Fonterra’s organic flip flop

Fonterra has just announced that it is renewing organic milk supply contracts in Manawatu, Taranaki, and Wairarapa for two years and three years for Waikato and Bay of Plenty farmers, but dropping Northland contracts as they come up for renewal. Manawatu, Taranaki and Wairarapa farmers had been told in 2011 that their contracts were not to be renewed.

It is great to see some suppliers that were previously being discarded having their organic status acknowledged again, albeit for a woeful two years in some cases. But going backwards overall by dropping Northland’s organic pickup and premium shows that Fonterra isn’t serious about promoting best practice sustainability or the New Zealand 100% pure brand across the board.

It appears just a commercial convenience when it suits.

If Fonterra is committed to the New Zealand brand, which favours sustainability, good animal welfare, and safe food free of residues, then it would encourage organics throughout New Zealand with a premium, and as capacity builds, begin processing in the regions.

Fonterra is flip flopping on whim, giving no stability to some of its best farmers, while still scrambling around doing damage control over contaminants such as DCD in its products.

Organic farmers can be the more profitable, but Fonterra seems wedded to an unsustainably produced volume based business model, encouraging the same elsewhere in the world also. A commitment towards organics by Fonterra will better advantage New Zealand farmers for the future.

11 Comments Posted

  1. USDA organic standards are too tuff on animal wellbeing. If NZs organic market was to the European Organic standard (rather than Asia/US), then the org-dairy in NZ would gain traction. Antibiotics etc in moderation for animal wellbeing is humane and compassionate common sense under European Org Cert.

  2. Organic milk coops have failed. Smart competition tactics by Fonterra is a big factor. The offer of a nation-wide organic premium then withdrawl a few years later did break one coop, and stopped atleast one other from forming.

  3. Arana – probably because they don’t need to for precisely the reason you laid out. The product has discretionary demand therefore no co-op is required.

    While supermarkets continue to pitch organic milk as a high end product segment, it will remain niche.

    Supermarkets would not want to kill the golden hen while Fonterra’s comparative advantage can be turned into retail profits.

  4. If there are high margins, and high demand exists, then why aren’t organic farmers forming their own organic co-op, as opposed to waiting for Fonterra to “see the light”?

  5. There is no need to force people to buy organic milk as the world market is still growing. The price of organic products is going to get benefits of scale as time goes by, and if we have too much poison in “the normal” product, we will kill off the market, actually or figurativly. Look at the distrust in the China market now.

  6. Unless you force people to buy more expensive organic milk, there’s probably not a lot Fonterra can do.

  7. If GE is also in Fonterra’s “growth arsenal” then having Organic suppliers may also prove an embarrassment. Maybe the time frame they give is based around this?

  8. when you see the John Campbell show on Cadmium and it’s buildup and realise the potential threat to food safety and property value, and this is only one of the nasties, then maybe their reluctance about organics is fear of showing the rest of their industry up with good quality organics. As someone who has been poisoned by cadmium I really laugh at so called researchers who say organics offers nothing extra. They don’t know what questions to ask.

  9. “It appears just a commercial convenience when it suits.”

    That’s capitalism. You may well be right about Fonterra, but it seems a bit rich to complain about a particular corporate that is just playing to the rules of the game, unless you are prepared to also condemn the rules.

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