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8:54 am, October 31st, 2025 - 49 comments
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The vast majority of Fonterra shareholders have agreed to sell all its consumer brands to Lactalis, and it’s an economic crime against New Zealand.
Winston Peters is right, writing to all farmer shareholders: “Farmers, under this deal you will not control the very thing that has underpinned your success for generations: quality.
“For $4 billion, they are giving it away,” Peters writes.
And Winston knows that rather than spend this farmer windfall, the older generation of farmers will just use it to tidy up their bank debt and sell out:
“The short-sighted may have dollar signs in their eyes, having heard that farmers stand to have hundreds of thousands put in their bank account. But when the sugar rushes, the ants follow. Watch how quickly that money goes,” the NZ First leader says.
Tractor dealers aren’t going to get a windfall. Banks will.
Peters is also sceptical about a clause in the agreement that allegedly only guarantees that Fonterra farmers will supply Lactalis with milk for three years.
“After three years, Lactalis can terminate milk supply from Fonterra for Anchor and Mainland.
Or to put it in the jargon of Fonterra, “‘the initial term is three years. Following the initial term, the Global Supply Agreement automatically renews until it is terminated’,” Peters explains.
Fonterra is the only company with any global stature in a major international market of any kind that we have ever produced. Selling these brands when we look back on this time in 20 years, will be at least as consequential as Glaxo selling out of New Zealand in the 1970s as it marched forward to leave us and form the global giant GlaxoSmithKleine.
Lactalis really kicked off its growth in the 1960s. As a young country we should have the collective corporate memory to track that even by the 1980s New Zealand were down to a duopoly which evolved into Fonterra in 2001. The merger was seen as a way to ensure the long-term viability and growth of this vital sector and maximize the value captured from New Zealand milk for New Zealanders. Fonterra should have been and was intended to be our giant that took this entire economy upwards.
It’s doing the opposite.
There is no need to imagine what Fonterra could have done if they had had a successful corporate growth strategy guided by a strong government hand: Fonterra were formed by government hand directly. The industry begged them to do it. Prime Minister Helen Clark accepted their future vision as good for us in the long term. MBIE and MPI direction to Fonterra was supine beyond that.
The government also has two seats on its board that sets the price for milk, so don’t anyone tell you there are no ways the government could influence the price of butter.
Fonterra after nearly a quarter of a century have given up their global ambition. They have sold off all of their global plants except Australia and that will go soon. They have started with a massive company and shrunk it and its ambition every year for a decade.
Fonterra have consistently failed to deliver what they promised the government and the people of New Zealand. What they have done is sell off the commercial brands for cash and deliver much of that cash back to shareholders because they didn’t have an alternative business plan to use it for. Their lack of growth ambition is staggering particularly considering what is at stake in New Zealand’s economic prosperity in Fonterra.
If Fonterra had the skill and ambition of Lactalis or Kerry’s we would see Palmerston North bustling with spinoff companies. They may have dozens of PhD food scientists but we have less than a handful of unique products and very, very few international patents upon which to build wealth.
In the late 1990s and early 2000s industry leaders hoped the massive new cooperative would move beyond simply exporting commodity products and transition toward higher-value goods like specialized ingredients, consumer foods, and even pharmaceuticals. That was our history. The government saw this potential to “move up the value chain” as a key benefit for New Zealand’s economy
Fonterra is now left generating the same Business-To-Business ingredients and foodservice items which as we have seen are far more volatile in price than branded consumer products.
It is also a sale decision which is irreversible. It took us a century to make and grow these brands, well beyond the time Fonterra began. On current record we are never going to make those equivalent food brands again.
There is nothing inherent in New Zealand that means we cannot build and generate powerful consumer brands: obviously Anchor and TipTop and Mainland and Kapiti are right up there, and clearly worth a lot. It takes time and consistent investment and patience. As the Mainland cheese advert consistently says: Good things take time.
Fonterra need to be held to account by Parliament directly if not by the market or the media: where are their promises for New Zealand now? Why aren’t you vaulting into our version of Glaxo or Nestle? Why is your drive for prosperity so damn weak?
Farmers get short term cash from this sale, but the Fonterra brands sale is a destruction of value that will see Fonterra continue to shrink in size and ambition and in the long term will weaken the entire economic prosperity of New Zealand.
This is Fonterra’s economic crime against New Zealand.
Once again, I miss Rod Oram and his perceptive analysis of the NZ dairy industry. A few years ago we did a project for the IUF on the global dairy industry, in which the innovation and commercial energy of Lactalis stood out, and in which the more pedestrian performance of Fonterra was clear. Fonterra's management has changed markedly since then, but the sale of these brands provokes more questions than answers.
