Minister of Finance Grant Robertson wants to see Fonterra going “bigger and faster” on the value-add side of their business.
Speaking to Q&A on Sunday, Robertson said New Zealand can no longer rely on exporting commodities and Kiwi companies need to be looking for more opportunities to add value to their products.
He singled out Fonterra, after being asked if the company needs to be split up so it’s able to focus more on its value-add business.
“I want to see that [value-add] go bigger and faster and I made that point to Fonterra when I was in opposition and I would happily make it again today.”
Robertson said the co-op had begun work on its value-add strategy in recent years, with some of its plant developments and its high-quality cheeses.
This time last year, Fonterra announced a $20 million investment in its Te Rapa site to help meet growing demand for cream cheese and mini-dish butter.
The Finance Minister says every company in New Zealand should be looking ahead to the next few years and working out how it can do more in the value-add space.
“We have to be looking for the opportunities to add value, because that’s where the higher wage jobs come from.
“What we want to do is encourage all our exporters to be doing that in a bigger and faster way.”
Earlier this month, Regional Economic Development Minister Shane Jones suggested the Agriculture Minister should consider restructuring Fonterra.
Asked if the co-op should be split up, so it could concentrate more on the value-add side of its business, Robertson said that was a matter for Fonterra’s shareholders.
Meanwhile, Robertson has again dismissed concerns of low business confidence, saying the issue is one of perception.
He says business confidence traditionally takes a bit of a dive with a new Labour-led Government and that the confidence figures do not necessarily match up with GDP growth figures.
“GDP numbers this week show there was a 5.5% increase in business investment in the year to March, compared to a 3.9% increase in the year to March the previous year.”
Last month, ANZ Business Confidence figures showed 27% of businesses are pessimistic about the year ahead, up four points from April.
The bank is scheduled to release updated figures on Wednesday, which will capture the impact of the Budget, as well as the Government’s handling of the ban on oil and gas exploration policy.
42 Comments
Value added? Cost added? Which is it? Have to be careful here having to compete with homegrown product in the marketplace and the relative cost of overheads & labour there. And then there is branding and then there is the politics. Many years ago saw the then Dairy Board make absolute fools of themselves, on all of the above counts, over a certain retail product in Malaysia.
Grant with no skin ever in the game, shouldn't be giving advice.
"Grant studied politics at Otago, graduating with a Bachelor of Arts with Honours in 1995. His involvement in the campaign against user-pays education led him to become President of the Otago University Students Association, and later Vice President and then Co-President of the New Zealand University Students Association.
After leaving university, Grant joined the Ministry of Foreign Affairs and Trade, and was also posted to the United Nations in New York. On his return to New Zealand he became an advisor to then-Minister of Environment Marian Hobbs, then to Prime Minister Helen Clark."
Ah, the old '80's chestnut. Value added.
Dairying is the turning of fossil fuels into food - a temporary state of affairs. Making more money from that process? What will the digital '1's and '0's be able to be exchanged for?
Jack did similarly, trading the family cow for some magic beans.
What we need are leaders who realise that the fossil-fuelled agriculture we practice, is not permanent. Who can facilitate a morph to more sustainable farming practices and more people per arable hectare. Because surely that is what is coming. It would be better to go there before the pressure comes on.......
interesting you say that, in NZ we have developed milking technology so farmers can milk more cows
ie rotary milking sheds, automatic cup releases, even robot milking machines.
the only downside is the small family fam will not be able to compete on costs per KG in the future with big corporate farms as they can leverage workers across numerous farms when needed and keep their wage costs down, as well as afford the upfront expenditure to make the farm run more cost effective over time
this chaps a clown. Value add has been a concept that has been around for the best part of 25 years. There is only so much you can do with a "grass" by product. But then again, Shane, and Grant have a huge degree of experience running a large multinational dairy business.
I think it's about time these ministers were regulated to state some sought of disclaimer before shooting from the hip.
Especially when as AndrewJ above gives Robertsons background as stated. Hardly someone qualified to comment on a business of this complexity
"The information provided is for informational purposes only. It should not be considered legal or financial advice”
As I understand it, they were being given this advice prior to the dairy downturn, failed to implement it and got burnt because of this. Since then they have been making changes. Seems that this could be political grandstanding. "Robertson said the co-op had begun work on its value-add strategy in recent years, with some of its plant developments and its high-quality cheeses." So they should be doing what they have already begun doing...
New Zealand needs added value production. This is no mere management theory. It is essential to the life the country. And it's where Fonterra's failure is writ large and affects us all.
New Zealand has an added value society – health, ACC, education, welfare provisions, pensions, etc. We need added value in the goods we produce to sustain the nature of our society. We need to find, create, earn and capture a consumer/customer premium for our goods - the essence of adding value. In effect, though, we’ve been trying to finance an added value society with commodity products – trying to finance a developed-world lifestyle with developing-world production. It can’t be done. We borrow to fill the gap.
Our agricultural sector – Fonterra particularly – has led the country down the garden path in this – the idea that we can just sell more and more undifferentiated/commodity product to more and more relatively-uneducated consumers in China. Rather than seeking to add margin, add value, the company and sector has been and remains disproportionately focused on reducing the costs of production - in particular through many thousands of low or minimum-waged immigrant farm workers.
Imagining that we can go on expanding and intensifying commodity dairy production, that China will take whatever we produce if only it is priced low enough, and that this will support our economy and society, is no way forward - environmentally, socially or economically. This is the fiasco at the heart of Fonterra's thinking, and for too long it has been ignorantly supported by foolish and compliant government thinking.
