Coles poised to increase dairy processor payments

With a number of milk processors announcing increases in opening milk prices for the next season, Coles is being pressured to stay "true to their word" and increase its payments to processors.

Fonterra, Murray Goulburn and Warnambool Cheese and Butter recently announced stronger opening milk prices, crediting the rise (20 percent, on average) to global demand and the weakening Australian dollar.

According to Queensland Country Life, the supermarket giant has "rise and fall" clauses in its private label milk contracts and has announcedit will ingredient processors' payments to reflect the higher farmgate prices.

"If they are true to their word the price for Queensland dairy farmers supplying Coles with fresh milk should see their price rise by at least 24 percent, which is the increase announced by Murray Goulburn," said Queensland Dairyfarmers' Organisation president, Brian Tessmann.

A Coles spokesperson said the company will be reviewing and substantiating claims and cost price rises and then deciding whether to absorb the increases or pass them onto consumers.

There's no doubt the dairy industry will welcome any move by the supermarkets away from their $1 pricing schemes, which have been heavily criticised by dairy farmers and are belived to have contributed to the collapse of two West Australian dairies, one being Lactanz Dairies, the state's biggest dairy producer.


WA dairy struggles raise questions over industry’s future

The collapse of two West Australian dairies, now in the hands of receivers, has raised questions over the viability of Australia's dairy industry.

Western Australia's biggest dairy producer, Lactanz Dairies, and a family run dairy at Capel have both collapsed and acting chief exectuive of Lactanz Dairies, Michael Allen, said the company's woes are because broader industry issues.

According to, Allan is based in New Zealand, where the dairy industry is thriving, and says Australia's industry is at risk unless farm gate prices rise.

"Unfortunately in WA over the years our production increased but the milk payout fell. Prices fell by more than 15 percent two years ago and on top of that land prices fell," he said.

Dairy farmers have spoken out about the supermarket duopoly's $1 milk wars, arguing that it's made the industry unsustainable.

Western Australia experienced its biggest shortfall in decades this year, with Lion, which supplies to Woolworths, bringing in milliopns of litres of milk from interstate.

While Fonterra, Warrnambool Cheese & Butter (WCB) and Murray Goulburn have announced strong opening farmgate milk prices this month, WCB's CEO, David Lord, says the company will remain cautious in the coming months.

"These movements have been very positive and give us confidence in our outlook for the first half of the season where we anticipate world dairy prices will remain strong. Given the volatility of the many external factors, such as; milk supply growth, market demand, world dairy prices and exchange rates make it difficult to predict in the longer term, we maintain a cautious approach to the second half of the year," he said.

Ben Purcell, managing director at Brownes Dairy, said farm gate prices have been given a boost over the past 12 months due to competition for local suppliers between the Lion, Brownes and Harvey Fresh processors, they're still not delivering farmers a reasonable return.

"If we don't get a fair price out of the market and a fair price back to farmers, the industry won't survive … We are not seeing people taking up dairy farming, we are only seeing exits," he said.


Warrnambool Cheese & Butter announces opening milk prices

Warrnambool Cheese & Butter (WCB) have announced their final 2013 and opening 2014 milk prices.

The average opening milk price is approximately 25 percent higher than last year at $5.65 per kilogram according to a recent statement from the company. WCB’s forecasted full price range is $5.90 to $6.10 per kilogram of milk solids, and will be subject to a quarterly price review process.

WCB’s CEO David Lord, said that the price reviews will be undertaken due to the volatile nature of the industry.

“As the Industry has experienced in recent years, markets and exchanges rates are volatile and can move very quickly in a positive or negative direction. In this environment we need to be aware that this volatility can impact on the industry and on milk prices paid,” he said.

The 2012-13 season will see a step up of six cents per kilogram for butterfat and 15 cents per kilogram for protein. This will serve as a retrospective payment with the new rate applying to milk supplied from 1 July 2012. A statement from the company says that the payments will be made from June 2013 proceeds in July this year to current milk suppliers.

Lord said that the increases represent a strong competitive milk price for suppliers.

