Global Co Won’t Deliver

Global Co Won’t Deliver

Global Co’s goals are brilliant: grow sales from $10 billion to $30 billion; get into value-added products; open up our biotech potential; dramatically increase profits; become one of the top five dairy firms in the world. Fantastic!

So why do we oppose Global Co? Because it won’t deliver these goals. To succeed, it must:

- Be highly responsive to what consumers want and much less production-driven;
- Find a lot more capital;
- Spread risk across more people;
- Bring in fresh management skills, especially in value-adding areas; and
- Ensure better monitoring and accountability.

Our directors are saying, “we can fix up these things later – after the vote.”

No they won’t! After the vote is too late. If the structure is wrong now, fixing it later will be hugely difficult. Even a great chief executive wouldn’t be able to turn it around. Global Co simply can’t deliver the vision.

Top 5 not possible: Warren Larsen says Global Co MUST reach the ranks of the top five dairy food firms in the world within five years. Sounds great! But where on earth will Global Co get the additional $60 billion of supplier capital needed to lift us to those lofty heights?

Competitors are hugely bigger: Right now, one of our key competitors – Kraft – is raising additional share capital to join Unilever and Nestle in the top three. To be in the top three, you need shareholder funds of $100+ billion. Global Co will only have about $3 billion. Warren Larsen’s talk of joining the top five without new shareholders is simply ludicrous.

Got a spare $275,000? Despite Warren Larsen pretending he has “no idea in hell” of where the figure comes from, top advisers to our leaders have said we need an additional $12 billion to achieve our growth strategy, $4 billion of which is supposed to come from us farmers. That’s about $275,000 each. Anyone got a spare $275,000? Want to put the lot into Brazilian milk factories and high risk consumer products? No? Well tough – under Global Co you’ll have no choice. They’ll take it from your payout without asking.

Know an efficient monopoly? We can’t think of any. Air NZ before Ansett? Telecom before Clear? No. So let’s be realistic. Who would keep Global Co honest in NZ? The risks of inefficiency in Global Co are very serious.

‘Must do’ safeguards not met: If a whole lot of ‘must do’ requirements are not met, McKinseys said a mega co-op would be worse than two competing co-ops by $300 million. So we’ve got a big problem on our hands – the ‘must do’ requirements have not been met (unless McKinseys and our directors are planning something none of us know about).

Things missing: What key ‘must dos’ are missing? First, a ‘sister’ corporate to grow the value-added businesses, with ownership not linked to supply, ready to list on the stock exchange. Second, an obligation to make 4% efficiency gains every year. Third, a ‘large minority’ of independent directors. Fourth, proper separation of dividends from milk payments. Fifth, true merit based job selections. Sixth, a new performance based culture and ethic. Seventh, a “fast and disciplined” approach to the merger.

NZ divided: Despite John Roadley’s claims of ‘keeping the industry together’, Global Co is a recipe for division and foreign control. Our farmers will be ‘cherry picked’ by foreign-controlled competitors. There will not be another major NZ processor to join. The Government’s new special regulations are supposed to make this foreign ‘cherry picking’ easier. Why don’t we keep our NZ industry under two strong NZ-based co-ops?

Cooperative principles will be breached: Our directors are promising to stay true to traditional cooperative principles. Do you know of any very large traditional dairy co-operative in the world that is winning in high-value consumer businesses? The trend is absolutely clear. To win in value-added dairy foods, you can’t do it as a traditional co-op. Sure, the processing part can stay a traditional co-op, but not the downstream stuff.

Until our leaders can properly address these key issues, vote ‘NO’ to Global Co.

If you’ve got any doubts, vote ‘NO’ to Global Co.

If Global Co happens, it’s all over – we’re stuffed.

Vote ‘no’ – the sky will not fall in.

For more information, log on to www.dairynz.org. By Mark Masters (06) 765 7544. Hilary Webber (07) 827 1722.

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