Showing posts with label Fonterra. Show all posts
Showing posts with label Fonterra. Show all posts

Tuesday, 17 May 2011


Half of all dairy farms inspected by Environment Southland are polluting rivers and waterways to such an extent that they are liable for prosecution.

Dairy Farmers seem to have grown in arrogance because of the important place the industry holds in our economy. Dairy farmers are making good money and there is no excuse, that in the race for bigger profits, the amenities the rest of the community own and enjoy are degraded in the process.

Tourism is also a vital income stream for this country and fishing is a big drawcard- in fact its a poster child for the tourism industry. But the arrogance of the dairy industry is squashing the face of tourism deep in a muddy green eutrophic mire.

Environment Southland has a obligation to get tough with dairy farmers. This level of non- compliance is not acceptable. If it is possible for half of all dairy farmers to comply then it is possible for all dairy farmers to comply.

Wednesday, 12 January 2011


We note that Ngai Tahu is wanting a piece of the Milky Way action. Thats great. Diversification is good. And the goal to own and operate a profitable environmentally friendly business is laudable and wise.

However, Ngai Tahu objected strongly to the proposal to build a mega dairy farm in the McKenzie basin. It could be seen that they use the the Resource management act to hobble other entrepreneurs so that they can get a running start on their own businesses.

Only a year ago they werent too fussed about dairying - and were all talk about " cultural values and sacred water"
Ngai Tahu supports water being made available to provide security of supply for landowners but is concerned at the possible conversion to dairying. Almost without exception, the conversion over recent years of dry land farms to dairying has brought with it a host of adverse environmental effects and has resulted in the significant degradation in the quality of our rivers, lakes, streams and wetlands. This has impacted seriously on the cultural health of waterways and has resulted in the further loss of access by tangata whenua to mahinga kai sites and resources. Needless to say, Ngai Tahu is strongly opposed to any repetition of this situation in the upper Waitaki/Te Manahuna/Mackenzie Basin Before Ngai Tahu will be prepared to depart from this position, it will need to be convinced that suitable measures can be implemented at both the on-farm and catchment level that will be capable of avoiding and/or mitigating the site-specific and cumulative adverse effects that will arise as a result of conversion to dairying.

How times have changed.

Ngai Tahu needs to be very careful. Yes it is a significant player in the South Island economy- mainly because of the smart white fellas they employed like Tony Sewell.

We wish them well with the Dairying venture. They have 35,000 ha forestry land that is probably not returning much in the way of value. So dairying is definitely a smart move. But what it is highlighting is that Ngai Tahu is in danger of looking hypocritical, chastising others about their methods then a few months later signalling that they are seriously looking at the same large scale operations.

We are also interested to know why they have not entered dairying with a joint venture partner. Its a complex business and it would seem to make sense to tap into the expertise NZ operators have built up rather than go it alone.

No doubt we will find out the answers to that in due course.

Wednesday, 15 September 2010


So its an interesting song - but WTF - who cares??? Fonterra ad campaign sours after a smidgen of media attention over the lyrics of a song that no-one hears..

Can we have a real story please???

Thursday, 14 January 2010


This is very amusing. Our good mate has been named as the top PR guru by a leading British publication for looking after the Japanese Whaling interests..

One of the biggest players on the other side — apart from the Japanese government — is New Zealand’s top PR guru, Glenn Inwood, head of Omeka Public Relations, the mouthpiece of the whaling industry, who says: “Japan has been whaling for many, many generations and will continue to do so.”

Well done him we say. Perhaps Fonterra could consider him next time they get in the crap.. It has to be said that he has probably been responsible for a softening of opinion towards Japanese Whalers.

Wednesday, 13 January 2010


We think this is the most interesting story of the day. We call it scrubbing - there is probably a geek name for it
( and we would like to know what it is ) but its when info on a particular issue " disappears" on the net.

We witnessed it first with the Chinese reaction to the Melamine scandal and along with a couple of other bloggers we wrote about it at the time.