“This increase once again delivers on WCB’s commitment to delivering a strong competitive milk price for our suppliers in a very difficult year and takes our final average milk price to $5.00 per kilogram milk solids equivalent.”

The recent improvement in global dairy prices and the easing of the Australian Dollar poses as a positive outlook for the industry, however Lord says that the company will remain cautious in the coming months.

“These movements have been very positive and give us confidence in our outlook for the first half of the season where we anticipate world dairy prices will remain strong. Given the volatility of the many external factors, such as; milk supply growth, market demand, world dairy prices and exchange rates make it difficult to predict in the longer term, we maintain a cautious approach to the second half of the year.”

The announcement has come after Murray Goulburn announced its early opening price of $5.60, a month premature of the new season starting date.


Lion ‘unprincipled’ in latest milk pricing changes

Leading food and beverage company, Lion, has left farmers unsure about their future following its announcement that it's seeking a new round of farm-gate pricing with producers.

According to the ABC, the changes exclude purchasing from suppliers of less than 1.5m litres as well as those in certain regions, leaving many NSW and south-east Queensland farmers feeling vulnerable.

The Dairy Farmers Co-op isn't supporting the changes, arguing that up to 60 percent of its members could be left without a vendor or real price guarantees, and has branded the move as "unprincipled" and a "take it or leave it" approach.

However Lion is arguing that today's competitive dairy market means suppliers and producers need to reassess how milk is supplied.

Mike Logan, executive officer at NSW lobby group, Dairy Connect, reassured producers, arguing that supply discussions are continuing and there's a market out there for existing producers.

"It is doom and gloom in the first instance because people are going to lose contracts but in the second instance there are more people that want NSW milk than there are available," he said.


Fonterra announces milk prices

Fonterra Australia has announced a step up of four cents per kg of fat and 10 cents per kg of protein for milk supplied in Victoria and Tasmania in the 2012/13 season.

It simultaneously announced a strong opening farmgate milk price for next season of $5.60 per kg of milk solids (kg/MS) for suppliers in Victoria and Tasmania and a forecast full-year milk price of $6.00 kg/MS.

Judith Swales, managing director at Fonterra Australia, said the company is pleased to be passing through market improvements.

"We value our supplier's loyalty and commitment to producing high-quality milk and promise to work with them to ensure their farm is a robust, sustainable business that delivers solid returns over time," she said.

"Our goal and strategy is to have the most competitive and sustainable dairy supply chain here in Australia. We know delivering on this goal starts with the profitability of our suppliers and that's why we are pleased to reflect the improved market conditions with a strong opening price for next season."

Fonterra also extended its offer for suppliers to access interest-free advances for a period of six months until 30 September 2013.

Earlier this week Murray Goulburn (MG) also announced an opening price of $5.60 per kilogram of milk solids.


Victoria’s dairy farmers told to wait on milk prices

Despite Murray Goulburn’s early opening price announcement, many Victorian dairy farmers have been told to wait until the new season commences to uncover their opening milk prices.  

Murray Goulburn (MG) has announced an early opening price of $5.60 per kilogram of milk solids, almost a month premature of the new season starting date.

The Weekly Times Now reports that the price includes a ‘prepaid step up’ equating to 13c/kg of milk solids which will be available to dairy suppliers next month, resulting in a 24 percent rise in its opening price.

The announcement was widely embraced by industry, however other milk processors in the region say that they will not be ‘rushed’ into a price announcement.

Other major processors have stated that as the market is moving in a positive direction they will announce prices soon, however volatility in the market required decisions to be made with caution.

Heather Stacy, Fonterra’s milk supply general manager said that the weakening in the Aussie dollar and rising commodity prices provided a positive outlook.

“(MG’s) opening price, which includes a binding loyalty payment, does confirm our view that the market is moving in a positive direction," said Stacy.

Robert Poole, MG’s shareholder relations general manager said that the early announcement will aid in the development of suppliers budgets.

"Given the very tough season we wanted to provide dairy farmers with maximum opportunity to budget on known pricing so they could plan their (financial year) 2014 cashflow," he said.

