Tidy your room, Fonterra

Mark Chamberlain is pleased Fonterra is tidying up its business after a number of missteps.

 Jordan Peterson, a clinical psychiatrist from Canada, has several rules for life. One of them is to tidy your room. He believes that if you cannot (or are unwilling to) solve uncomplicated problems in your life, how can you expect to solve complicated ones.

This philosophy has now been adopted into the Chamberlain family as something of a mantra, not just for the kids but also for me. It appears that this advice has also filtered through to the Fonterra board and management. I was pleased to discover this recently when I attended the Fonterra ‘My Connect’ conference, in Auckland.

Mrs Chamberlain’s shopping abilities, while I was at the conference, left both myself and our credit card stunned, but it was Fonterra’s ‘show and tell’ that was truly impressive.

A day and a half of polished presentations ranging from global managers zooming in from around the world, little snippets from the 350 strong research and development team, all segued together by super slick sports broadcaster Scotty Stevenson as MC. A non-farming highlight was a presentation by Peter Beck, founder of Rocket Lab. A boy from Invercargill with a dream, who now employs 700 people worldwide, and who will be listing shortly on the NASDAQ for somewhere around $4 billion… give or take. A man pushing boundaries and learning from failure to achieve success. He could have been a farmer in another life.

Say what you like about Fonterra (and people certainly do), it has not always been rosy at head office. Missteps, poor investments, poor messaging, and wrong decisions are well documented. However, it is easy to criticise from the comfort of your keyboard, as hindsight is always a perfect science. But it must be said that aside from the odd earthquake or adverse weather (both related, if you listen to the Moon Man); New Zealand’s dairy behemoth has always delivered… or more literally, always picked up.

Strangely enough the other mobs in the milk game, who have only managed to exist by suckling on the back teat of Fonterra due to the Dairy Industry Restructuring Act regulations, have always been able to magically match Fonterra’s milk price. The other milk companies never experience the same level of scrutiny that Fonterra does and have only just got significant gains after years of lobbying in Wellington, ironically under a Labour Government – thanks, Nathan Guy.

To this humble sharemilker, the board seems to be (at long last) functioning as a unit, with just the right amount of professional distance from management – something that was not always obvious in the past.

At the meet and greet drinks and nibbles, Mrs Chamberlain and I had the good fortune to meet the chairman, Peter McBride (formerly of Zespri fame). What ensued, was a 20-minute candid conversation with the most wanted man in the room. Such open conversations with the decision makers extract a sense of loyalty. The takeaways we got from this conversation were that he certainly doesn’t believe in the ‘old boys club’, he has endeavored to remove the ‘them and us’ mentality, and that the board are genuinely intent on listening to shareholders.

McBride also signalled that with him at the helm, there will be a change in attitude towards sharemilkers which will see them more welcomed into the Fonterra family, as they are a vital part of the company’s future. Because you see, Fonterra has a problem. It is not a problem for today, or tomorrow, but in the near future. Declining milk year on year (for various reasons), coupled with an ageing shareholder base, all adds up to a capital structure that is not sustainable.

Over the two days, tough questions were asked – and none were dodged. No doubt, as they move forward to further discuss capital restructuring, with over 80 director – shareholding meetings throughout the country, this will hopefully be an on-going theme.

And that’s where it could get complicated; real fast. Here’s hoping they’ve got their rooms tidy.