The New Zealand Milk Wars

The "Maori Wars" were renamed the "New Zealand Wars" in the interest of political correctness, and now we see the beginning of the New Zealand Milk Wars.

Whatever we like to call them, the "New Zealand Wars" were hardly anything positive. Hopefully the New Zealand Milk Wars can have a more positive outcome.

Fonterra was created in October 2001 out of the New Zealand Dairy Board and two dairy cooperatives. The purpose of this was to create a single company to manage New Zealand's larges export, dairy products. It is not working well.

The problem we got now is that Fonterra has become another "Telecom" monopoly. A near monopoly that survives on its dominance, financial and legal muscle, and much less on its competence and ability to compete. It is slowly proving to become a loosing formula for New Zealand, and controlling farmers income and wellbeing, even survival.

While Fonterra is a near single face outwards for New Zealand dairy export, it has also become a monopolistic plug for developing a loosing New Zealand market share of the world, with a disastrous trade balance development. Fonterra make it very difficult for emerging New Zealand new entrants to develop and sell new products and develop new markets on the increasingly protective and competitive world market.

We may be excused for wondering what Fonterra is hiding and why. Why have Fonterra used legal intimidation to cover up the inside story of the China melamine disaster, why did they cover up the latest melamine scare in February this year, why did the cover up the information that Fonterra allegedly had approved melamine as an additive, why was the information on melamine contaminated dairy protein lactoferrin from Morrinsville-based Tatua quieted down, why was the alleged $640,000 'cover up' leaked memo over poisoned babies covered up, why did Fonterra threaten a $17 million law suit against a Sri Lankan newspaper over an article alleging contamination, and why are they continuously using legal intimidation to force publishers to pull any uncomfortable news?

The "inside story" of the melamine disaster was published in New Zealand Scope, but soon pulled off the web after a Fonterra intervention, the article alleging Fonterra paid off customers to keep quite was pulled within hours from the Chinese QQ web site.

The Chinese authorities have put the Fonterra melamine disaster behind them, but the Chinese public definitely has not. There are too many unanswered questions, and the public in China are suspicious in the light of how uncomfortable news has been handled in the past in China.

Apart from appointing people to represent Fonterra that obviously were not even near competent for the job, on the surface it seems that Fonterra have done things right in China and in line with Chinese law and tradition. It appears the Kiwi directors quietly or actively approved the melamine as an additive as they did not understand what it was, much less the effects it would have, but Fonterra probably accepted culpability, and in line with Chinese justice culture compensated the Chinese with an $8 million donation. That would have kept the Kiwi directors out of the courts and any punishment. Chinese justice still works in the old "father and son" ways, "if you prang the widow, you fix the window, and if you do we forget that it ever happened".

While New Zealand justice has a major focus on punishment, not to say revenge, the Chinese justice culture have a hard focus on the victims and on rehabilitation and re-education of the offender, whatever the offence was deliberate, by ignorance, or incompetence. You admit your wrongdoing, and work to do it right, it replaces the western punishment.

The new emerging Dairy company Oceania Milk was originally going to be called The New Zealand Milk Company, but, as so often is, Fonterra stopped them with legal intimidation.

Competition is well overdue, but it remains to see if the new entrant will go anywhere. Looking at the main players it does not give you much confidence, a failed business person and failed politician and a former electricity boss. It would have given more confidence if any one competent in marketing, sales and with experienced from the main markets as China would have been involved.

We certainly hope it will go well for them, but New Zealand need to take a step away from its traditional beancounter and "famous face appeal" approach. In China, where the dairy market is increasing some 40% annually, bosses keep a low profile, and they are all out of the famous Chinese successful engineering culture. No back room pretty suit clad boys in tall glass towers shuffling the money in accounts trying to make it all just look better, in China managers are in the front line getting their hands dirty, and they know what they are doing.

The Oceania Milk setup reeks of the traditional Kiwi attitude that "we are experts, but we just have not done it before." Would you fly with an airline who appoints economists and accountants as pilots? Probably not, but it seems like Kiwis love the concept when it comes to managing companies and ventures.

We can only pray that this in some way turn to something positive for New Zealand. Lets hope they at least hire some China competent and sales and marketing competent people.

Rick Harriss
Writer in Hong Kong