New Zealanders are not afraid of expressing a point of view and we're no different. Here are some of the things said about us we'd like to address by offering our point of view.
They say “we’re destroying our environment.”
There seems to be this idea that it’s farming or the environment, but it can’t be both. We don’t believe that. We know these natural resources give us our livelihood.New Zealand is known as a clean, green nation that produces top quality agriculture products and has innovative farmers. Consumers are prepared to pay a premium for food that comes with these benefits.
Here’s what we are doing to leave things better than we found them for generations to come.
We are particularly focused on managing freshwater quality on farm by fencing waterways, managing raceways, tracks, paddocks and effluent, and reducing run-off with riparian planting.
We use an innovative modelling software on our farms so we can understand how many nutrients are leaching through our soil and making it to ground water.
We look at areas on our farms that have land unsuitable for dairying that could be planted back in natives or to create a small wetland.
We monitor water use throughout our supply chain and work to preserve and enhance the environment around our processing sites. We are investing in resource-efficient plants to lower the water used per tonne of product.
We invest significantly in greenhouse gas mitigation technology to inhibit the amount of methane a cow produces, or manage the nitrous oxide that escapes into the atmosphere.
It’s a massive programme of work, and it’s going to take time, but it’s our commitment to New Zealanders. We share your ambition for a country where farmers can farm profitably, supporting communities and living alongside a healthy environment where we can swim, fish and gather food in the places that are special to us.
We are currently running a trial with NIWA which gives farmers greater accuracy with weather prediction. This will help to prevent unnecessary irrigation and fertilising before rain, therefore helping to prevent nutrient run off and nitrogen leaching.
We have fenced more than 24,000 kilometres (97 per cent) of significant waterways on dairy farms which are now stock-excluded, along with more than 10,000 kilometres of smaller waterways.
In our New Zealand processing sites we recycle or reuse 2.4 billion litres of water and we are seeking to increase this percentage every year.
86 per cent of our farms have nitrogen management reports, giving useful information that reduces the risk of leaching.
Dairy farmers have spent over $1 billion on environmental initiatives over the last five years.
We use advanced irrigation technology and soil sensors to determine exactly how much water to put on our farms.
We have invested more than $8 million in methane reduction technologies.
They say “we’re milking New Zealand’s natural resource dry.”
Some people think that New Zealand can’t support any more dairy farms. We believe that by being smart with the land we have, we can continue to use the land productively and protect the environment.
The number of dairy farms in New Zealand has increased significantly over the past three decades. We have not driven this change. Land owners have made the choice to convert their farms to dairy because of the relative prices for milk, wool, lamb, beef or forestry. This has been most prevalent in the South Island, where the area of land used for dairy farming has tripled in Canterbury and more than quadrupled in Southland.
In some places, intensification has meant there has been an impact on the environment. Councils, communities and farmers recognise this and are working hard to address it, balancing environmental, recreational, cultural and economic interests to find a solution.
There are areas in New Zealand where dairy or other intensive land uses can continue to grow without degrading the environment. In other places, we need to know what the environmental limits are, and work with local and regional councils to develop workable plans and strategies to reduce the impact of these operations.
We’re doing our bit by adjusting our farming systems, changing practices and investing where we need to. It’s a massive programme of work, and it’s going to take time, but it’s our commitment to New Zealanders.
New Zealand will always be our number one source of milk, but we complement it with milk sourced in Australia, Chile, Brazil, China and Europe. Sourcing milk in these markets shortens our supply chain and provides the fresh liquid milk needed to meet local demand for many of our consumer and foodservice products. It also allows us to meet global demand growth as well as take the New Zealand high standard of dairy farming and production to more consumers around the world.
In New Zealand, we are a signatory to the Sustainable Dairying Water Accord that works with farmers to adopt good management practices on-farm. We have excluded stock from more than 24,000 kilometres of waterways and continue to improve effluent and nitrogen management, and reduce run-off through riparian planting.
Our nitrogen management programme is the first organised process in the country to collect data from farms, model the nitrogen loss and provide that information back to farmers so that they can adjust their farm systems accordingly.
They say “we burn coal ahead of renewable energy.”
There is a belief that we burn coal when we could just use renewable energy. This is only half of the story. Like other New Zealand businesses, we are using coal while we work to a better solution. In the meantime, we are driving energy efficiency across our Co-operative.
Climate change is a significant environmental, economic and social challenge for the world and we want to play our part in reducing our effect on the global environment.