However we dont think that The Chinese are the only ones who purge the net of info they dont want in the public arena. We came across what we think is another example the other day and we will give you an update when we get concrete proof.

Anyway - we will track this story. Its the beginning of the dark arts of PR being played out in the big cloud and it has huge implications for the integrity of information on the net.

Wednesday, 9 December 2009


Now it seems that Cactus came from a dairy farm so you would think she knows a bit about the milk biz and indeed she shows a reasonable understanding of what goes on and even a fine grasp of economics as she backs Economist Brent Wheelers views on the mega dairy hotel planned for the McKenzie Basin.

And she so eloquently describes Dairy farms - green underfoot they maybe but we are kidding ourselves as a nation if we believe it is Milk au naturelle...

She also misses on one critical point and stunningly its about sex and cows or sex with cows and bulls.
There is no one time coupling with a rampant bull - nope.The closest a cow gets to the bovine hanky panky is a brief encounter with a sterile straw of semen. The poor cows don't even get to have a bit of natural nooky.

We agree with Cactus and Brent. The market needs options - and the McKenzie mega cow hotel will give the international market options. And at least this way our bloody streams wont get overrun with cowshit.

Monday, 7 December 2009


There was a bit of a taint to Fonterras moolah marketing campaign that TV3 followed up on tonight. Now its easy to see that they followed the letter of the law when it came down to the promotion but the spirit - the intent of the campaign wasn't. It is pretty easy to see that the competition was badly designed and manipulated. So the downside for Fonterra is that they will have left a bad taste with the budding milk consumers. The downside for the consumers is that Fonterra pretty much dominates the market so its not like a brand switch will do much damage.

The sad fact of this this saga is that Fonterra needs to position itself as the heart of New Zealands primary sector. Its the company we all want to be proud of. It needs to win the support of kiwi kids for the future.
This campaign failed the company and the country dismally on that count.


The follow up to this story is on Campbell Live Tonight at 7pm.

Thursday, 3 December 2009


Well we have all heard about how well Fonterra has been doing but hows this for big corporate bully bastards .

A mum we know well has written a letter to Andrew Ferrier after she got a shit response from the company.

Good evening Andrew -

It was a pleasure to meet you at the.....................................................last week

After meeting you briefly, you struck me as an approachable man with a commonsense head.

I have an issue arising at a personal, consumer level that I wonder if you could help me with. Please note this email is unrelated to work and my approach to you is as a private individual.

You may be aware of the Anchor Milk Moolah promotion currently running at retail. With two weeks left to run, the promotion has suddenly and without warning shut out thousands of NZ kids from access to its redemption (earned rather than auction) prizes. This move has caused distress to kiwi children, who have been encouraged to engage with the brand since September, saving up milk carton labels towards some great child-targeted prizes.

I spent a harrowing one and a half hours last night, comforting my 12 year old son, who is devastated. He discovered the news via the competition website - not declared openly at the outset, but buried in the deep-click details of each individual redemption prize, a particularly cowardly attempt to avoid attention.

I am at loss as to what to say to him. I had spent the last several weeks encouraging him to engage with the brand, I'd dutifully changed my buying habits to help him, I thought the promotion would be fun for him, engaging and a good lesson about working for and earning rewards over time (delayed gratification).

Instead, he's been smacked in the face with the reality that grown ups don't play fair, they don't honour their commitments to little kids, but they'll keep trying to get them to buy more milk (the promotional offer is still on pack and the withdrawal of redemption prizes was not explained on the website). It's an appalling lesson to learn at 12. I suspect my son is not alone and that others will be learning the same harsh lesson at even earlier ages. It's irresponsible, callous and unconscionable.