Supermarket giant Coles has also said that it would consider paying processors more, providing they can demonstrate that the increase is a direct result of farmers receiving a higher price.


New bill aims to curb power of Coles and Woolworths

A new bill will be brought before federal parliament next week which is designed to curb the market power of supermarket giants Coles and Woolworths.

Independent MP Rob Oakeshott, will be introducing a private members bill which aims to strengthen the current rules surrounding abuse of market power especially within the context of $1 milk.

Oakeshott believes that provisions under the current Competition and Consumer Act do not sufficiently protect the supply chain or the consumer in the long term.

The Weekly Times Now reports that the new legislation would ensure that a broader view would be taken by the ACCC when making decisions, rather than limiting judgements to the direct consumer affected, or the direct supplier affected.

Oakeshott says that the 2011, $1 per litre milk campaign by both supermarkets is a prime example.

The commission found that the supermarkets were bargaining with large milk suppliers for $1 per litre milk without abusing power, resulting in a win for consumers. However Oakeshott says those truly affected by the price, the dairy farmers in the supply chain, were not adequately protected.

The new bill will force companies to assess the impacts on the supply chain and provide protection for those affected. It will also allow the ACCC to obtain documents and other information which may impact on the supply chain.

"Their concern is that, in the long term, the processors would look to dairy farmers to deliver the fresh product at lower prices," Mr Oakeshott said.

"Anecdotally, the prices expected at the farm gate to allow the consumer to purchase milk for $1-per-litre may not cover the basic on farm costs of production for all but the largest dairies.

"Taking a long-term view, a reasonable perception would be the win for consumers now may result in higher prices as more and more dairy farmers leave the industry.

"If dairy farmers do leave the market it could result in less competition in a small pool of dairy producers, or the fresh milk needing to be sourced from international markets."


Fonterra workers win jobs back after Harlem Shake sacking

Two workers fired from Fonterra's Takanini plant in New Zealand for doing the Harlem Shake dance have successfully appealed the company's decision.

Henry Taufua and Craig Flynn were fired after a video showing the men performing the dance was discovered by the dairy company, which stated that Taufua had "rode a paper trolley or pallet jack in an unsafe manner endangering himself and others and failed to report unsafe acts by other employees", while Flynn had put himself and others at risk by organising the videos, "dancing with a shovel between his legs, hosing water where another employee was dancing and splashing a pallet ."

According to The NZ Herald, the workers successfully appealed the decision to the Employment Relations Authority (ERA), with the video [below] disproving Fonterra's grounds for dismissal.

"Their individual actions do not seem factually similar to the facts alleged in the respondent's[Fonterra's] authorities. Hosing an area of floor then cleaning the water up prior to employees dancing around indicates preventative steps to ensure employee safety. Falling or tipping the paper trolley may have resulted in minimal (if any) injury or damage or none at all," the ERA stated.

"Neither of the applicants conduct necessarily had the potential for the serious injury contemplated in the respondent's authorities."

The ERA ordered the men's temporary reinstatement to their jobs until a substantive hearing.



Chobani Founder named Ernst & Young World Entrepreneur of the Year 2013

Hamdi Ulukaya, CEO and founder of Chobani was presented with the Ernst & Young World Entrepreneur of the Year 2013 award at a ceremony in Monte Carlo over the weekend.

Ulukaya was chosen out of a group of 50 country-winners from across the globe and was recognised for his disruptive innovation to bring real food to the masses, regeneration of a long-stagnant category, financial success and personal commitment to building to a world-class brand over a five year period.

“I am deeply honoured to receive this award from Ernst & Young and in the company of such amazing fellow business leaders from around the world,” said Ulukaya.

“What began as just my personal commitment to make delicious and nutritious Greek Yogurt accessible to everyone has turned into a 3,000-person-strong company serving three markets around the world. I look forward to our next 3,000 employees and sharing our food philosophy with even more consumers as we expand into new markets.”

Bryan Pearce, Americas Director, Entrepreneur Of The Year Ernst & Young LLP, said that the award recognises and celebrates the work of innovative entrepreneurs and corporations around the globe.

