15/04/13

Fonterra is renewing contracts for some of its organic dairy farmers in the middle and lower North Island of New Zealand, following what it describes as a turnaround in its niche organics business.

Managing director Fonterra Nutrition, Sarah Kennedy, said the Co-operative has worked hard over the past 18 months to return its organics business to profitability.

“18 months ago we were losing money so we restructured the business to focus on markets in Asia, while also reducing our costs to ensure ongoing profitability.,” she said. “We reduced transport costs by concentrating organic milk supply in the central and lower North Island. Our focus on Asia has also paid off with higher premiums for organic ingredients and increasing demand, mostly out of China.”

“Based on this turnaround, we are now able to renew contracts for farmers in the middle and lower North Island who have contracts expiring this year. The remainder of our organic suppliers in these regions have between 1-2 years left in their existing contracts with us. We want to ensure we build a business that is sustainable. With that in mind, we are conducting a thorough review to ensure we have the right business model to cope with volatile markets and will come back to our farmers early next year.”

“We know our farmers are looking for certainty but it’s critical we get this right for the long-term benefit of the whole Co-operative,” said Kennedy.