KEY POINTS:
Profits at Fonterra Brands are as much as 30 per cent higher compared with last year, says outgoing managing director Sanjay Khosla.
Fonterra is targeting an ambitious 20c/kg of milk solids lift in the contribution such value-added activities make to farmer payouts this season.
Khosla, who leaves on Wednesday, said the consumer products business was responsible for about a third of the value-added contribution to payout.
"As far as we're concerned at this stage, we're on track" for Fonterra Brands to meet its part of the extra value-add performance.
The brands include Mainland, Tip-Top, Anchor and Anlene.
The performance of its "power brands" was about 12 per cent ahead, the foodservices arm was 15 per cent ahead and costs were down.
Khosla said that during his tenure the Fonterra Brands team had turned around a previously "static" sales situation.
Last year, Fonterra Brands lifted its operating surplus 8.6 per cent or $23 million to $288 million through growth in several areas and dealing with underperforming businesses.
Khosla said underperformers had been dealt with quite ruthlessly. "What we've done is gone and said either we fix them in a certain timeframe or you get out." Fonterra was now in the process of changing its business model in the Middle East.
On whether a possible share float by the co-op might offer advantages to Fonterra Brands, Khosla said people had asked him whether he faced a lack of access to capital as a result of being a co-op.
"And the short answer is certainly in the last 2 1/2 years I've had no issues in terms of wanting the right sort of capital at the right time.
"Clearly any business - whether it's a corporate or a co-operative - has to evolve and I will watch with interest that [capital structure] debate go through."
Khosla saw Fonterra Brands' key opportunities as the healthy image of dairy products, good brands well-positioned for growth and ensuring the company operated only where it could make good money. "Our strategy is not simply to put the Kiwi flag in every part of the world."
But the growth of "house brands" was a threat to growth in sales of Fonterra's branded products. Another was potential disruptions to the leadership team - his departure being an example of the need not to be dependent on key individuals.
It was also important that Fonterra Brands did not overstretch itself in export markets such as China.
The value adder
* Sanjay Khosla is the outgoing managing director of Fonterra Brands.
* The business lifted its operating surplus by 8.6 per cent or $23 million to $288 million last year.
* Khosla leaves on Wednesday to live in the US and his successor is expected to be named shortly. An announcement on his new US role is pending.
