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Fonterra in South America

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REPORT DESCRIPTION

‘Fonterra in South America’ (August 2010)

Report #1 in dairymark.com’s ‘Corporate Profile’ series of publications.

During August 2010, dairymark.com has published a report entitled ‘Fonterra in South America’.

As background, Fonterra is not only New Zealand’s largest company, and deals with > 90% of N.Z. milk production, but the company is also the largest worldwide marketer of dairy products. Arising in no small way from its NZDB roots, Fonterra also has a continually evolving and rapidly expanding global footprint – not just in terms of its distribution network and the markets that it services, but increasingly in terms of:

  • Milk collection & procurement in foreign locations
  • Strategic third party dairy ingredient sourcing
  • Joint ventures and alliances at various points throughout the value chain
  • Offshore equity investments across the dairy supply chain – including such diverse elements as:
    • R&D/discovery facilities in Chicago (U.S.)
    • Dairy farms in China
    • Re-packaging in Saudi Arabia
    • Recombining in Malaysia
    • Processing in Sri Lanka
    • Almost complete ownership of Soprole – a large-scale dairy company in Chile
    • Complete ownership of Fonterra Australia – effectively allowing Fonterra to extend its ‘home market’ through the annexing of its Australian business

There is little doubt that Fonterra wishes to continue its global growth and expansion initiatives. Indeed, the recent (and by all accounts ‘successful’) process to get farmer support for its capital restructuring program is founded in no small way upon the need to source capital for these developments. And the capital restructuring program vote was sought with two primary and undying considerations in mind:

  • Without compromising the co-operative principles upon which the organization was founded, and
  • By strictly maintaining ownership and control of the company within its N.Z. supplier-shareholder base

So what is Fonterra about? Dairymark.com concludes that despite all the rhetoric about its market orientation that Fonterra has a single focus. This focus is on one key resource – raw milk – and that this is something that Fonterra has unequalled experience and well-developed insights about within a highly contested global dairy industry.

Thus, all that Fonterra does is intrinsically linked to leveraging what has become an exceptionally strong comparative advantage. Execution of this strategic foresight is all about‘where it can get, and what it can do with, raw milk’.

The current report discusses what is known about Fonterra’s strategy and how South America fits into its strategic plans.

Click here for full details of the report.