“We work with great entrepreneurs at every level of society: fresh thinkers at global corporations, visionaries at pre-IPO firms and social entrepreneurs working on the world’s most pressing issues and unmet needs,” said Pearce.

“These high-growth companies are thinking differently and disrupting the norm to create entirely new industries and categories. We are particularly excited to see this year’s World Entrepreneur of the Year winner from the U.S. – innovating an entire product category and propelling economic and job growth here in the states as well as abroad.”

With humble beginning at his parent’s dairy in Turkey, Ulukaya left his family’s business to seek out opportunities abroad where he recognised a gap in America’s dairy market for Greek Yoghurt.

Setting up in 2005, he took two years to perfect his recipe with the first order shipping in 2007. November 2011 saw Ulukaya choosing Australia as the first international market to launch his product due to the high quality of Australian dairy products.

In December 2012, Ulukaya opened his $30m state of the art yoghurt factory in Dandenong South, Melbourne which saw annual capacity triple, along with the creation of 50 new jobs.

Today, Chobani is a $1b global brand.


Fonterra NZ to boost dairy in Asia

Fonterra has identified Asia as a significant growth market moving forward, after discovering 72 percent of people see dairy as an important part of a balanced diet, but less than half have it on a daily basis.

Nine thousand people across nine countries were surveyed and Fonterra's group director strategy, Maury Leyland, said the findings represent an opportunity for the New Zealand dairy industry.

"With a fast-growing and increasingly affluent population, people across Asia are becoming more focused on their families receiving the right nutrition. Fonterra is well-positioned to help meet this demand," Leyland said.

"Our strategy outlines our focus on the Asian markets, where we see big potential for growth. In New Zealand the average person consumes the equivalent of 245 litres of milk each year, but in Asia this average is only 30 litres."

According to a statement issued by Fonterra, dairy demand across Asia has grown rapidly over the past 10 years, with demand for high quality dairy nutrition increasing by 49 percent.

Fonterra also has 11 markets across Asia, educating food companies and consumers about the benefits of dairy, and looking at ways to make dairy more accessible and a core ingredient in commercial kitchens.

Of those surveyed in the research released today [31/5/13], Chinese and Thai consumers were the most aware of the benefits of dairy nutrition, with 84 percent of respondents saying they believed it was an important or very important part of a balanced diet. Recognition was the lowest in Indonesia, Taiwan and Vietnam at just over 60 percent in each country. 

Chinese consumers are eating the most dairy with over 60 percent of people eating at least one serving a day, followed by the Philippines where 53 percent of people have dairy products on a daily basis.


Australia’s oldest dairy celebrates 125 years

Warrnambool Cheese and Butter have celebrated 125 years of operation making them the nations’ oldest dairy processor.

The families who founded the processor gathered at Allansford, south-west Victoria to reflect on the company’s history according to ABC Rural.

Frank Davis, WCB’s chairman, said the company was registered in May 1888 and today uses over 90 million litres of milk annually.

Local Allansford historian, Graeme Mcleod said that the initial opening of the dairy was received with scepticism surrounding the need for a dairy processor as most farms made their own butter.

"When it first started, farmers didn't really get involved in it. They were quite happy to do their own thing. It took a lot of convincing that working together was better than working alone."

The 125 years of operation were not met without challenges. The factory suffered through two fires, the first in 1913 and second in 1929, and more recently, the company withstood a supplier exodus in 2009 which lasted five days.

The Burleigh family has supplied milk to the company since inception aside from the five day exodus which was caused by a milk price dispute. The businesses came to an agreement five days later and have never looked back.

“It was a wakeup call to the company. Only good has come from it,” said milk supplier, Noel Burleigh.


Brownes dairy praised for water savings

Dairy company, Brownes, has been praised for making some serious water savings, thanks to fairly basic operational changes at its Brunswick Junction site in Western Australia.

According to thewest, Brownes Brunswick Junction was named in the silver category in the Water Corporation’s Water Efficiency Management Plan program awards for improving water efficiency by between 25 and 35 percent in 2011-12.

