Great Scott – could this be the source of fresh thinking from Fonterra?

Fonterra’s new chairman, John Monaghan, the man chosen to resuscitate the co-op’s flagging fortunes, got a big serve from the NZ Herald’s  Andrea  Fox this week.  Under the headline “New chairman – same old Fonterra song”, she wondered  if  anyone else  had a sinking  feeling  when Monaghan presented his idea of the biggest  challenge facing the embattled  dairy  company:  the need  to change  the law  that forces Fonterra  to accept milk  from  any  farmer and sell it to  rivals at a subsidised  price.

Fox  went  on:

Meanwhile back in real life land, Fonterra had a crisis of confidence among its 10,000 farmer-owners due to its financial and investment decisions, its balance sheet wasn’t pretty reading, and our so-called ‘national champion’ was being scorned by the public and the Beehive.

“With the chief executive as well as the former chairman gone, Monaghan, rather than jump into the leadership void and address these inconvenient truths head-on, pitched a tired old complaint that’s worked for Fonterra’s spin machine before, firing up righteous indignation among farmers when it’s needed a distraction tactic.

“It’s also been a handy one for implying if only Fonterra didn’t have this pesky bit of the legislation holding it back it’d perform better.But challenged by the Herald to produce evidence of the hardship created by its statutory milk obligations, New Zealand’s biggest company cried commercial confidentiality”.

Fox went on to note that Monaghan’s idea of Fonterra’s biggest challenge

“ … is well offside with his shareholders. Several told the Herald his priority should be restoring their confidence in the board and  senior management”.

As  Point of Order  sees it,  Monaghan   would not be  the  first farming  leader to stick  to the party line  when stepping  into one of the  toughest  jobs  in the global  dairy industry.   Having graduated in  the  school of  co-operative  business,  he’s  not   going  to desert  the  ethos  to  which the  10,500  farmer-owners  subscribe  so  rigorously.

It’s clear the big co-op  is now  at  a  critical  point in its  relatively short history. Many of its farmer-suppliers are dissatisfied, and so  too are its public shareholders who see    competitors’ financial  performance  out-stripping it.

Since  the Fonterra  board  announced a  “pause”  to see where it stands in the  wake  of  John Wilson suddenly leaving as  chairman because of ill-health, and  the decision  to put the search  for a  new CEO on hold as  Theo Spierings departs,   the  co-op  has a  chance to  set  clear  strategic goals  and find the flexibility  in tactics  which has served its nimble, younger competitors  so well.

So  from  what direction  could  new ideas   emerge?

Some  might be pinning  their  hopes on   a  relatively  fresh  face  at   the Fonterra  board table, Scott  St  John,  who  had a  stellar   career  as  chief  executive  of  First NZ  Capital.  One authority  reckons  St  John’s record  at  that  investment  firm  is  rather like that of  Steve Hansen  as  coach  of  the All Blacks.

St John left  FNZC  when he  was  just  50  to  take  up  directorships, including those with  top companies  like  F&P Healthcare and Mercury  as well as Fonterra.  His proven ability  with FNZC lay  not  just in the  selection of  highly talented   individuals,  but  in  setting  clear  goals  and   applying  a  culture   in  which those individuals  sought to shine.

He told  the  NZ  Shareholders’  Association  annual  meeting in Auckland recently  the  co-op  won’t be changing its ownership  structure  but  it needs

“ … to think  carefully and innovatively how we fund the projects we enter into”.

He pointed to the Indian  joint venture with Future Consumer Ltd  to market consumer and  food service products as

“ … probably more likely to be  the sort of  thing  you see us doing”.

If  Fonterra is to succeed  in restoring the confidence of both its  suppliers and shareholders,  not to mention  Andrea  Fox,  the  key  may  be  the influence  directors like  St  John  has in re-shaping its  strategic  goals.

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