Co-op needs more staff "rolling up sleeves" in sales, fewer at head office
Tim Hunter talks about Fonterra on NBR Radio and on demand on MyNBR Radio.
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See also: Media told of hundreds of Fonterra job cuts hours before staff
Fonterra [NZX: FCG] is to cut hundreds of jobs from support and head office functions as it puts more resources into selling its products overseas.
Speaking on Radio New Zealand’s Nine to Noon programme, chief executive Theo Spierings said the dairy co-op needed to “trim the sails because the weather is rough”.
“Do we have to review whether we have too many support functions and possibly not enough people in market? Yes. That’s what we’re reviewing right now.”
Mr Spierings said more people were needed in sales roles “rolling up sleeves” in Fonterra’s overseas markets and fewer in support roles.
“It’s a shift of people and capabilities.”
Asked by Nine to Noon presenter Kathryn Ryan how many jobs might go, Mr Spierings said: “You’re talking about hundreds of people more in market and that means less in group functions.”
He indicated that an equivalent number of support jobs would be cut in one go while jobs in sales would be added gradually.
The time frame for the restructuring is not clear. A spokesman said the review process was ongoing so he could not say when any job cuts might take place.
Fonterra’s Auckland head office is likely to bear the brunt of job losses.
The review, due for completion by August 1, was started last December when it became clear the global dairy market wasn't going to recover as quickly as hoped. The company has slashed its farmgate milk price to $4.40 kilogram of milk solids for the 2014/2015 season and has an opening forecast of $5.25/kgMS for next season. An estimated one-third of farmers are likely to post losses this year.
Mr Spierings says volatility in the market means there could be a $1.50/kgMS swing either way to the 2015/2016 forecast but he's confident demand will come back in the market at some point, given milk inventories are relatively low.
There has been anecdotal talk of some of Fonterra's 10,500 suppliers voting with their feet to join other dairy processors offering payouts above Fonterra's rate or not requiring suppliers to pay for shares based on production levels that they will struggle to afford.
Mr Spierings said while some have indicated they will leave the cooperative in the following season, most of those are in regions where other processors have built plants. He says the MyMilk brand, where farmers can join as suppliers without having to buy shares immediately, has won at least 20 suppliers back for the next season and overall supplier numbers have stayed stable.
The review includes external input from McKinsey & Co providing global benchmarking on how Fonterra was performing against its peers, although earlier this week the company refused to confirm the business management consultancy was even involved in the review.
Mr Spierings rejected criticism that Fonterra had a bloated management structure and its underlying performance had been less than satisfactory but said the company had to drive harder on the value-add side of the business, despite a 22% increase in the volume of milk that it's had to process in the past few years. It has spent $1.6 billion on stainless steel to cope with that influx.
The long-term question would be how it would fund investment in that value-add strategy but the first priority was "grabbing more cash," he said.
An outline of the top-line plan, produced by a team of 15 from around the globe and the senior management team, will be discussed with the board next week and then a bottom-line "bankable plan" presented to farmers by the start of August, he said.
(BusinessDesk) Additional reporting Tim Hunter
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