Agreed, Rod Oram's comments on the dairy industry (and farming in general) were always perceptive and constructive: eg https://newsroom.co.nz/2019/07/20/let-true-farming-leaders-lead/
Your comments remind me of the old joke beloved by the Aussies: "How do you set a NZer up in a small business? Give them a large one and wait."
I don’t often agree with what Winsome has been saying and doing of late, but he’s bang on the money with his comments this time.
What comes to my mind is Genesis 25, 29-34.
No doubt at some point there will be another lot of start-ups that eventually succeed in building major home-grown brands. But as Ad says, it takes time. Even the comparatively recent Kapiti took over forty years to get to this point.
I have one major issue with Winston's comments – why did it take him sooooooo long. They have come with the process almost complete when he has not been able to build any momentum to reverse the proposed decision.
Winston's claim that resulting loan repayments benefits banks is obviously 100% wrong. You can work this out using a standard mortgage calculator, the longer it takes to repay any loan the more you end up paying to the bank.
The point he's making is that it won't be spent, thus not resulting in an economic windfall for the regions. It'll just sit there as savings, or be used to pay down debt.
That's certainly possible but businesses which carry less debt also tend to pay out more profits (e.g spendable income of the owners).
If Winston wants to make a point he should obviously do so without invoking such an obviously false statement however.
Actually, scratch that it’s only the author making that claim, not Winston.
You’re right. But the real problem isn’t just the sale. It’s that Fonterra was allowed to live by a different set of rules for decades.
Fonterra likes to think it’s unique.
That the rules of competition, accountability, and risk that apply to every other industry somehow don’t apply to it. But there’s nothing unique about a company that used government backing to entrench itself, failed to deliver on its global ambitions, and now blames “market realities” for selling off the very assets that justified its existence.
Let’s be honest: if the government ever allowed, say PGG Wrightson, to become a state-backed farm supply monopoly, one that every farmer was effectively forced to buy from at whatever price it set, there’d be tractors lined up outside Parliament by sunrise.
Yet when it comes to milk, farmers have been more than happy to enjoy that same privilege in reverse: dominance over supply, preferential treatment, and quiet government protection.
That double standard cuts to the heart of the problem. Fonterra’s special status was meant to serve New Zealand’s long-term economic interests, not just the short-term balance sheets of its shareholders. The “uniqueness” farmers defend is not a mark of success: it’s a shield against accountability.
And while Fonterra may not be a monopoly anymore, it still controls an overwhelming share of the industry and the narrative that goes with it.
Now that it’s selling off the very brands that gave it meaning, maybe it’s time to take another hard look at how it uses that dominance. Because if it’s no longer holding up its end of the bargain, why should it still enjoy the privileges that came with it?
It’s very apropos that Fonterra’s breaking of its promises to the country mirrors the slow, steady erosion of the agricultural sector’s social license to operate.
They had the chance to aim for value-add. But got seduced by the short-term money to be made from a bulk strategy. Yet somehow, ordinary New Zealanders are being forced to pay the price.
Say what you like about the capital structure (its a licenced monopoly) or their business acumen, the reality is the shareholders (the individual farmers who own Fonterra) are the sole owners of the assets under its control.
They own them. If they decide to sell them, shut them down, blow them up, whatever that is their right as the owners of the assets. In a normal public company, shareholders get (some) say and can vote by selling their shares and investing elsewhere. Here that remedy is not an option. They only choice you have if you don't like how Fonterra operate their business is to not buy their products or start up as a competitor. Again, problematic as we have a licenced monopoly.
In this case, it is rational for the shareholders to consider what is the best allocation of their capital. They are in the best position to weigh that decision. They are exclusively the ones who carry the economic risk. They would have paid vast sums to excellent financial analysts to look at that portfolio and provide the information that underpins the decision. Those considerations would definitely have included intangibles such as brand equity, downstream risks, reputational risks – they are serious business people.
As far as I can see, nothing they are doing is remotely illegal or immoral. I don't see where or why WP feels he has a right to stick his oar in.
At the end of they day, they are doing what businesses should and must do – look after the interests of the shareholders. The rest of us can have a say, but we dont get a vote.
“Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.”
Thanks, Milton Friedman.
Yes, Fonterra’s shareholders do own its assets and are, of course, legally entitled to sell them if they believe it’s in the best interests of the business.
But let’s be clear: they’ve benefited enormously from being an implicitly tolerated and explicitly permitted near-monopoly. And in doing this, they’re absolutely breaking the bargain they struck when they were allowed to amalgamate.