Water usage at the site dropped from 2.6L per one litre of milk to 1.4L, said Brownes engineer Andrew Bennett, and all from fairly simple changes to procedure.

"Before, we used to do a rinse and that water would go down the drain — now we recover it to be used for the pre-rinse next time," he said.

"We’re saving on water but we’re saving on chemicals too."


Fonterra recalls processed cheese

Fonterra is recalling a slice cheese product in New Zealand, amid reports plastic is sticking to the cheesse once it's unwrapped.

According to, Fonterra has voluntarily recalled its Mainland Tasty Individually Wrapped Flavoured Processing Cheese Slices 250g with a best before date of 8 February, 2014. The slices have been sold in New Zealand's North Island and also in Fiji.

The recall came after two reported incidents of thin strips of plastic sticking to the cheese.

Fonterra Brands NZ sales director, Baden Ngan Kee, said "The plastic wrapping of individual slices may split into thin strips causing a potential hazard if consumed. There have been no reports of anyone being harmed."

Consumers should not eat the product but should return it to the point of purchase for a full refund.

Margarine slides, private labels rise, study finds

Recent Roy Morgan research has found that less Australians are buying margarine, compared to 2008, but it's still the most popular table spread.

Thirty-nine percent of Australians aged 14 and over bought margarine in an average four week periodw, down from 42 percent in 2008.

Norman Morris, Industry Communications director, Roy Morgan Research, said "Over the last five years there has been a small decline in the proportion of Australians purchasing margarine in an average four-week period. It is still the top category of table spread … and most of the popular brands have maintained their market share. Supermarket-branded margarine has even seen an increase."

Butter is the second most popular spread, bought by 33 percent of Australians in an average four-week period in the year to 2012, up from 32 percent in 2008.

In regards to margarine brands, Flora margarines were bought by 12 percent of Australians aged 14 and over – the same as in 2008 – while eight percent opted for Meadow Lea, also unchanged from 2008.

Supermarket brands were the third most popular, growing in popularity from five percent in 2008 to seven percent in 2012.

Queenslanders in particular favour supermarket branded margarine, with nine percent buying them in an average four week period, compared to seven percent of the total population.

Darwin and Alice Springs residents are also slightly more likely to purchase Nuttelex, a vegan-friendly spread which ranked fifth across the country, up from sixth in 2008.

"Manufacturers need to understand not just the state differences but also the detailed profiles of their customers and competitors if they are to maintain their market share in the future," said Morris.


Dairy export opportunities in developing nations

Demand for quality dairy products in developing nations has provided a valuable opportunity for Australian and New Zealand producers.

Australian and New Zealand producers are looking to nations in Asia and Africa with emerging dairy markets and rising middles classes to expand their reach as dairy importers around the globe start reduce their dependence on exports.

A New analysis from business consulting firm Frost & Sullivan (Strategic Growth and Emerging Export Opportunities in the Australian and New Zealand Dairy Sector Nations) has predicted that the market will rise from $11.60 b in 2011 to reach $17.2 b by 2018.

“Exporters need to re-evaluate their marketing strategies to cater to newer customers, rather than simply concentrate on the big importers such as the United States and China,” said Frost & Sullivan Chemicals, Materials & Food research analyst, Natasha D’Costa.

“This will enable the exporters to not only address the healthy markets locally, but also help build global dairy demand.”

Frost and Sullivan believe that ANZ producers should take capitalise on the first mover advantage by entering these markets, and take advantage of the geographical proximity markets, particularly Asia.

However they have also warned produces of the challenges that exporters face regarding trade barriers, fluctuating currencies, price sensitivities, regulatory processes and cultural differences- especially regarding religious beliefs.

Frost and Sullivan have stipulated that exporters must position their products appropriately to align with the needs of the importing nations in order to be successful.

“Finding the right mix of existing and emerging key growth export nations will ensure that the ANZ dairy market grows from strength to strength both in terms of revenue and perceived brand value,” said D’Costa.


Shoalhaven Farmers consider Devondale offer to supply Coles

Farmers from the Shoalhaven region are considering an offer from Devondale/ Murray Goulburn Co-operative (MG) to supply milk to supermarket giant Coles on a 10 year contract.

