The Future Opportunities and Challenges for one of the World‘s Largest Dairy Export Firms: Fonterra in New Zealand

Abstract

Fonterra is the world’s largest exporter of dairy products and the fourth largest dairy company in the world responsible for about a third of international dairy trade (Rabobank, 2002). Based in New Zealand, Fonterra operates in 140 countries through its two main subsidiaries NZMP1 and New Zealand Milk.2 As a co-operative, Fonterra is owned by its 10,400 supplier/shareholders who can elect directors and shareholder councillors to govern and monitor the company. Since its formation in 2001, Fonterra has continued an aggressive programme of acquisitions, joint ventures and worldwide alliances whilst simultaneously undertaking an innovative capital restructuring process. Funding this aggressive growth strategy as well as maintaining and improving various debt to equity ratios has not met with all shareholders’ approval. Fonterra’s domestic milk supply market share has fallen from 95% in 2001 to around 87% in 2014 and as more overseas competition move into the domestic market this percentage is expected to drop even further (Patterson, 2014). As New Zealand Milk has continued to grow in real terms, Fonterra has been shielded from this drop in percentage. But the quantity of milk that New Zealand produces cannot grow forever and this is expected to plateau in the near future.