I contacted your call centre and received a scripted "tough luck" response. As a professional courtesy I also rang your PR service to let them know how negatively the promotion had impacted on my son and to see if there was an opportunity to make it right for him (by allowing him to redeem the points he had saved so hard for over so many weeks for the laptop he had dreamed of earning). The alternative was (and still is) to draw public and media attention to the brand's cavalier treatment of kids. I'm keen on my children learning from this experience not to be victims but to stand up for themselves. They are currently thinking about staging a public protest and picket at the supermarket.

The response I received from your PR team today was entirely unsatisfactory and arrogant - that's the way it's worked out and tough luck if you missed out. I was advised that there was an auction element and a bonus prize draw - but you know what? My 12 year old didn't want to win $50,000, or enter an auction for a car - he's 12, he doesn't even know what $50,000 looks like - he wanted to EARN a laptop of his very own.

I was told there had been huge interest in the promotion, as if that mitigated the company's behaviour, with 40,000 entrants (I was not surprised, it's a big brand, bought daily over 12 weeks, promoted with a large budget). I heard that some adults gamed the system, buying bulk milk supplies at once and donating the milk to shelters, since they were only interested in bidding for the cars. Fair enough, they were adult prizes. Those entrants weren't interested in engaging with the brand.

The second part of the prize pool was targeted at children, with child-aspirational prizes and a school element. In talking to your staff, I was advised that they were aware of some entrants (older than 12, I assume, my boy's smart, but not that sophisticated) writing computer programs to alert them the second new redemption prize stocks came on line, so they could swoop down and grab them up before the kids had a chance.

So, not only was the promotion woefully underprepared for the demand level, but you posted the last prize pool after kids went to bed. It's almost as if you didn't care about kids at all.

The kid-oriented redemption section of the prize pool got hijacked but some IT-sophisticated adults and Anchor's response to all of the children all around New Zealand who were, like my son, just a few labels away from their goal and thinking the promotion had two more weeks to go ( the deadline is still marked on our family calendar), was "tough luck, we said there was limited stock (but not how woefully inadequate)" and "never mind, there's always the prize draw".

Kids weren't in this for the cash, they wanted to earn prizes. They were almost at the finish line and your team took the game away with no regard at all for the impact it would have on them.

And by the way, your PR advisors have interpreted or "spun" my giving them a chance to make it right for my son as attempted "extortion". I don't think that's plausible and it is insensitive in the extreme.

My issues are these:

This is an appallingly put together sales promotion. Any well designed reward redemption promotion factors in the cost of prizes in relation to the sales required to earn it - that way, selling more milk should just mean buying more redemption stock, but no increase in cost. Marketers have been taught this basic rule for the last 20 years.

Stopping the redemption pool two weeks before the end of the promotion is just cruel and insensitive to kids. They don't understand if clever adults hijacked it, they just know the rules they thought they were working were just dismissed and they were shut out.

This is an appalling way for any brand to interact with children. Interacting with children involves an entirely different foundation of trust and expectation of responsibility than interacting with adults. What were you thinking?

I think you owe the children of New Zealand an apology. You certainly owe my son one.

I'd like to discuss this in more detail and am requesting a meeting so you can explain to Zachary why the rules of natural justice don't apply to little kids.

As I said at the beginning, you strike me as a fair man. I'd appreciate a direct response.

We think Fonterra needs to seriously rethink this one - its a very very bad look.

Friday, 25 September 2009


We gave a column from Brent Wheeler an airing the other day and it has been fisked by No Minister..

The comments are worth a look. Heres the best.

Dumb analysis. Try reading it again. Brent is saying that the incentives on farmer suppliers are to maximise the return on supply - which is what they are good at.

They face very poor, in fact perverse incentives, to maximise the return from value add, because value add requires capital, and capital requires Fonterra to hold-back dividend returns.

You can't have both. Its logically inconsistent, and a cash starved, dumb, politically driven beast is the result.

Fonterra can't even get their PR straight, are they managing the redemption risk, or are they trying to capitalise the value-add business? Can anyone tell?

Nope. The model is doomed, if Fonterra can scrape together a couple of hundies from this they put off the day of reckoning another year or two. So keep kicking the can down the road there Sagenz!

