Friday, March 29, 2024

Fonterra wins back hearts, minds

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The dynamics at the top of Fonterra, the nation’s largest corporate entity, are strong and productive, chairman-elect Peter McBride says.
Reacting to criticism that the DIRA bill tilts the playing field in Fonterra’s favour, chair Peter McBride says the new structure will in fact help level the playing field with foreign-backed competitors and is in NZ’s best interests.
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McBride, a Fonterra director of 18 months, has been chosen by fellow directors to success John Monaghan in November. He is a dairy farm owner with kiwifruit industry management and governance experience.

Last year’s Fonterra strategy reset and a relatively new and young chief executive in Miles Hurrell are delivering what farmer-shareholders and other stakeholders want – in one word, performance.

After 17 years as a Zespri director, six of them as chairman, McBride believes his greatest expertise lies in stakeholder relations in producer co-operatives.

His governance philosophy is to empower and encourage within uncrossed lines of accountability.

“Miles’s job is to manage, mine is to govern and I am not going to confuse the two,” he said.

He should know the difference, based on a career featuring both.

He is chief executive of Trinity Lands, which has 20 dairy farms producing more than six million kilograms of milksolids annually and nearly 200 canopy hectares of kiwifruit growing more than two million trays.

Three constituent Christian trusts will give away $11.5m – more than half the trading profits – this year in charitable donations and meeting community needs in south Waikato and Bay of Plenty.

He managed both Trinity and the Zespri chairmanship concurrently and intends to do the same while heading Fonterra though that will be subject to review.

McBride, 56, and his wife Linda and their four adult children have kiwifruit interests, a small avocado orchard on which they live at Te Puna and the 950-cow Crocodile Farm at Tokoroa under a contract milker.

They bought their first kiwifruit orchard in 1989, three years after he graduated with a horticultural science degree from Massey University, followed by a post-graduate diploma in commerce from Lincoln University.

A decade of sharemilking to build equity was followed by large-scale Gold kiwifruit conversion from dairying in Bay of Plenty.

In 2002 he was elected to the Zespri board on a wave of shareholder activism on issues around strategy, leadership and stakeholder engagement.

When Psa hit in 2010 Zespri chairman John Loughlin drafted McBride to the Kiwifruit Vine Health board, administering $50m of industry and government money aimed at rescuing the industry from the disease disaster.

“They were incredibly tough times, like driving into a long tunnel with no lights on.

“We wanted growers to cut out their diseased vines but we didn’t have a what-next plan.”

Trinity and the McBrides took out about a third of their old Gold canopies, roots and all, replanted and cut and converted the rest to new Gold varieties.

Dark days turned into prosperity and McBride’s reputation enhanced, after which he was happy to leave Zespri in very good heart in February 2019.

The two big co-operatives have similarities in their strengths and weaknesses but significant differences too, he said.

Zespri is kept as small as possible, capital light with only functions of marketing, research and leveraging the IP. Growers see their fruit go all the way to consumers with minimal changes.

By contrast Fonterra is capital intensive, invested from the farm gate through processing to export markets and brands and the farmers’ milk is substantially reformulated.

Good governance is absolutely critical because with centralised control comes centralised risk.

“Fruit growers have shown in the past they can pull their own house down so we had better get it right.”

The Fonterra Shareholders’ Council is not governing the co-op and its roles and functions are being reviewed.

The council has attracted some unjustified criticism for the company’s lack of performance.

Its primary function must continue to be connections between the company and its suppliers in each region, feeding back what farmers have to say.

When McBride stood for director in late 2018 his position statement included a need for Fonterra to win back the hearts and minds of shareholders. Has that been done?

“Yes, I think so, partly on improved performance and partly engagement with the shareholders at several levels.”

High performing co-operatives don’t promise equal outcomes for all suppliers but offer equal opportunities, in the same way that Fonterra’s Co-operative Difference programme is moving.

Consumers and customers want warranties that Fonterra stands behind what it says.

Waikato farmers must have clear environmental policy settings so as to invest accordingly.

McBride would not comment on likely capital changes ahead of a review process that must be comprehensive, not rushed.

“These are complex matters of capital structure, the law, government regulation and stakeholder relationships.”

McBride said familiarity tours of Fonterra’s sites and overseas offices will be a priority.

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