The dairy Co-operative discussed plans for a new milk processing facility and future milk supply with local dairy providers and farmers at the Bomaderry Bowling Club last Thursday. The local producers appear to be cautiously interested in the proposal according to the South Coast Register.

“They want to know if this is an opportunity or a threat,” said Dairy Connect Consultant Mick Logan.

Local dairy farmers appear to be interested in the offer providing that an appropriate price is negotiated according to local farmer, Col Walsh.

“They said that they would give us the market value, I’m hoping they can offer more,” said Walsh.

Walsh also explained that despite an attractive ten year contact many farmers remain wary of locking in contracts with either of the supermarket giants.

“Farmers are now sceptical about partnerships with big companies like Coles and Woolworths.”

The new Devondale/ MG processing plants are said to be built in Melbourne and Sydney with operation commencing on 1 July 2014 following the finalisation of the contract with Coles.


New silos “future proof” Fonterra site

Fonterra has announced the installation of two new milk silos at its Cobden manufacturing site in south-west Victoria.

The almost $1 million capital expenditure is part of a $20 million dollar investment package to modernise Fonterra’s sites across south-west Victoria over the next three years.

According to Rob Howell, Cobden site manager, the new silos will create production efficiencies and allow for any potential, future increase in the site's capacity.

"The new silos are really all about future-proofing the Cobden site. They will generate good productivity gains and support future growth, which is great news for our suppliers," he said.

"Fonterra remains deeply committed to manufacturing in south-west Victoria, so we are pleased we can invest to modernise the site and continue to deliver high quality dairy products to our valued customers."

Cobden manufactures a range of products including the popular Western Star butter, as well as cream and milk powders. The site is one of Fonterra’s 10 manufacturing sites in Australia.

Earlier this year, the multi-national dairy company announced it will be investing more than $100m in a new UHT milk processing plant at its Waitoa site in New Zealand's Waikato region. The plant is expected to enable Fonterra to increase its UHT production by 100 percent over the next few years, and will include five new UHT lines producing a range of products including UHT white milk and UHT cream for the foodservice sector.

It also teamed up with A-ware Food Group, a partnership which will see the development of a new cheese plant and dairy ingredients plant in the north of the Netherlands.

Fonterra has also recently announced a corporate shake-up, with the appointment of its new Australian managing director, Judith Swales.


Fonterra cleans up at the Australian Dairy Product Awards

Fonterra has taken home 27 awards at the 2013 Dairy Industry Association of Australia (DIAA) Australian Dairy Product Awards.

Fonterra’s Victorian manufacturing site, Cobden where its famous Western Star butter is created, won 12 awards spanning their butter and milk products range and received gold for every category that the brand was entered into.

The Cobden site also received the Arthur E Hacquoil Gold Medallion and E T Heard Memorial Gold Medallion for its bulk dairy products, Fonterra’s Bulk Salted and Unsalted Butter respectively.

Fonterra’s Tasmanian sites, received 10 awards in total for their cheese and milk powder products. The Wynyard site’s Colby Semi Hard Cheese received the Merk Award for the highest scoring semi hard cheese and the Spreyton site claimed gold for its Skim Milk Powder.

Wagga Wagga, Fonterra’s NSW site won five medals, with its Riverina Fresh Chocolate Milk taking home gold.

Chris Diaz, Fonterra’s Operations Manager said the awards were an excellent achievement for the brand and continue to confirm the quality of the company’s dairy products.

“We manufacture great tasting, Australian-made products at our 10 sites across Victoria, Tasmania and New South Wales using milk from our local suppliers in the region. We’re thankful to our dairy farmer suppliers for continually supplying us with the high-quality milk that is an essential ingredient behind these award winning products,” he said.

“Being recognised as the producer of top quality dairy products is a fantastic acknowledgement for our employees, the regions where these products are made and to our farmer suppliers.”


Lurpak launches new “weave your magic” campaign [video]

Lurpak launched their first Australian television commercial this week as part of the Danish brand’s new “Weave Your Magic” campaign.

