become just another in a long line of milk jugs,\u201d Peters said.<\/p>\n
Under the terms of the deal, Lactalis has agreed to take Foterra\u2019s milk for an initial term is 10 years, after which it automatically renews until terminated, with a 36-month notice period. <\/p>\n
Reymer said in the unlikely event of Lactalis ceasing to take Fonterra\u2019s milk, it would allow the co-op to divert milk to the higher-yielding Ingredients and Foodservice businesses.<\/p>\n
\u201cThe message is that Lactalis is going to want our milk, long-term.<\/p>\n
\u201cThey want the brands but they still want our milk because it has a good story.<\/p>\n
\u201cThey want it for the low carbon footprint which they\u2019ll use in, in their own marketing, so I\u2019m not worried.\u201d <\/p>\n
In a letter titled \u201cAnd another one bites the dust\u201d, Tim Hazledine, emeritus professor of economics at the University of Auckland, said the sell-off of New Zealand\u2019s corporate assets continued with Fonterra\u2019s disposal to a French family of most of its consumer products business.<\/p>\n
\u201cCorporations and thus countries don\u2019t get richer by selling productive assets, and New Zealand hasn\u2019t,\u201d he said.<\/p>\n
\u201cInstead of exulting over the start of \u2018one of the most exciting phases in Fonterra\u2019s history\u2019 (August 23), the chairman, Peter McBride, and his executive team should be hanging their heads in shame at having been unable to develop the value of the company\u2019s retail businesses to the point of them being beyond the reach of a foreign takeover operator.\u201d<\/p>\n
![\"John]()
John Stevenson, chairman, Fonterra Cooperative Council. Photo \/ Supplied <\/p>\n
Reymer said the deal would offer a capital injection for some but for others, it will make up for lost capital if they happened to buy in at higher prices than prevail today.<\/p>\n
\u201cA lot of farmers would have bought shares north of $5, so for some it will just be matter of getting capital back,\u201d he said.<\/p>\n
Reymer said there was a lot more confidence generally around Fonterra.<\/p>\n
\u201cThe confidence around Fonterra has ebbed and flowed over the years.<\/p>\n
\u201cThere have been times when we felt really good about it and times when the tide went out then came back in.<\/p>\n
\u201cBut we\u2019ve got a spring tide now and I feel extremely positive about it.\u201d<\/p>\n
The council\u2019s Stevenson said there had been good engagement from farmers.<\/p>\n
Fonterra was formed in 2001 after farmers voted in favour of merging the New Zealand Dairy Board, New Zealand Dairy Group and Kiwi Co-operative Dairies.<\/p>\n
Since then, the co-op\u2019s performance has been mixed, and punctuated by ill-advised investments such as a stake in China\u2019s Beingmate for $755m, which was later sold at a big loss.<\/p>\n
However, a slimmed-down Fonterra – courtesy of a number of big asset sales – has performed better in recent years.<\/p>\n
Stevenson said the sale of Consumer to Lactalis was a significant decision for farmers \u201cbecause the future does look quite different post the divestment\u201d.<\/p>\n
\u201cWe\u2019ve gone pretty deep into this, as we should as a representative body.<\/p>\n
\u201cIf you put the capital return to one side, we\u2019re going to continue to supply milk for hopefully generations to come, so we need to have the confidence that our co-op will deliver into the future,\u201d he said.<\/p>\n
The council engaged Northington Partners to provide an independent assessment of what Fonterra put to farmers.<\/p>\n
\u201cNorthington came back and indicated that Fonterra looked like a better business, post this divestment, and that they would have the capital to be able to make their short to medium-term investment plans.<\/p>\n
Fonterra has said it intends to return to 2025 earnings (net profit $1.079b) by 2028, despite the absence of a contribution from Consumer.<\/p>\n
\u201cThe commitment that Fonterra has made to return to this past year\u2019s earnings by 2028 gave the council a lot of confidence that the future of Fonterra, with it focusing on Ingredients and Foodservice, does look like a more repeatable business for Fonterra as a farmer-owned co-op.\u201d<\/p>\n
Stevenson said Fonterra farmers were \u201ca broad church\u201d.<\/p>\n
\u201cWe\u2019ve got a number of farmers that have a real emotional connection to the brands, and you can understand that.<\/p>\n
\u201cWe also have a lot of farmers who have looked at the rationale and the financial data and have a lot of confidence in the direction going forward,\u201d Stevenson said.<\/p>\n
\u201cFonterra farmers also have a strong history of making the right decision when it comes to long-term structural decisions within the co-op.\u201d<\/p>\n
Listen and subscribe to the Today in Business<\/a> podcast \u2013 the top headlines from the NZ Herald business team summarised and delivered by an artificial intelligence (AI) voice as an easily digestible recap.<\/p>\n","protected":false},"excerpt":{"rendered":"The deal involves the sale of some of Fonterra\u2019s most recognised brands, including Anchor and Mainland. Fonterra says…\n","protected":false},"author":2,"featured_media":104348,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[17767,1863,138,10166,18509,3311,54327,9174,12026,17150,7226,17766,1426,38118,111,139,69,13310,23940,1133,30203,165,28050,61,24688,1316,1533],"class_list":["post-104347","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-42b","tag-back","tag-business","tag-businesses","tag-closes","tag-consumer","tag-coops","tag-discover","tag-farmer","tag-fate","tag-fonterra","tag-fonterras","tag-investment","tag-lactalis","tag-new-zealand","tag-newzealand","tag-nz","tag-poised","tag-related","tag-sale","tag-shareholders","tag-their","tag-thursday","tag-to","tag-voting","tag-when","tag-will"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/104347","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=104347"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/104347\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/104348"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=104347"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=104347"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=104347"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}