It might not be illegal, but good business still relies on a social licence to operate. And that licence can’t be taken for granted forever. Especially if they're just taking the piss and expecting us to be happy with being treated like suckers.
Red herring
Arguably, the decision is unethical, which is essentially what Winston Peters says.
Your biased view is short & simplistic – have you ever heard of the ‘Fonterra Act’?
Sorry, how unethical? Im not an authority on the DIRA but please explain how you have arrived at their actions as being unethical.
Haven’t you read & understood the OP?
You seem to believe that Fonterra is just another business going about their business.
You seem to struggle with ethical reasoning – did you vote for the Coalition by any chance?
once again I respectfully ask for a simple clarification and get personal abuse.
Life is too short.
So, rather than rising to the challenge, you’d want me to do your homework & thinking for you and re-read & summarise the OP? Why do you comment here if you don’t want to participate in robust discourse?
Anyway, here goes, for your convenience, some ethical aspects, for your consideration:
BTW, re-read my earlier comment:
You haven’t addressed anything of substance and only produced red herrings and lazy replies.
That is a great list. Not forgetting of course their unfair tax subsidy in the form of methane emissions and other huge environmental impacts, and implicit subsidies in the form of roads and electricity and water, etc.
Just like forestry, I suspect the number of NZ owned farms will continue to diminish as farmers only care about breaking even for 20-ish years then selling up and reaping the capital gains.
We are selling our taonga for a few magic beans.
If the Fonterra brands are now owned by Lactalis, does that mean NZ dairy farmers are to be subject to EU environmental requirements? See https://dairydimension.com/eu-dairy-policy-nitrate-derogation-production-decline/
It seems an EU Water Quality Directive is to be looked at closely with regard to nitrate levels in surface and groundwater.
The dairy industry has hammered Canterbury's water resources and nitrate pollution of aquifers is a real problem.
In the end, Lactalis customers will have the final say.
To be fair to our classically conservative friend, there is a legitimate school of thought that suggests the only ethical imperative of business is to make a profit.
Milton Friedman summed it up best in an essay in 1970 titled "The Social Responsibility of Business is to Increase Its Profits". Exactly what it says on the tin.
Fair enough, but I never went to that school and am not about to.
The Fonterra Act was an abomination and should never have been passed. All to keep the farmers on side with the Labour Government.
And now it has rebounded right in the farmers faces
Dairy farmers by vote are delighted. This older generation will use the $$$ to sell out and down to their children. A small bright silver lining.
If they are a normal business with obligations only to their shareholders – and are asserting that fact by this sale – then we should treat them as such. We could start by making those shareholders pay the true costs of their methane emissions for example, rather than giving them a free pass because they have convinced us that they are in some way benefiting all of us by doing what they do.
Either there is something called a 'national economic interest' that is different from the aggregate of all private interests, or there isn't. Peters thinks there is such a thing. And most NZers think the same – when they complain about the price of butter they often say to camera something like, .."but we make this butter here…" they assume a "we" actually exists. If there is no "we", then they need to be told so they can react accordingly when going to the voting booth.
"Problematic" indeed for someone attempting to give us a lecture on free markets. The shareholders were granted that monopoly on the basis Fonterra would act in NZ's interest. Now that the shareholders demonstrably have it acting against NZ's interest, it's time to strip them of their licenced monopoly.
Exactly, PM!
You can either be an implicitly tolerated monopoly or a regular old business and be subject to the same scrutiny as everyone else.
But not both. Pick a lane, Fonterra.
Yes.
Fkn spot on.
The sector has Groundswellon, swallon swelt and now it’s time to compete fairly for our business.
If they’re doing f all to influence exports to the point they can’t even run a cheese brand, at least we want during this time of killer inflation is competitive domestic pricing. Split it up.
Yes the best, regrettably, is that Fonterra continue to decline and many milk companies eat their lunch.
Some like existing Fonterra shareholders will make bank on the way.
In 2001 they had 96% of milk produced, now it's 78% and falling.
Rising businesses like Miraka, Oceania Dairy, Synlait, Tatua, and Westland have delivered payouts as good or better than Fonterra.
That's simply Fonterra managing decline downwards.
I'll take that as a compliment 🙂 but fundamentally I do think the issues is the capital structure that was allowed and has been allowed to persist.
The products will still be made in NZ I am assuming/hoping that there will be no negative changes for the workers in what is a highly unionised company.
For now. But that three-year "renewable" agreement makes me very uneasy.
