7 Dec 2018

Fonterra's possible sale of Tip Top: 'They just need the cash'

7:05 am on 7 December 2018

A marketing expert has warned the sale of Tip Top could see a repeat of the Dunedin Cadbury factory saga and would not make long-term financial sense.

Tip Top Ice cream factory in Auckland, New Zealand.

Tip Top Ice cream factory in Auckland, New Zealand. Photo: 123rf

Yesterday Fonterra announced it was considering selling the popular ice-cream brand, as they did not want to put in the investment it needed.

It said keeping the company in New Zealand would be factored into its decision, but foreign ownership was not ruled out.

Tip Top spent four years under Australian ownership before Fonterrra bought it back under local control in 2001.

For the 380 workers at the ice cream factory in Auckland, the main concern was what a change of hands would mean for their jobs.

New Zealand Dairy Workers Union national secretary Chris Flatt said workers were first told about discussions with potential buyers yesterday.

"Understandably, this a is a challenging time for workers and our members.

"At the DWU we're doing everything we can to support them through the process and ensure their terms and conditions are protected and at the moment we're working with the company through this process."

Mr Flatt said there were talks about a potential New Zealand buyer, but could not give more details.

Senior professor of marketing at Otago University Robert Hamlin expected job losses if Tip Top went to foreign owners.

"If it was to be a major Australasian or overseas buyer you would probably find there would be quite a lot of stripping out of local infrastructure.

"A lot of the decision would probably not be made in New Zealand and an awful lot of the stuff would be moved to operations overseas.

"Cadbury is a good example of what happens to brands that move into foreign ownership."

The manufacturing of Kiwi favourites like Pineapple Lumps have been moved out of New Zealand after foreign-owned Cadbury closed Dunedin's chocolate factory earlier this year. More than 300 jobs were lost.

Dr Hamlin said whether a Tip Top buyer was overseas or local they were likely to change the product range.

"It's more likely that it will be bought by one of the bigger players in the branded dairy products or food industry, and they will presumably buy it and then look at what they've got and keep the bits they want and get rid of the bits they don't."

Selling Tip Top did not seem to make long-term financial sense for Fonterra because value added products like ice-cream did not suffer the same price fluctuations as commodity items like milk powder, Dr Hamlin said.

It would be different if they were investing the money in other activities.

"Unless they enlighten us with what they are going to do with this money, they just need the cash."

Fonterra is reviewing all its assets as it looks to bring down its debt levels by $800 million.

A final decision on Tip Tip will be made over the next few months.

Get the RNZ app

for ad-free news and current affairs