The most meaningful way we can reduce our contribution to climate change is to optimise our energy mix towards cleaner, more efficient forms of energy and to reduce energy consumption.
Our focus is first on reducing our reliance on coal, as our biggest greenhouse gas emitter. Right now, our scale, lack of viable alternatives and need for a reliable energy source to keep our operation running, means that we will be reliant on coal for some time. That doesn’t mean we are doing nothing.
We continue to develop alternative, renewable sources of energy such as biomass, solar, geothermal and wind power with the aim of reducing our reliance on fossil fuels.
In the North Island, we have three remaining coal burners, the others use natural gas. In the South Island, where there is no natural gas available, we have recently committed to burn up to 20 per cent wood biomass in our proposed new boiler at Studholme.
As well as looking for alternative energy solutions, we have a target to reduce our energy per tonne of production within New Zealand manufacturing operations by 20 per cent per tonne of production by 2020.
To achieve this, we have one of the longest-running energy efficiency programmes in New Zealand. Since it began in 2003, we have achieved more than a 16 per cent reduction in manufacturing energy intensity. This is equivalent to saving enough energy in 2015 to power 190,000 average homes in New Zealand each year.
We advocate for appropriate policy as we support a transition to a low emissions global economy, and recognise our responsibility to contribute to global emissions reductions efforts.
We only purchase low sulphur coal and have installed emission control systems, such as bag houses, at the majority of sites to minimise emissions. The ash that is generated is returned to the mine source and typically has plantings on top of the ash ponds as part of the rehabilitation of the mine.
We have trialled biomass generation on-site – a cleaner burning mix of organic materials, grasses and other plants grown specifically for energy generation.
Our partnership with Z Energy secures cleaner burning bio-diesel for some of our fleet of 550 tankers. It will reduce emissions from each tanker that uses it by up to four per cent per year.
Our energy efficiency programme has been in operation since 2003. It assists with decreasing energy costs, as well as decreasing the emissions associated with our energy use.
Our continued focus has resulted in a 3.1 per cent reduction in our combined New Zealand and Australia manufacturing greenhouse gas emissions to 0.592 tonnes CO2 e/tonne in 2015/16.
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Fonterra and energy use
They say “we don’t care about our cows.”
While it may sound simple, cows are the absolute core of every dairy farm, and their health and welfare is of paramount importance to us. We know there is a close relationship between well-cared for cows and good milk production which is why animal husbandry is a source of pride for every farmer.
We are committed to managing animals responsibly and continuously improve animal health and welfare outcomes as well as eliminating practices that contravene the internationally recognised “Five Freedoms”.
If anyone identifies an animal welfare issue on a farm, New Zealand has an early response system set up with the Ministry for Primary Industries and DairyNZ to protect the animals.
In all regions, we build on existing animal welfare legislation and work with industry bodies while ensuring our practices are verified by the New Zealand Government.
Our responsibility to animal welfare extents to wherever we operate in the world. We share our knowledge of best practice with other countries, and assess the welfare of animals as part of our on-going quality checks in overseas markets.
The Animal Protection Index, which ranks 50 countries across the world on their animal welfare standards, places New Zealand (along with the United Kingdom, Austria and Switzerland) in first place.
We work closely with other dairy industry bodies to provide farmers with comprehensive training and information on animal health and welfare. And at least once a year, farmers have a consultation with their vet about animal health management. Our practices are verified by the New Zealand Government.
Globally, our International Milk Quality team assess animal welfare as part of their milk quality audits in all markets outside of New Zealand where we source milk. This enables Fonterra to identify and recommend improvements to farmers.
We care for our cows and follow the standards set by the World Animal Health organisation, protecting their internationally recognised rights, known as the ‘Five Freedoms’.
Freedom from hunger and thirst - our cows have access to clean water and a good diet.
Freedom from discomfort - providing a comfortable environment, with shelter and resting areas.
Freedom from pain, injury and disease - vet attention when they need it and regular vet visits.
Freedom to express normal behaviour - sufficient space, and the company of other cows.
Freedom from fear and distress - so they feel comfortable and relaxed.
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They say “the price of milk is hurting our farmers.”
Often people say we are holding back on our farmers in order to make a profit. The fact is, we are the farmers. As a co-operative we all collectively take the good with the bad.
Global milk prices paid to farmers are stubbornly low at the moment and there’s no doubt that dairy farmers all over the world are doing it tough. We’re doing everything we can to get as much cash as possible to our farmer owners, but the reality is global dairy prices are outside of our control.