The fact your rellies were dumb enough to invest in the financial services industry is a non-sequitor. Whats that got to do with whether a regulated monopoly is a doomed whale thrashing around? I should also remind you that Dairy Farmers of Britain is in receivership. A classic example of what happens when a Co-op over leverages itself - it hands itself to its creditors.

There is your future under the co-op model. Fonterra is a price taker, not a price-maker.

Look at saturday's Herald. Fonterra is down to 21% assets to debt, this is dangerous territory for a Co-op with a redemption clause and just while I am piling on, Fonterra is NOT a price maker. That is just dairy propaganda.

If they were price makers, why was everyone surprised when the price went down. D'oh! Was it some cunning plan to disguise Fonterra's market power? Or was it that they take the world price?

Nor is Fonterra the largest dairy trader in the world. It is the largest player in the freely traded global commodity market. These are not the same things.

Most milk is traded under regulated protections (the EU and US in particular).

Fonterra is probably the best producer of basic dairy ingredients in the world. Thats fine, but it means NZ dairy farmers are in the commodity supply business. That is a business with low returns, and all the value is captured at the other end of the food chain. NZ dairy farmers are already at the mercy of those evil commodity traders, and no amount of propagandising can hide the fact that Fonterra is over leveraged and in trouble.

Hence the need to manage the redemption risk, by encouraging farmers to invest even more of their equity in the business.

So which bit of Brent's analysis were you disagreeing with again?

Monday, 21 September 2009


Every now and then you come across something that someone has written that requires a very wide audience. This essay by Brent Wheeler should be required reading for everyone who has a stake in our economy.

Dairy Farmers are about to be asked to make some decisions about the future of Fonterra.

The farmers have always been scared about outside investment worrying that it would mean they would lose control.

Brent has done a very neat dissection of the issue. It's a brave article. Journalists should add Wheeler to their list of "go to" people for comment as the round of farmers meetings are rolled out across the country.

Take this pithy take on the robustness of the model. He contends that it only exists by state coercion through legislation.

No one else needs or gets that hand up. If this model is so robust why is force needed? This is anti smacking stuff for farmers. A large number of nursery rhymes about collective behaviour, weak selling and such like have circulated for years while the evidence says, unsurprisingly, that these people are price takers not price setters and no amount of collusion can stop competition for long - ask OPEC.

He has concerns about the fact that Fonterra in its current form is exposed on many fronts and is by and large run via a political process.

And he scoffs at the fact that farmers are being forced to accept high risk and paying top dollar for an equity stake.

Third, "their" company is asking them to invest at a cost of equity about which little is known other than the fact that it's limited liquidity, its rules around ownership and the dependence of the model on state imposed monopoly all combine to drive risk higher than standard levels. Paying over the top for equity in a company you have a compulsory sales arrangement with in which the company sets the price is, at the very least, bizarre.

He thinks that the whole set up is Schizoid

Thus capital comes and goes with redemption and growth fighting one another in a process which never sees a stable capital structure. The value of permanent capital was recognised by the Dutch and the English in the middle of the 17th century.

Just what price is "enough" for the rights to be a part of all this? We don't know but may be about to find out. What is for sure is that it's pointless looking for objective answers from farmer politicians who have everything to lose and nothing to gain.

And why should we be asking questions?

Well that's simple says Wheeler.

It would be useful if a few more critics turned some serious spotlight on the political roadshows to come - after all, that monopoly is granted by taxpayers - not farmers, not by suppliers to Fonterra, not by Fonterra management and certainly not by farmer politicians. Taxpayers too are owed some accountability.

Brent has mapped out some of the key areas for debate. We will return to Eye2theLongRun

as the issue progresses.

Wednesday, 25 March 2009


Finally, we get a good meaty piece on the Fonterra accounts and half year announcement from Fran O'Sullivan in the NZ Herald. She also reinforces the view of the NBR the the PR around the half year announcement was very badly handled.

