Letter To John Roadley, Global Co Chairman
8 June 2001
Mr John Roadley
Global Dairy Co
We believe it is vital for all dairy farmers to have the opportunity to consider the options that would better achieve the industry growth and diversification strategy.
To that end, we are holding an meeting with farmers in Hamilton on Monday, 11 June, 3pm at the Quality Hotel in Hamilton.
We would like to invite you to exchange views at our meeting on how you propose to deal with very real concerns about Global Co, in particular:
- How will Global Co become one of the top five dairy firms in the world within five years (as promised by Warren Larsen on the Global Co web site) without bringing in outside equity capital?
- How will Global Co deliver the strategy set out by McKinseys, which called for a new, consumer-driven culture, instead of the production-focus we have had for 80 years?
- How you will stop Global Co becoming inefficient? McKinseys estimated $800 million of possible losses from monopoly inefficiencies;
- Why haven’t you adopted the McKinseys “must do’ conditions - without which they advised a single co-op wouldn’t work?
- How you will achieve the $310 million of gains promised from Global Co?
Remember, McKinsey’s calculated that:
- Integrating manufacturing and marketing through a merger would only deliver about $20 millions over two co-ops;
- $130m was supposed to come from pre-existing improvements within the Dairy Board; and
- Whereas the main gains from Global Co were supposed to come from fresh, dynamic new management - McKinsey called for a “catalytic event’. Where is it?
- How will the board agree on really big business decisions when it can’t agree on the chief executive?
- How will milk payouts stay the same across NZ when it is widely acknowledged some farmers will have to be paid more to stop “cherry picking’ by possible competitors?
- When will Global Co stop cross-subsidising transport costs? McKinseys were very up front that cross-subsidies among farmers would have to stop;
- Is Global Co really going to spend hundreds of millions buying into foreign milk factories in Asia and South America? Who will fund these investments?
- How can Global Co remain a pure co-operative when McKinsey said it would have to get $12 billion - $275,000 per farmer - to fund the strategy?
- Why haven’t farmers been given the McKinsey report? There must be a version that does not contain information sensitive to our competitors.
- How many industry leaders believe Global Co is simply a transition phase - something we have to go through to settle-down the politics before we can put in place a structure to really deliver the strategy?
To ensure proper process, the meeting next Monday will be controlled by an independent and neutral chairperson - a partner from an senior law firm in Hamilton with no involvement in the merger issues.
We would welcome your participation at our meeting. We look forward to seeing you there.
If for any reason you are not able to attend, we would be pleased if your deputy, Greg Gent, could attend in your place. In that event, Henry van der Heyden would also be most welcome.
It is such an important issue for our industry and NZ as a whole. A proper, open discussion and debate of the issues vital to ensure a healthy democratic process. We look forward to seeing on Monday.
Farmers for a Better Dairy Deal