Maybe we could have a new reality show "Grant Gets A Real Job". Wait for the next parliamentary recess and instead of going overseas somewhere on a junket. Disguise him "Undercover Boss" style and send off to pretend to be working class for a week. Maybe even in a dairy factory somewhere. Could be a much better way to boost popularity than ballroom dancing.
WTF ?
Since when does the Government tell the productive sector how it should run its businesses ?
Someone should tell Robertson his sole purpose is to make doing business easier, so when GDP growth accelerates we all benefit ............
Instead we have coalition partners who want to upset the apple-cart and make things more diffiicult
A bit of Desperate Diversion, methinks. The Hon FM needs to be back in his counting-house, totting up the effects of the following:
- Nurses settlement (last seen at 1/4 billion and oops, that ain't enough - it'll be 1/3 billion before he can say 'Nurse, the Screens!')
- The effect of the NO settlement on health sector relativities. Pluck at one string, the whole harp resonates....
- The effect of the eventual NO settlement on teachers claims (16% when last seen, will shurely be more now)
- The effect of the Teacher's settlement on ECE, University sector salaries and the cascade through to PTE's
- The Police and Defence are waiting in the wings, considering their options. Remember the old saw: when two tribes fight, there's always a third tribe just sitting on the hill, out of the fray, watching and getting ready to capitalise on the result...
- The effect of removing the cap on public service staff numbers. While the trade-off is said to be Staff for Consultants, there is no way that they can get product-specific IT, engineering, geotechnical, or other niche professional advice any place else. The public service is well adapted to growing numbers, meetings, managers, reports and inputs. Not so much Outputs, Value-Add, or Body of Knowledge.
Then pray tell us 'your' solution to solving the accumulated neglect of the Key legacy.
It is from a longer period starting with Rogernomics and Ruthenasia.
So it is not just Nats or Labour, it's both of them.
Remember when an MP and a school teacher were on similar incomes.
Wow, lots of jerking knees all over to night.
All he said was what Fonterras have been saying for years, only fonterra then spent $2b on powder plants and $200m on value add plants. With three times the Staff ( relative to production) and profit substantially behind the likes of Miraka ( they use geothermal not coal @ powderdownkiwi) and synlait Fonterra have simply not practiced what they preached to their ten thousand plus shareholders. The opportunity was there while there was fresh capital arriving via increased which milk production but they have squandered that.
Having politicians pocking sticks at Fonterra may not be ideal but it's more effective than the shareholders council. Ever.
I hear you redcows. Although GR may not have the credentials to offer advice, I've just read an email from our SHC explaining the role of a panel of experts in vetting director candidates and suggesting who Fonterra shareholders elect. I'm picking J Wilson will be one of the recommended candidates! Considering GR et al. comments on Fonterra, sadly the embrace of corporate best practice and director selection hasn't resulted in projected expectations and performance.
Fonterra is number five in the world and guess who is number one NESTLE, but most would not associate nestle as a dairy company and they dont even make the top 15 counties in the world by dairy cow numbers or milk production.
my guess is most of our MPs look at nestle or Lactalis (Parmalat) or danone and wonder why Fonterra has not followed its competitors and gone down the route of more than milk powder,
and the hand brake on that is the ownership model, farmers want the biggest valve for the milk they sell and they dont care about what products are produced and good on them they have a business to run.
he is right the company needs to be split one that concentrates on milk and its main products, milk, milk powders, cheese,
and a company that specializes in producing food from milk, yogurt, drinks, chocolates, ice creams, desserts.
whether farmers own shares in the second company should be up to them if they want to sell them fine, as for the first company yes it still needs to be a coop
and they need to do away will the requirement for Fonterra to supply competition with raw milk that in itself has made the industry anti competitive
http://www.dairyinfo.gc.ca/index_e.php?s1=dff-fcil&s2=proc-trans&s3=glo…
We need to stop using the words "value add" and start talking about a value equation:
https://www.linkedin.com/pulse/nz-ag-why-we-must-stop-using-words-value…
A value equation, stjohncramer, is certainly multi-dimensional, as is any value transaction. But a value equation or transaction is just as valid when someone unwilling to pay obtains desired goods free, or when someone for whom price is determinant obtains goods cheaply - and this is the essence of commodity buying and selling.
My point is that commodity-type equations or transactions are no way to support or further an added-value society. If they were we wouldn't need tens of thousands of low- or minimum-waged workers to keep the dairy industry from running off the road, nor would our vast explosion of agricultural debt be dependent on land asset values instead of income and profitability.
Unless New Zealand increasingly produces goods or services that reach premium value transactions or equations (add value at any number of levels, but certainly monetary value) we shall slide further from first-world standards across the board - simply because we can't afford to keep them up. And such a slide is well evident in a host of social, economic and environmental measures.
The NZ market is very small compared to overseas markets and is spread out. Any niche type product is best suited to niche brands and even then, some of them like Lewis Road, don't have any direct farmer suppliers/processing facilities, instead they contract the production of their products to the likes of existing processors such as Green Valley Dairy. At times they even buy organic milk from Fonterra. During periods when either demand is unusually high or production unusually low, GVD will obtain milk from other sources, including Fonterra organic milk for ‘top up’. https://lewisroadcreamery.co.nz/the-lewis-road-story/our-story/
Really Casual Observer? Fonterra and its sector associates have had more talking-time with, and influence over, our MPs and public servants than any other New Zealand industry or grouping. MPs have every right to talk back, and it's about time they did - for the health of our economy, environment, society, and their future well-being (for which areas our elected representatives have certain responsibilities). And commentators? I wonder how many Fonterra products Rod Oram can name: https://www.newsroom.co.nz/2018/06/02/112720/rod-oram-should-fonterra-b…. This industry affects us all. We all have rights to use our knowledge of it to speak up.
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