Fran leads with the fact that there has been a drop in revenue. And she focused in on the large milk mountains that Fonterra has warehoused around the country . But overall her tone is cautiously optimistic - noting that Ferrier has managed a reduction in operating expenses and that despite all the payout to farmers has been maintained at $5.10.

Tuesday, 24 March 2009


We are more and more turning to the NBR for up to the minute biz news and commentary. Today is this very funny insight from Allan Swann into how Fonterra's communications czars handled the half year result.

NBR has the story her

Here's an excerpt

6) Sit through a relatively easy press conference, reading almost word for word from said press release.

7) Make up absurd reasons why the 'results' were late and provided incomplete, during phone conference question time.

Blame either:
a) An earlier boardroom meeting that ran over time

b) That some journalists' email accounts can't accept email attachments.

8) After complaints from journalists, provide balance sheet data – by email in an attachment – at 12.53PM – nearly two hours past deadline.

9) Wonder why your company engenders suspicion from shareholders, the fourth estate and the general public.


As we predicted - Fonterra has done a lovely job of dressing up their half yearly result and it is interesting how the main stream media has portrayed it.

The NZ Herald has reported an increase in revenue - here's the headline - no mention that the two reporting periods are different not any mention of the increase in debt ratios.

Stuff has it that revenue has risen - again no mention of the change in reporting periods which actually show that instead of a rise there has been a real time decline..

The real story is in the third paragraph
Adjusting for timing factors and including exchange hedging, Fonterra said total revenue would have been down by 7.6 percent reflecting the lower international dairy prices. Significantly Fonterra’s already high debt gearing has increased from 57.4 per cent to 61.5 per cent over the last six months.

And then the NBR has that Fonterra
has revenue of $8billion in six months but debt is up then it doesn't shilly shally around and does a good precis of the issues.

While Fonterra has weathered the last six months better than many predicted we don't think that farmers will be overjoyed with todays announcement.


We wonder just what will be revealed today - as Fonterra does its half yearly results thing.

We think whatever they have to say it will be dressed up to look like a Sunday lamb roast when in reality it will be smelly old tough hunk of mutton.

NBR has been keeping a very close eye on what big issues are for Fonterra

It makes for very interesting reading.

We will keep you posted

Monday, 9 March 2009


Fonterra looks likely to face an extraordinary general meeting as we predicted last week here

The story in the Farmers Weekly last week has struck a chord and the Marshes who started the ball rolling are seeking advice on the process to call the Extraordinary General Meeting after getting a very big response.

We will watch developments with interest.

Wednesday, 4 March 2009


Farmers Weekly is carrying a yarn about concern about Fonterra.

Its an open letter to board members and suppliers from Kevin and Andrea Marsh of Te Puke.

  • Their concerns are the retention of Fonterra of 28c of the $7.90 payout.
  • Shifting the balance date so there was a longer wait for final seasonal payment in October of the following season.
  • Downsizing the forecast with little notice.

  • Altering the announced schedules of payments with no increase till July rather than suppliers receiving boosts in November and February

  • All of the above factors in another season of dry January and February - with no payouts till July.

And some governance issues make much more interesting reading here as well.

The upshot is that the Marsh's have said that they want to establish if other shareholders feel the same way they do. If they get support from 10 percent of the shareholders then they want to hold an extraordinary general meeting.

A old Southern Jersey Heifer has told Roarprawn that these issues have struck a chord and the good money is on the Marsh's getting the numbers for a meeting.

Watch this space.

Saturday, 21 February 2009


Bruce Sheppard has done a very good piece analysing whats up at Fonterra.

It's Here and its well worth a read

So what is the real picture of Fonterras finances , and just what does it mean for New Zealand?


Fonterra has been facing an issue over posssible melamine contamination in NZ milk. Food Safety has given them the all clear. Phew.

Friday, 13 February 2009


We hear that there is a secret meeting to discuss the Milky Way early next week. We have been waiting on this for a week or so.