It is now selling bespoke, hand-made Kit Kat bars offering customers a choice of 1500 flavours. They pay through the nose for these tasty delights but then that’s the point.
Fonterra, however, is going in the opposite direction. It’s retreating into its shell.
Our biggest company is shying away from innovation and niche markets in favour of supplying commodities to other firms that will make goods to sell to consumers.
Farmers might well ask how that fits with the add value mantra that’s been drummed into them for the past several years by all and sundry.
It is also yet to be explained how Fonterra’s new strategy, which is really a recycled old strategy, fits with the target set by the National Government of doubling the value not the volume of exports, a sentiment echoed by the latest administration.
This plan ignores the collective wisdom of controlling the entire supply chain from farmer to consumer, of building branded products that identify with consumer expectations and ideals and that can build their trust and loyalty.
We keep being told our problem is the biggest mark-ups are made by the overseas firms that take our mass-produced products and turn them into fast-moving consumer goods so we lose most of the retail value.
But Fonterra, unlike Nestle, apparently doesn’t want a bar of those niche, luxury markets prepared to pay through the nose to put top notch food in their mouths.
Some might well see it as prudent, given the turmoil Fonterra has created for itself, to take a cautious approach and run a conservative balance sheet but that gives lie to the reasons why the giant co-op was set up.
But then, Fonterra said it is incapable of running Tip Top when justifying the sale so perhaps a back to basics approach is the best farmers can hope for.
It has also promised to be more open and honest with New Zealanders though in the past it has claimed stock market rules prevented that. The stock market rules haven’t changed and Fonterra units are still listed so it sounds like the excuse was a load of baloney.
To sum it up Fonterra has promised to get back to basics producing commodities for others to turn into high-priced consumer goods while being more open and honest. It’s new slogan could be Hiding in Plain Sight, especially if it wants to be more open and honest.
Fonterra’s leaders also say they are getting away from grandiose ambitions, gimmicks and slogans but all their statements have been full of meaningless warm fuzzy feel-good phrases about culture, values, healthy people and the co-operative difference. It doesn’t matter how much flowery waffle they use, it won’t mean a thing if farmers think the farmgate price isn’t enough.
They say Fonterra is at heart still a co-operative. No, it isn’t.
It stopped being a co-operative when it set up Trading Among Farmers. That’s the difference.
It created a hybrid misfit that’s neither a co-operative nor a corporate. That’s when farmers started losing their connection to it and it lost its identity. It’s neither fish nor fowl and can’t fly or swim. Till that issue is addressed it will continue to flounder.
And farmers can’t blame anyone but themselves for the situation. They voted for it.
It’s also unfair to heap blame on former chairman John Wilson and chief executive Theo Spierings. They were just two men acting on instructions from Fonterra’s owners, farmers represented by the board and the Shareholders’ Council, a lapdog that needs to be put down. Wilson and Spierings are no more or less guilty than anyone else involved.
If farmers want active scapegoats they might as well blame Federated Farmers and DairyNZ for not asking enough tough questions.
The upshot, when Fonterra regains its strength, is likely to be a co-op run by a board and management scared of their own shadows, afraid to make any bold moves for fear of being deafened by cries of stick to your knittting.
And that’s a crying shame. Fonterra is not only New Zealand’s biggest company it’s also a flagship for the nation, an example to us all because we all had such high hopes for it.
Its revenue last year was $20 billion, almost half of our entire income from primary sector exports. Imagine what it could do if it is flourishing and innovative.
It’s likely to be a much more timid beast for the foreseeable future.
