Introduction

This is provided as a background to where the NZ dairy is currently, alternatives for where it may want to go, and possible strategies for getting there. All three start not from an existing accepted analysis base but from scratch. Starting from scratch is required because the industry has either not done this base analysis or not made such analysis available.

The analysis has grown out of a desire to understand some of the economically perverse things occurring in agriculture, and is documented here due to an apparent unavailability of sound analysis in the face of a pending restructure of Fonterra.

The first question that should come to mind in considering what structure is best for Fonterra is which one(s) match the strategies being followed by the company. This relatively simple question holds irrespective of whether you are a supplier shareholder, Fonterra management, private individual or government.

Following comes the question of identifying Fonterra’s strategy, and then whether it is appropriate. The latter depends much more on who is asking.

Potential confusion abounds. How well does Fonterra’s strategy fit with the dairy industry’s strategy - strategy that should have evolved out of an understanding of the industry’s strengths and weaknesses? The fundamental SWAT analysis demanded by industry leaders in forming their vision for the industry rather than simply assuming that that the old strategies what worked in 1960’s through to the 1990’s will continue to work in the future.

The search for a coherent or documented industry strategy or even a rudimentary SWAT analysis has been fruitless. This raises questions over leadership - there may be something of a vacuum. Maybe our culture is not helping and needs to change. Looking around, dairying and agriculture may not be alone with these issues.

These are issues that are not going to be addressed by restructuring Fonterra. Perhaps we just conclude that the classical approach to leadership is not working and others are needed. Maybe the need for effective industry leadership was forgotten in the reforms of the 1980’s and again overlooked with the formation of Fontera in 2001. Or is the industry simply too greedy for anyone to be interested in the bigger picture - beyond short, narrow and selfish perspectives.

Meanwhile, Fonterra is being restructured regardless, and supplier shareholders amongst others appear to lack sound information on basic industry strategies. Instead of a balance of independent analysis and sector or institutional views we are getting a heavy bias towards the latter.