The television commercial titled “The cook” (see below), directed by Scott Lyon of the UK’s outsider, and narrated by Rutger Hauer of Blade Runner fame, features cinematic slow motion effects and close ups of impressive feasts created by an unassuming cook.

The commercial aims to communicate the notion that good food can be created by anyone, anywhere in the world, and that the imaginations of food lovers can be transformed into exquisite meals with the right ingredients.

“When it comes to good food, cooks speak a universal language. It doesn’t matter where in the world your kitchen is, what dish you are cooking, imaginations of the food lover are most captured at the moment of creation” said Lyon.

“The commercial showcases this special moment, when the cook and the ingredients come together as one, with the help of Lurpak Butter.”

Senior brand manager Charlotte Buswell said that Australian consumers know the importance of using quality ingredients to create everything from a simple scone to an extravagant meal.

 “The campaign highlights this and encourages cooks to ‘weave their magic’, to transform the ordinary into the extraordinary,” she said.

Following the successful introduction to Aussie shores in 2006, Lurpak has identified the Australian market as having excellent growth potential as the interest in quality ingredients and home cooked meals continue to rise.

The television campaign will be complemented by a $10m marketing strategy including print media, outdoor, digital, sampling, and sponsorships of Lifestyle Food and Taste of Melbourne cooking school. 



Proposed job cuts at Fonterra drives shares spike

Dairy company, Fonterra, is proposing to cull 300 jobs and investors have responded well, with share prices jumping to over $8.

Yesterday, chief executive Theo Spierings announced that the company's support services structure was under review, causing the unit company's unit price on the New Zealand Stock Exchange to rise 2.69 percent to $8.02.

According to shares closed up 3.07 percent at $8.05.

Spierings said the changes, which could affect workers in Fonterra's Auckland and Hamilton offices, are expected to save the company $65m a year, before restructuring costs.

He added that about 50 roles potentially affected by the cuts are currently vacant because of a staff freeze imposed in February this year.

Consultation with staff is under way at the moment, with the review to be completed at the end of May.

Spierings said, "The review has identified potential opportunities for us to deliver a range of corporate services centrally, reducing duplication and removing layers of management."

According to, the savings gained from the proposed job cuts would be reinvested to support Fonterra's growth priorities and would be additional to the $60m in cost savings the company has already committed to deliver this year.

In late April, Fonterra announced a restructure to its Asia Pacific/Middle East/Africa division, which saw the departure of MD Mark Wilson, and the appointment of Judith Swales as the new Australian managing director.

Swales was previously MD at Heinz Food Australia and also has experience at Goodyear Dunlop, Angus and Robertson as well as WH Smith and the food division of Marks and Spencer in the UK.

The big cheese
Fonterra Australia also made a big announcement yesterday, confirming it will invest $6.6m in upgrading the cheese production system at its Wynyard, Tasmania site.

The company received $659,000 from the federal government as part of its Clean Technology Food and Foundries Investment Program. Other companies to benefit from this hand-out include Teys Meatworks and confectioner Robern Menz. De Bortoli and Barossa Vintners will also be installing new solar power generators soon, expected to save the winemakers tens of thousands every year, and partly funded by the grant.

The new system includes eight new cheese vats which will improve efficiency in Wynyard’s cheese production and allow for a potential future increase in capacity.

The project will leverage Wynyard’s existing cogeneration system thereby reducing carbon dioxide emissions from the essential milk-warming portion of the cheese making process by 90 percent.

Minister for Climate Change, Industry and Innovation, Greg Combet, said "Fonterra will see a real difference to their energy consumption with this investment in energy efficient capital equipment and low emissions technology. Investing in clean technology is good for a company’s environmental footprint and good for their bottom line."

Swales added that the new technology will help boost business for Fonterra both here and abroad.

"Australia is a must-win for Fonterra. We have been investing over the years to develop a platform for growth in Tasmania and this investment continues that trend. By improving the efficiency of our factory and using less energy, we will boost the competitiveness of our high-value domestic and export products that Wynyard manufactures, allowing us to maximise returns," she said.

Works to install the system will commence in June 2013.