The example of Cadbury's should be borne constantly in mind. I wonder how many of the Fonterra-owned factories will eventually become museums showing how we used to make those products here.
Which might not be a bad thing – get rid of a huge number of dairy cows~
Hudsons of Dunedin were a massive company who sold to Cadbury to become Cadbury Hudson Fry in the 1920s.
Again, if our business leaders had chosen something more ambitious than the inherited British agricultural model of commodities we could have a sector with more innovation and more profit than what we are left with.
After the old Cadbury site closed it became the site of the new Dunedin Hospital.
All tax free income as well,
Well, if Fonterra isn’t really acting in the interests of New Zealanders in the export market the way it was designed to, let’s split it up.
There’s no reason to allow an uncompetitive behemoth to extract profits from domestic consumers above the odds in a decade of obscene inflation, if there is no or little pay off in their ability to influence exports. If they can’t even run a cheese brand, what’s the point in them?
Might as well have the best local price we can. We’re already due to be subsidising farmers on their climate change obligations.
As it heads slowly downwards in NZ total % milk taken from farmers down to 75%, other milk businesses will rise.
My favorite has always been Tatua. Consistently high payouts, choosy about its suppliers,ots of innovation.
Imagine if Fonterra had bought Synlait when it had the chance.
A quick google shows the following are owned in NZ
Lewis Road
Barry's Bay
Meyer cheese
Whitestone cheese
Zany Zeus
Cyclops
and more
Overseas owned are Puhoi, Meadow fresh, Naturlea, Tararua, Bouton D'or (Goodman Fielder)
Rolling meadow, Alpine (Synlait)
Opportunities for local companies to make a really good cheddar, and butter.
Pams cheddar is no match for Mainland, sadly, and they have been accused of watering down their butter recently.
And the Westgold operation was sold by the cooperative to China
I don't think you realise that when it comes to old school cheddar cheese sold in NZ, they all come from the same Fonterra factory in bulk. All colby is the same. Mainland Tasty is differentiated though, it is aged longer than any other brand on market hence that type is so much more expensive.
What gets us, is that for a couple of lousy bucks Fonterra farmers have polluted this country's soul (water) with filth, then sold to the French free of charge.
Not a thought of putting 50% of their lousy bucks towards cleaning up our waterways.
Shame on Fonterra farmers. Time to levy these farmers a meaningful sum to claw back pollution money. Sick of the community paying for corporate profits.
And the average payout per farmer is $200,000.
The new price for a farmer's soul
Theo Sperings incompetence while at the helm cost fonterra hundreds an hundreds of millions, along with that idiot Romano it seemed every step was designed for failure with successive govts allowing this circus to carry on to its current end! The impact of which is only starting….
Full marks to The Standard for their very sound article. Also kudos to (most) of the contributors who have added to the story. All in all another sorry tale for our country adding to our banks, Montana Wines, Navman and hundreds more…
I am not sure if you understand how banks make money. Not really a windfall for the banks as they make money by having loans out. If farmers use the payout to repay debt, that reduces the banks’ interest income, so it’s more like their revenue stream shrinks rather than grows.
You’re the second person here who draws inaccurate conclusions and makes misleading comments – you seem to have little idea of how banks make money.
Banks often charge early-repayment fees. They will also have more capital for new lending or investment, as they’re constrained by regulatory capital requirement and this can be more profitable in the medium-to-long-term than the original loan to a farmer.
I have worked in Fonterra's branded business, and I don't agree with your view on this (or Winston's) for the following reasons:
Take the emotion out of it, its a transaction made by a private business
No (private) business is an island.
The libertarian force is strong with this one.
Well you did well to get out because your old colleagues are fucked.
I agree the branded products business has been doing it tough with milk solid prices so high.
So, obviously, when milkfat prices go low the branded consumer business partially offsets that to the farmer shareholder.
It's happened, as you're aware.
But it won't now.
It's all eggs in the commodity basket.
Also, remember what they did with the TipTop proceeds? Blew it on loss making international plants.
Fonterra: dumber and smaller every year.
It's a business decision with national-scale consequences.
Very well put. Sadly, the tall poppy choppers on here would sooner believe the ramblings of a clever but totally ineffective politician nearing an election.
All this crap about it being " just a business decision".
Fonterra has more farmer suppliers than our combined NZ army, navy, and airforce.
Then approx 14,000 direct employees.
Then NZ researchers: thousands in universities.
Then further tens of thousands of subcontractors.
That's the scale of impact on NZ.
And every few years they beg for more legislation to re-perfect their "purely business" arrangement.