Marketing guru milks Fonterra brand for all it's got

Sanjay Khosla has the task of turning Fonterra into a major international player. Picture / Richard Robinson

New Zealand Milk managing director Sanjay Khosla was well primed for the toughest test that any new Fonterra executive faces - meeting the farmers.

Company chairman Henry van der Heyden presented the so-called marketing superstar with a pair of gumboots and told him to get them dirty before he fronted up.

"We pulled up at my first farm and I realised that I hadn't even taken off the tag," Khosla says with a self-effacing smile. "I said to my colleague: 'Stop the car, stop, stop the car'. I got out, cut it off, then I found a puddle and jumped in."

Indian-born Khosla is a world leader in brand development, regularly lecturing at some of the world's most prestigious business schools.

That he is excited about stomping about in the mud of a country he had previously only noticed from the corporate boxes at Twickenham is good news for farmers. And it could also be very good news for New Zealand.

Fonterra and its $12 billion of annual revenue have been a vital ingredient in the economic good times.

The NZ Milk arm generates a third of this sum and Fonterra management knows it must compete with the food industry giants to keep the good times rolling.

NZ Milk is the building block, and it will become a force to be reckoned with if Fonterra succeeds with its audacious $2 billion takeover of Australia's National Foods. It is the cartons of flavoured milk that will generate big money in the future, not commodities like milk powder and butter.

Dairy industry leaders recognised this years ago but after more than a decade, NZ Milk is still underperforming.

Khosla faces the task of making it work, and doesn't appear the least bit daunted.

Often dubbed a marketing guru, he has a passion for the art of branding.

"Living and sleeping and dreaming brands, that's what I've been doing for 27 years," he says.

He spent those years working his way up the corporate ladder at Unilever.

Sanjay Khosla's crowning glory was the dramatic revival of the old fashioned Lipton's tea brand.

His Paint The World Yellow campaign lifted sales around the world and Lipton even started selling in the great coffee-loving nations such as France.

Building strong brands is about taking a good simple idea and implementing it "with missionary zeal", he says - in a tone that leaves no room for doubt about what that zeal might sound like.

When the Lipton campaign was unveiled to Unilever bosses in the UK, it was greeted with silence, he laughs.

"But once we got missionaries behind that concept, we found that there were yellow countries spotted around the globe pretty quickly."

Getting NZ Milk fired up was his first big job here.

After six months of visiting NZ Milk's operations he believes he now has his team behind him.

Khosla said he not would be talking to the media if he did not already have a buy-in to his strategy from staff and the board of directors.

"This not something I've just invented. No way. This is something that all of us are fully committed to.

"Ask any of our leadership team and they'll say much the same things," he says.

"Although they may say it with a slightly different accent."

Once again Khosla's exuberance for team building is obvious.

"Getting good people working interdependently, it's beautiful. You have a lot of fun, but more importantly you get excited about what you have to do."

The new strategy - dubbed Winning With Brands - has three key platforms, Khosla says.

The first is "power brands and innovation".

It's the kind of marketing jargon that tends to sound banal.

But Khosla injects it with the enthusiasm of a professional sports coach.

"It's a simple principle: Less is more. Focus on a few things and do them well."

Brands that aren't working and don't have great potential will be dumped, leaving more resources for those that do.

"We're not here just to push products with labels on. Those are not brands, " he says.

"Our mission is to create brands that provide not just a functional experience but a complete emotional experience for the consumers. That's the way great brands make money."

With the focus on power brands will come a more disciplined approach to research and innovation. Finding a balance between creativity and discipline is one of the keys to success, he says.

Growing the food services business is another key theme. That's the business that supplies cheese to the pizza chains, milk to milkshake outlets and so on.

It is one of the businesses that can start producing results relatively quickly, he says.

"There is buzz there. We have made sure that we are more aggressive in taking our opportunities."

The third key platform, he says, is to drive down costs and improve efficiencies in the supply chain.

Khosla isn't keen to talk too much about how bad the business - which last year reported a $945 million slump in revenue - was when he arrived.

He's put a staff ban on dwelling on past problems.

"If you can learn from it fine but otherwise it's a waste of time. Moaning and groaning and saying we didn't have this or that ... that's pointless."

He'd rather talk about the competitive advantage he thinks NZ Milk has over its bigger competitors.

"As a relative outsider I can see that New Zealand and Fonterra know this industry better than anyone else," he says. "If you cut a Fonterra employee's hand I think they'll bleed milk.'

The giant food companies are good at the consumer business - but they have a lot more going on than just dairy.

"Fonterra is very focused and that is a strength that has to be leveraged," Khosla says.

Critics argue that the co-operative structure of Fonterra and lack of support from its board of directors has hampered NZ Milk in the past.

Khosla says one of the things that attracted him to the job was the commitment from the board to developing the business.

"That support, if anything, has been even more endorsed in the past few months," he says.

The proof of this is the large bid Fonterra is making for National Foods.

It's a great opportunity, he says.

But if it doesn't happen, he says, there is a "perfectly viable business in Australia".

When Khosla finally met his farmers he didn't need to worry about the amount of mud on his boots.

Of course they want to see results, but Khosla says he is not interested in "one-day wonders".

He wants to set NZ Milk on a path of long-term, steady growth.

Khosla says he was struck by the comments of one Pukekohe farmer, which really helped him put Fonterra into perspective.

"He was in his late 60s and he was very straight and honest. He said to me: 'We are looking for you to build a legacy for our children.' I just thought that was really great."