Empowering Fonterra farmers

Abstract

The co-operative business model has been in existence since 1844. It is estimated that today, at least 50% of the world's population is, in some way, affected by co-operative activity. Most of this activity is in the agricultural sector where groups of farmers have formed co-operatives. This provides them with some collective strength and security to ensure their produce is processed and marketed accordingly. The relationship between a co-operative and its members is formalised through a set of co-operative principles that outline what responsibilities members have to the cooperative, and vice versa. Co-operatives have certain requirements of their members, namely that members own and control the business equitably and they are the providers of capital. While the supporting objectives of a co-operative business model and an investor driven model are similar, the prime objectives are different. A co-operative's prime objective is to deliver benefits to members, while the investor-driven business objective is, quite simply, to deliver a return on investment of capital. Fonterra's impact on the New Zealand economy is significant. It is New Zealand's largest company, by some margin, with turnover of $NZ12 billion, and employs 20,500 people worldwide. Fonterra's farmers are a diverse group of people who, as individual farmers, have differing goals and objectives. They do however, have a common requirement of their co-operative; to collect, process, and market their milk. As New Zealand's largest business, and a co-operative, Fonterra should lead an initiative that will lift the profile of 'doing business' using the co-operative model. The risks that Fonterra faces, as a result of commodity price fluctuations, or currency variances, are relatively small when compared to the risks that poorly informed, nonparticipative members could place on the co-operative.