Bolger estimates New Zealand has access to only around 14% of global dairy consumption at tariffs below 10%.<\/p>\n
\u201cTrade access is extremely important to us and we applaud any work done by ministers and officials to open up more access. We get that it\u2019s hard and that there are a lot of things going the other way.<\/p>\n
\u201cWe need to maintain the access we have and keep dairy access on the table \u2013 that\u2019s a really important thing.\u201d<\/p>\n
New Zealand\u2019s need to invest in energy supply is also top of mind.<\/p>\n
With coal use banned after 2037 and the natural gas supply dwindling faster than expected, Fonterra, as a perishable product processor, is particularly vulnerable if energy supply is threatened.<\/p>\n
\u201cIf we can\u2019t run factories for a day or a week, that has enormous implications because you can\u2019t stop the product flowing. The potential for having energy outages that last any time is very bad, but if they last more than a few hours, that has huge implications for us and our customers, and ultimately farmers and the wider economy.\u201d<\/p>\n
Fonterra no longer uses coal to fire its North Island manufacturing plants and is investing substantially and quickly to decarbonise and convert to biomass and wood pellet energy for its boilers, Bolger says.<\/p>\n
\u201cWe\u2019ve seen firms closing outside our sector due to energy pricing and energy supply uncertainty. We think energy resilience needs to be one of the key priorities for any sort of economic development out of any government.\u201d<\/p>\n
On productivity, Bolger says there\u2019s \u201ca sense of frustration\u201d that New Zealand hasn\u2019t been able to lift it.<\/p>\n
\u201cTo give credit to farmers, they have steadily lifted productivity through genetics and pasture and animal management. We\u2019re trying to do what we can with technology and so on in our factories, but it does feel like there is something that holds us back.<\/p>\n
\u201dMaybe it\u2019s thinking a little bit too small around the use of technology in firms or maybe it\u2019s the fact we are a nation of small-to-medium enterprises and it\u2019s hard to get the scale needed to deploy technology.\u201d<\/p>\n
Meanwhile, Fonterra continues to develop the US market for protein products and highly nutritious ingredients, now one of its most important growth engines.<\/p>\n
While it\u2019s not a new market, consumer understanding of health nutrition has finally caught up with Fonterra\u2019s science and research, Bolger says.<\/p>\n
\u201cWe\u2019ve been doing the science on functional proteins and the value of dairy proteins, as opposed to generic protein for decades, and we\u2019ve been trying to sell them in there for a while. Now consumer understanding has matured a lot.<\/p>\n
\u201cHealth trends come and go but protein is very good and the story around GLP-1 drugs is having quite a leading effect on people. They\u2019re losing a bit of weight, eating fewer calories a day and focusing on the quality of what they\u2019re eating a lot more.<\/p>\n
\u201cEven if you\u2019re not taking that medication, that\u2019s mainstreamed a lot of the discussion around the quality of what you\u2019re eating.\u201d<\/p>\n
GLP-1 is a natural hormone released by the gut after eating. It helps control blood sugar and signals the brain that the gut is full.<\/p>\n
Bolger declines to give a percentage of expected future earnings growth from specialised proteins, but says it will be significant.<\/p>\n
So how will Fonterra ensure the value of US protein market growth is captured in New Zealand?<\/p>\n
Bolger says the \u201cvast majority\u201d of Fonterra products are sourced from New Zealand, returns from which flow back to farmers and shareholders here.<\/p>\n
On whether New Zealand has the energy infrastructure, skills and research capability to become a global specialised dairy product producer, he says Fonterra already is, supplying many of the world\u2019s leading food makers.<\/p>\n
And while New Zealand\u2019s limited dairy market access is concerning, Bolger says the good news is many global customers are paying a premium.<\/p>\n
\u201cNew Zealand butter has traded at a significant premium to US and European butter for a substantial time now \u2013 even the commodity sort. Customers value the taste, mouth-feel, colour and the grass-fed way our farmers farm here.\u201d<\/p>\n
So, is Fonterra\u2019s optimism an outlier to the national economic mood?<\/p>\n
Bolger says first it must be acknowledged \u201cit hasn\u2019t always been this way\u201d.<\/p>\n
\u201cA lot of hard work\u201d has gone into Fonterra\u2019s now-strong balance sheet and confidence to invest, he says.<\/p>\n
\u201cThe organisation\u2019s matured a lot in the last 10 years, in its understanding of risk, policies around risk, and management of balance sheets and capital allocation.<\/p>\n
\u201cThere\u2019s also fundamentally a deeper understanding of our identity as a New Zealand farmer-owned co-op, and while that can sound a bit like a slogan, it really does affect how to think about your strategic choices.<\/p>\n
\u201cBecause it\u2019s so clear that we\u2019ll always have to process our farmers\u2019 milk and sell it for as much as possible offshore, that means when we\u2019re making capital decisions, we\u2019ll never put that core function at risk.<\/p>\n
\u201cIn the past we may have lost sight of what was core and what was optional, but the core is very, very clear to us. Having the machine working very well now, generating great cashflows from food service into Asia and proteins into the US and Europe, it\u2019s now getting us into a position where we can invest with a very strong balance sheet.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Bolger estimates New Zealand has access to only around 14% of global dairy consumption at tariffs below 10%.…\n","protected":false},"author":2,"featured_media":641474,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[103334,20493,138,124,7224,4190,219,1667,103238,28164,7226,17766,2070,3499,314523,1345,13840,220,111,139,69,22507,314522,70675,56268,2859,9939,109209,314521,9938,8218,2963],"class_list":["post-641473","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-ambitions","tag-brakes","tag-business","tag-could","tag-dairy","tag-demand","tag-economy","tag-energy","tag-exporter","tag-fears","tag-fonterra","tag-fonterras","tag-full","tag-growth","tag-highlyreputed","tag-home","tag-like","tag-markets","tag-new-zealand","tag-newzealand","tag-nz","tag-outages","tag-premiumpaying","tag-processing","tag-prolonged","tag-protein","tag-states","tag-threaten","tag-throttle","tag-united","tag-warns","tag-zealands"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/641473","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=641473"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/641473\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/641474"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=641473"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=641473"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=641473"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}