Overseas growth leads to global search

Max Parkin

Dairy giant Fonterra has begun a global search for someone to lead its new manufacturing business group formed as a result of the co-operative's rejig.

The appointee will be responsible for Fonterra's 29 New Zealand milk processing and manufacturing plants, and 35 international processing operations, including two acquired in Australia last week.

The new manufacturing business will be run in the meantime by industry operations veteran Max Parkin.

Last year, Fonterra manufactured nearly 2.5 million tonnes of dairy ingredients.

Chief executive Andrew Ferrier is not commenting on the rejig, but it is understood Fonterra has outgrown a single operations function, which was embedded in its biggest business, Fonterra Ingredients.

That posted revenues of $9.5 billion and operating earnings of $852 million last year.

Fonterra Ingredients remains intact but now has a managing director, former Dairy Board executive John Shaskey.

A marketing and "innovation" business based in Palmerston North, will be given more muscle and becomes Fonterra Innovation.

Logically, it would seem the new twin business structure of ingredients and manufacturing will be replicated in Fonterra's brands business, its value-added consumer foods operation called New Zealand Milk.

Revenues in this business last year were $3.8 billion and operating earnings $292 million.

The Business Herald understands the pressure has gone on to isolate and strengthen manufacturing control because of the growth of Fonterra's non-New Zealand milk processing operations overseas.

Innovation also needed a new focus because Fonterra is increasingly providing research and development and innovation services for its global ingredients customers.

Its acquisition of Nestle's milk powder plant in Victoria, announced last week, is a case in point.

Fonterra will provide ingredients and R&D for Nestle from the plant at Dennington.