8 Jun 2015

Fonterra needs to be 'better run'

1:58 pm on 8 June 2015

There are calls for major reform to the country's biggest company, as Fonterra faces another big corporate shake-up.

 Fonterra plant in Takanini, South Auckland.

Fonterra plant in Takanini, South Auckland. Photo: RNZ / Diego Opatowski

The dairy giant is going through what it calls a reset, instituting a performance improvement programme - it has named Velocity - and bringing in an external organization which specialises in things like restructuring.

Farmers are facing tough times with low payouts and high debt, and are scrutinising the high salaries paid to some executives.

Waikato University's Professor of Agribusiness Jacqueline Rowarth told Nine to Noon Fonterra was trying to do everything - supplying as well as branding and marketing - and there should be a major rethink of the structure.

"It's too difficult to be milk supply, processing, branding and then the marketing of the brands at once, as well as expanding overseas."

Federated Farmers' Southland past president Russell MacPherson told the programme the business needed to be better run and simplified.

He said executive salaries, however, were all about value for money.

Fonterra said it would update shareholders at the annual meeting in November on the project.

Last month Fonterra lowered its forecast milk payout to farmers for the current season to $4.40 a kilo of milk solids, and announced its opening price for the new season was $5.25, below the break-even point for many farms.

In a statement, Velocity chief operating officer Jacqueline Chow said programme was a "re-set of our business focusing on performance, creating value faster and generating more cash for our farmers.

"We will do this by stepping up our game and the way we work, improving efficiency, lowering cost and duplication where we can, and improving effectiveness and agility."

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