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Fonterra Announces Cost Cutting Reorganisation


Fonterra Announcement

Fonterra Co-operative Group today announced a reorganisation that will reduce duplication and costs and create an integrated structure aligned to the co-operative’s future direction.

The major change sees NZMP, as the world’s biggest dairy ingredients business, changing from a stand-alone unit to become the heart of Fonterra’s operations. NZMP’s operations include milk collection from 13,000 suppliers, the manufacture and packaging of more than 1,000 product specifications and the operation of a global supply chain linking production plants in New Zealand and offshore to customers in more than 100 countries.

Announcing the reorganisation, Fonterra CEO, Craig Norgate, said today it was logical for NZMP to be at the centre of Fonterra's structure.

“In our first year since the merger we have operated as a small corporate centre with two strong business units in NZMP and NEW ZEALAND MILK and a collection of other activities grouped under Fonterra Enterprises. This was appropriate in the first year and ensured we delivered the required performance, but it did mean some duplication.

“It’s now time to deal with that duplication so we can reduce costs and, more importantly, become a single integrated team behind a common Fonterra vision.”

Under the new structure, the position of Managing Director NZMP will be replaced by that of Chief Operating Officer. NZMP'S Managing Director, Chris Moller, was offered the new role but has decided, after 15 years in senior roles in the New Zealand dairy industry that his preference is to move on.

Mr Norgate said Mr Moller had made a significant contribution to the industry, leading NZMP through a very challenging year and acting as Deputy CEO of Fonterra.

“He has earned a great deal of respect from the dairy industry during the past 15 years. We wish him and his family well in the next stage of his career,” he said.

Mr Norgate will hold the COO position until a permanent appointment is made.

NZMP’s Finance, Human Resources, Strategy, and Merger and Acquisition functions will all report through corporate function heads with a dotted line to the COO. Fonterra is consulting with staff affected by the reorganisation.

NEW ZEALAND MILK, Fonterra’s fast moving consumer good business whose main operations are in sales, marketing and distribution nationally and globally, will remain as a separate business.

“There are benefits in building a distinct culture in our consumer business,” said Mr Norgate, “but we will be ensuring that culture is clearly aligned with that of the wider Fonterra Group. What we want to ensure is that the focus that has been critical to the success of NEW ZEALAND MILK since it was set up as a separate business continues and is strengthened.”

The only real change to NEW ZEALAND MILK will be moving its Merger and Acquisitions operations into the Group Merger and Acquisitions unit, reporting to the Group Director of M&A.

“This change reflects a desire to create a single Merger and Acquisitions team for our whole organisation,” said Mr Norgate.

Mr Norgate said the changes announced today focused on reducing duplication across Fonterra and creating a single, strong team well placed to capture the opportunities identified for the company going forward.

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