Fonterra’s managing director Rene Dedoncker has told an annual dairy breakfast the company would be “more vulnerable”, in the future.
He told the annual Dairy Australia Situation and Outlook breakfast, in Melbourne, the company had made a promise to listen to farmers.
“Our promise is to listen, we won’t always get it right, but we will listen and we will own the decisions and we will be judged on every call we make,” Mr Dedoncker said.
“In three years time, my vision is that farming families say ‘we made a choice to send our milk to that processor, because they have delivered on what they said.
“We know we need to be more vulnerable, that’s a change in the way we operate, it’s a change in the way the leadership team is operating.”
He said when he took over at Fonterra, just under a year ago, the company made a critical decision to “step out of the shadow, and run our own race.”
“We were going to own and be accountable for our own decisions,” Mr Dedoncker said.
“Our behaviour, in how we listened to a farmer voice and embraced a farmer voice, had to change.”
He said he had spent a lot of the last 10 months meeting with more than 500 farming families.
“It taught me a whole lot about what we didn’t do so well and where we needed to improve.
“It taught me Fonterra needs a farmer voice in critical decisions, like the one we made three or four weeks ago, when we talked about our price range for next year.
“That’s quite new to us, to some extent, you could argue it’s a bit of a risk, we would argue that it’s working quite well.”
Fonterra would announce its opening forecast next week, and Mr Dedoncker said the company was using “that farmer voice to inform what we do.”
He said Fonterra had three trading business; supermarkets, food services and ingredients.
“It’s that ingredients business, both domestically and abroad, that tended to be historically, our sponge, if we had more milk, that was where it would go.”
It involved spontaneous trading, in flexible markets.
He said Fonterra was changing that model, knowing it needed more security more long term contracts - in doing it means you actually have to make commitments.”
Fonterra would be committing more milk to enduring contracts.
“For us, that means we have to protect that, it means the buffer we have got reduces – it comes back to what we talked about earlier, we need loyal supply, so we know, the hygiene factor of having a competitive price, of then building confidence over time, in the way we behave is going to be really important.”
Industry wide, it was a challenge, as Fonterra was committed to domestic supply.
“We tend to have a more valuable channel in our restaurant and food service business, which we do want to grow, I think, for all of us, we need to be really clear on how we look after Aussie households, first and foremost.”
Mr Dedoncker said overseas markets were growing; it had a food service business operating in 93 Chinese cities, compared to 15, three years ago.
“We are opening up new cities using cheddar, mozzarella, butter, from both Australia and New Zealand.”