This recent RNZ article repeats the now familiar narrative about the sale of Fonterra’s consumer brands, the big money involved and how good it is for New Zealand. It is exactly the same message conveyed on the 7 pm news on TVNZ last night. I heard at least four people repeat the mantra – “3.8 billion dollars”, all the way from Fonterra’s chief executive Miles Hurrell, to the Prime Minister, this is plainly the message that supporters of the deal want to get across. They certainly succeed in doing so.
Having written on this topic on a few occasions, I remain unconvinced and suggest we need to look closer at what’s really going on. While the whole deal is being very carefully curated and presented in a positive light, I can’t help but think that some hard questions are still not being asked. Instead, I see it as more like when one generation sells off the family silver and does very well out of it, only for future generations to regret how their forbears “cashed up“ the family assets and made them the poorer for it in the long run.
It also reminds me of one of Aesop’s Fables, the “Goose That Laid the Golden Eggs”, which tells the story of a man who has a goose that lays a golden egg each day. For a while, he is happy and celebrates his good fortune but gets greedy and impatient and convinces himself that if he kills the goose, he can get all of the eggs in one go, and get rich, only to find that when he kills it, his goose is just an ordinary goose. The moral of the story – value what you have and don’t short sightedly destroy the very source of your wealth in the pursuit of a short term windfall.
There are a couple of questions that arise from the RNZ article. First, it states that, the sale includes “a long-term agreement for Fonterra to sell milk and ingredients to Lactalis.” We are not told how long that arrangement is in place for, and how favourable it really is. Nor does it explain what security it provides Fonterra’s shareholders in the long run.
The article then states that, “Lactalis has the scale required to take these brands and businesses to the next level,”. The question I ask is, doesn’t Fonterra have sufficient scale and the right leadership to get into that position? If not, would it not have been possible to achieve such scale? if not, why not. Fonterra is one of the largest exporters of dairy products in the world. Surely, it’s stable of brands could have been nurtured and leveraged, supported by the right long-term vision?
And then finally, the article states that, “Fonterra farmers will continue to benefit from their success, with Lactalis to become one of our most significant Ingredients customers.” It’s unfortunate that we are celebrating the likely benefit achieved by a large French consumer brands company, rather than a Kiwi company bringing those profits back to New Zealand. And of course, the most important question remains, is it in New Zealand’s long-term interest to become a supplier of ingredients. That to me is code for being a common garden “commodity supplier”, perhaps with a bit of R&D added to the milk powder. In my view, this is simply not the way to ensure that New Zealand remains a first world country, if that is what our business leaders and political masters genuinely aspire to.
I still believe this is a sad day for New Zealand and a day we will regret for generations to come.