Our farmer owners are the reason for our existence, so naturally we act in their best interests. It’s simply not true to suggest that we are not paying out every cent possible to our farmers.
Because New Zealand exports 95 per cent of the milk produced by New Zealand farmers, we are more vulnerable to fluctuations in global dairy prices than other nations, say the EU and U.S. that export 15 per cent and 14 per cent respectively. You may have seen this reflected in our pay-out recently. But if you look at our pay-out to New Zealand farmers compared to other countries over the long-term, we are more than competitive.
Forecasting can be seen as an area of frustration. Often our Co-operative, the banks and industry analysts all have different views on what prices will do. We always aim for the most accurate forecast at the time it is given, but events can quickly change the picture. If there is good new information to support a change to the forecast farm gate milk price, we update it and let farmers know straight away.
We’re using the collective strength of the Co-operative to help farmers get through these tough times. Co-operative Support Loan is an interest free loan scheme that has been taken up by 76 per cent of farmers and $383 million was paid out. It has enabled our farming businesses to better weather the challenging dairy climate.
Primarily, Farm Source stores provide farming supplies for our farmers at the best possible prices. During times of particularly low farm gate milk price, Farm Source has offered extended interest free deferred payment terms to shareholders. In 2015, more than 4,000 shareholders and sharemilkers took advantage of this scheme, in addition to enjoying $8.5 million worth of Farm Source rewards.
They say “dairy is bad for you.”
Dairy is an incredible source of nutrition and it has something to offer everyone. Whether it’s nutrition for infants boosting development and cognition, nutritionally fortified products for nourishment and energy, or products to boost mobility, dairy nutrition can help people live fuller, richer lives.
We are committed to delivering superior dairy nutrition based on protecting the natural goodness of dairy and championing dairy nutrition understanding, awareness and accessibility.
We are improving our nutritional product portfolio to use minimum quantities of added sugars, without compromising quality, taste, texture and safety. In recent years, we have been reviewing products and prioritising those that deliver the goodness of dairy to children.
We also love to see people enjoying their dairy and the connection they feel to iconic Kiwi brands like Tip Top and Anchor. Some of our products, like ice cream or chocolate milk aren’t designed to be eaten every day.
We think there’s a place in life for people to treat themselves from time to time, so these products come with honest nutritional information to help people make balanced choices.
Anchor Uno was launched as a smooth, probiotic yoghurt targeted at kids with an added bundle of vitamins and minerals tailored specifically to support healthy immune systems in children. It also contains zero artificial colours, flavours or sweeteners. Although this product used to contain similar levels of added sugar to our competitors, this year we successfully reduced the added sugars content in the product without compromising its taste.
Tip Top has always prided itself on producing iconic Kiwi treats using fresh local ingredients, such as milk and cream. We are aware of New Zealand’s growing preference for natural ingredients. That’s why Tip Top has replaced all artificial colours and flavours with natural alternatives across our range of products.
With more than 80 years’ experience in dairy nutrition, our Research and Development Centre is the world’s leading dairy innovation hub, and it supports our regional technical centres to deliver customer support and commercialise a range of everyday consumer products. We provide world-leading ingredients, technical services and application science support to customers to help them realise their innovation potential in dairy.
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They say “we’re all about the powder.”
Every day, half of the pizzas sold in China are made with our cheese. That doesn’t happen if you just dry milk and ship it off overseas.
Our job is simple. We collect all of the milk off our farms and then work out the best way to maximize the value of every drop. At our scale, that means producing a mix of commodity, speciality ingredients, and higher value consumer and foodservice products that our customers and consumers enjoy all over the world.
We do make milk powder. In fact we are one of the best in the world at it. In the last five years we’ve built the largest milk powder dryers in the world, helping our ingredients business to generate significant revenue for our farmers.
Our milk powder dryers help us to process milk at scale. That’s important because it means we can continue to process all of our existing farmers’ milk, and give them room to grow their individual farming businesses. They also help us to meet our obligations to New Zealand.
Legislation requires us to have enough capacity to process any new milk – not just the milk of our own farmers.
More capacity also means more choice around our product mix., In the first half of this year that extra capacity meant we could move an additional 235 million litres of milk into higher value foodservice and consumer products. That’s on top of the additional 600 million litres we did the year before.
Our milk is used in a large variety of value-added products in New Zealand and around the globe. We remain focused on growing demand, especially in the eight markets where we currently hold or aim to achieve leadership and a very strong position: New Zealand, Australia, Malaysia, Chile, China, Sri Lanka, Indonesia and Brazil.
