Plenty of advice for Fonterra’s bosses – but are our expectations too high?

Dairy farmers  should be pleased with the  advice  liberally and freely tendered to Fonterra in the wake of the co-op’s board deciding to halt its international  search for a  new  CEO and instead,  with an  interim CEO,  Miles Hurrell, “pause and  assess  the  way   ahead”.

Fran  O’Sullivan,  Head of Business at NZME,  which publishes the  NZ  Herald, says appointing an interim chief executive to run New Zealand’s largest company is an admission of failure that should force Fonterra’s board to look hard at its own performance.  And she  concludes:

“If this company is to succeed, it needs to be governed and led by grown-ups within a grown-up NZ commercial environment”.

Only  a  couple of   years  ago, under the heading Fonterra on the eve of disruption, the  same author  was  advising  her  readers that Fonterra chief executive Theo Spierings’ challenge, ‘build windmills not walls’, is galvanising the dairy co-operative.  She observed:

“…behind the scenes there has been a fundamental refocusing of the company’s strategic operations which Spierings expects will result in a ‘strong picture’  when he unveils Fonterra’s financial results late next month.

“Fonterra is moving swiftly to occupy high-value market segments and has challenged its staff to find the next big game-changing idea or product through its new innovation programme: Disrupt”.

Another  commentator,   Keith Woodford,  reckons Fonterra’s latest move  could be a breath of fresh air. 

“It needs to be a wind of change.A starting question has to be why has Fonterra been doing so badly with its international ventures? This includes both international processing of milk and marketing of consumer-branded products. In the case of China, it also includes farming”.

Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd.

He  says  most New Zealand farmers are very loyal to Fonterra.

“Accordingly, over the years I have made my share of enemies by pointing out deficiencies. So, let me make one point clear: I am a strong believer in the importance of Fonterra, but for everyone’s sake it does need to do better.

“Fonterra is the emperor of New Zealand dairying.  But the emperor is down to his underwear and it is not a pretty sight”

Woodford  poses the question: Why is it that with a board of highly qualified people  Fonterra keeps making so many mistakes in the international marketplace?

“The key answer I come up with is that these directors, although well qualified, do not have outside information as to what is happening in the markets. Rather, they have to rely on the internal communications machine which polishes everything up before they receive it”. 

Woodward credits the so-called Fonterra Communications Division (“but in reality the Fonterra Propaganda Division”) with doing a stalwart job over many years of painting over the cracks.

“But even those skilled operators have been unable to cover up some of the recent messes, particularly in China, but also elsewhere. There are likely to be more awkward disclosures to come”.

 As  insightful  as these  commentaries  are, Point of Order  can’t help wondering  if  the  business  of  running  operations as  vast  as  those  of Fonterra  is   just  as    complex  for other  multinationals  in the food industry, like  Danone  and  Nestle.

Maybe  we  are  pitching  our expectations  too  high if  we think  NZ  can  produce  a  Bill Gates or  a  Steve Jobs to run Fonterra.