It’s another headline to propel the NZ First Cabinet minister up the political leaderboard. Maybe he’s learning from Donald Trump.
Jones’ latest outburst follows an earlier broadside against another iconic NZ company, Air NZ, suggesting its chairman step down and its CEO stay out of politics.
Is there some connection between the two onslaughts? Could Jones have heard the speculation that Air NZ CEO Christopher Luxon may be on the short list to replace Fonterra’s Theo Spierings (who announced earlier this year he is standing down as CEO after seven years in the job)?
Jones does not shrink from the role of being NZ First’s attack dog. What better way to keep your party (and yourself) in the news?
But this under-estimates Jones as a politician. He is much smarter than that.
He sees his mission not just as being the champion of regional NZ. He believes, as his leader does, the neo-liberal policies followed by successive governments have deepened divisions and inequalities in NZ society.
He points to too much neglect in the provinces by corporates. Auckland-based head offices have devoted more of their energy to boosting their salaries and not enough to the basic interests of the people who they should be serving.
As Stuff reports, Jones weighed into Fonterra saying –
“I’ve been bloody disappointed that Fonterra, in my view, their leadership have not accepted there’s been a new government and there’s a new narrative, and I’ve had a gutsful of them believing they’re bigger than what their writ really is.
“I’m worried about the absolute absence of accountability for the enormous amounts of dough that the current Fonterra chairman has presided over”.
He wants the company to “focus less on interfering in politics and more on justifying the money they’ve lost overseas”.
“I believe that they have become disconnected from the farming community and I said in front of Mr John Wilson that I have requested the Minister of Agriculture – when he looks at his dairy restructuring – identify the issues and whether or not it’s time for us to look at a restructuring of Fonterra. The leadership of Fonterra I believe, starting with the chairman, is full of their own importance and have become disconnected.“
Wilson was tight-lipped over his own future as chairman. By the end of next month he will have been on the board for four terms and chairman for two.
Primary Industries Minister Damien O’Connor defended his NZ First colleague and pointed out that Fonterra is being reviewed as required under the legislation through which it was set up.
The giant dairy co-op is perhaps NZ’s only truly multinational company. It employs about 20,000 people and earns about 15% of the country’s export income.
From that income the co-op pays $10bn annually to farmers, its shareholders, for the never-fail collection of 17b litres of perishable milk.
In recent years Fonterra has picked up, processed and sold the resulting dairy products effectively and without fuss. Its well-publicised failures – the buttermilk lake near Taupo, the wastewater overload at Hawera and the botulism scare at Hautapu – occurred at the 2013 peak. That was the season when farmers produced 8% more milk than the year before. Later seasons have produced lower volumes.
Because of a slow-down in the expansion of the NZ dairy industry and loss of some suppliers to competing processors, Fonterra now has 10% more processing capacity than it needed at the peak of spring milk production for the past two years. The overcapacity has led to fears of stranded assets and costly overheads, which the company strongly denies.
O’Connor has recently been talking about the need for more value-add by the industry. But it has been one of Fonterra’s achievements since Spierings stepped into the top job to lift performance in food service and advanced ingredients.
Food service products – cooking creams, cream cheese, mozzarella and cheese slices – now account for 11% of Fonterra’s 23 billion litres of milk equivalent (LMEs), about $2b of revenue. The volume grew 27% in FY2017 and the gross margin was 27%.
Fonterra’s problem child is its investment in Beingmate, the Chinese infant formula company. Not only has Fonterra been forced to impair two-thirds of a $700m investment and book a 19% share of repeated trading losses, but much of its lost NZ milk market share has gone to start-up Chinese processors, backed and facilitated by the Chinese government.
Just as the Sanlu investment was former Fonterra chief executive Andrew Ferrier’s biggest failure, Beingmate looms over the exit of Spierings and his former chief financial officer, Lukas Paravicini. The directors must accept some blame for the Beingmate investment approval and its outcome.
Wilson will face the shareholders later this year, when his term expires, should he choose to stand again.
All he will say at present is that the transition to a new chief executive needs to be accomplished before he considers his own future.