Whether you’re enjoying a cheesecake in China, chicken parmigiana in Singapore, pizza in Japan, drinking a milkshake in Dubai or biting into a croissant in Australia, there’s a very good chance it’s our dairy products that will make the meal memorable.
Our consumer and foodservice has grown by $2.5 billion from 2009-14 – the same value as New Zealand’s total horticultural exports.
The first batches of our slice-on-slice cheese, the most in-demand food product used in foodservice and home kitchens, are now coming off the line at Eltham. This plant will produce 2.3 billion slices of cheese annually, destined for more than 100 markets around the world.
We are one of the world's largest investors in dairy innovation, having invested over $1 billion in the last 10 years.
Clandeboye’s new mozzarella plant is running 24 hours a day, making enough cheese to top 300 million pizzas a year in our global markets. The premium-performance mozzarella is one of our most sought after cheeses, destined for pizzas across China, Asia and the Middle East.
They say “Fonterra pays its executives too much.”
We are a global leader in the dairy industry and an $18 billion business. To ensure that we can continue to grow and remain competitive on the world stage, we need to attract the best talent from New Zealand and around the world.
People with the skills and experience to consistently drive the performance of a business of our scale and complexity are in high demand. To continue to attract these people to New Zealand, we need competitive remuneration packages.
Our people are delivering. In the last financial year our net profit increased 183 per cent. New Zealand’s other top 10 companies managed an average of less than 20 per cent over that period.
Like many of New Zealand’s top businesses, we use salary bands to determine the pay range for each role. The pay ranges are set based on the local employment market using independent survey data. Fonterra’s policy is to pay around the median of the market with incentives to reward great performance.
Our employees’ annual earnings are reported each year and include any superannuation, performance bonuses and allowances; which vary greatly from each country.
It is also important to understand the strength of our employees’ performance has no influence over the global dairy market. Like all commodities, global dairy prices are determined by global supply and demand. Our team’s performance primarily contributes to the dividend that is paid to our shareholders, and this has risen steadily over the last three years.
We use salary bands to determine the pay range for each role. The pay ranges are set based on the local employment market and using independent survey data.
Our policy is to pay around the median of the market with incentives to reward great performance.
All of our executive team have clear performance targets that must be achieved.
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They say “we’ve done nothing for the success of the country.”
Nothing could be further from the truth. We are farmers; we became a Co-operative so that we could have each other’s backs and negotiate better deals.
As a Co-operative, our job is to collect all of our milk and then provide a cost-effective and competitive supply chain to reach customers around the world, to achieve the world’s best prices, and to provide transparency to allow our individual farming businesses to make production decisions.
We are a truly global business, owned by 10,500 farmers and supported by over 22,000 Fonterra employees around the world. Our products are enjoyed by 1 billion people in more than 100 countries. We operate 36 sites in New Zealand alone, which process 18 billion litres of milk a year.
Annually, dairy pumps more than $12 billion dollars into the New Zealand economy. Our largest economic dairy region is Waikato, where 9,322 people are employed in the dairy industry contributing $2.3 billion to the local economy, followed closely by Canterbury, where dairy employs 6,775 people and contribute $2 billion to the region.
Since our formation the gap between what our farmers are paid and what their global counterparts are paid has been closed. On average our farmers are paid the same if not on occasion more than their peers in these markets. High quality dairy protein continues to be the biggest global food trend and we are perfectly poised to help deliver this need now and in the future.
When Fonterra was formed, the New Zealand and Australian dairy industries were about the same size. Today, New Zealand’s dairy industry is twice the size of our Australian counterpart.
Last year, our ingredients business turned in $14.3 billion, and our consumer and foodservice turned in $6.7 billion.
Our consumer and foodservice business grew by $2.5 billion from 2009-14. That’s the same value as New Zealand’s total horticultural exports.
The New Zealand dairy industry poured $12 billion into the New Zealand economy last year alone.
Dairy represents more than 25 per cent of total New Zealand merchandise exports and seven per cent of the country’s Gross Domestic Product (GDP).
Last year, New Zealand exported $13 billion of dairy products
For every $5.00 of value created in the New Zealand economy each year, just under $1.00 is due directly or indirectly to the agri-food industries.
The good work we do here
Fonterra is owned by 10,500 farmers who, despite being in the middle of a very difficult down turn, continue to help New Zealand in many ways. Here’s just some of them.