Fonterra Establishes New Operations and Trade Business Unit

Fonterra has consolidated its core operations into a single strategic business unit and reorganised its senior management team accordingly.

26/06/09 Fonterra’s CEO, Andrew Ferrier, said the changes were designed to drive greater efficiencies in the core business and to give greater focus to the company’s global ingredients business.

The consolidated business unit, Fonterra Operations and Trade, brings together all functions from the farm gate through to Fonterra global trade customers. This includes Milk Supply, Shareholder Relations, Milk Collection, NZ Operations, Offshore Milk Sourcing and Processing (other than those activities already within existing business units), Supply Chain, Sustainability, Government Relations and Global Trade.

It will be led by Gary Romano as Managing Director Operations and Trade. Mr Romano was formerly Fonterra’s Director Group Manufacturing and Supply Chain. He brings to his new role a strong track record of lifting performance across Fonterra’s Manufacturing and Supply Chain Functions, and 12 years experience in the New Zealand dairy industry.

Underlining the importance of Fonterra’s global customer partnerships, Andrei Mikhalevsky becomes Managing Director Fonterra Global Ingredients and Foodservices. The Global Ingredients’ product portfolio ranges from commodities used in high-value markets to specialised dairy ingredients and foodservice products. Fonterra’s Latin American consumer products activities also report to Mr Mikhalevsky. He has been with Fonterra two years, and has been instrumental in strengthening Fonterra’s relationships with key customers across its Ingredients and Foodservices businesses.

Mr Romano and Mr Mikhalevsky will report to Fonterra’s CEO.

Mr Ferrier said the new structure would mean a more intense focus on efficiency in the core business, enabling it to better serve Fonterra’s global customer base and strengthen global customer partnerships.

“For our strategy to be successful, Fonterra’s core must continue to get more and more efficient. That will always be fundamental. The quality of our milk right across our supply chain will also always be fundamental to our success. Gary’s appointment gives more weight to this drive.”

Mr Ferrier said Fonterra also saw significant opportunities in growing Fonterra’s partnerships with key global and large regional customers through the increased focus on value-added products and services.

“Many of our major customers around the world are forecasting big growth over the next few years. We have an opportunity to become much more involved with them as their preferred supplier and partner.

“Andrei’s appointment recognises that this extended partnership requires special focus and a new level of commitment and resources if Fonterra is to supply more and higher-value products and services to these customers.

“The emphasis placed on Ingredients through Mr Mikhalevsky’s new position reflects Fonterra’s strong commitment to growing this business during the coming years.”

Mr Ferrier said Fonterra’s regional consumer brands businesses would continue to operate as strategic business units.

“These businesses, in Australia/NZ, Asia/ Africa Middle East and Latin America, are contributing well to Fonterra’s earnings and are showing strong growth. They provide a welcome profit buffer above commodity returns, which is particularly important in times of low commodity prices.

“In the early days of Fonterra various parts of the core commodity ingredients business were separated to get more clarity of where improvements in efficiency could be made.

“Each part of the core has achieved significant efficiency gains and I am confident that the time is now right to bring them back together. This will align the productivity gains already made and enable us to achieve further performance improvements across our global supply chain,” Mr Ferrier said.

As a result of the changes announced Fonterra’s Director Milk Supply, Barry Harris, has decided to leave his role at the end of July but will continue to advise the co-operative to the end of the year.

Mr Ferrier said: “It is important to acknowledge Barry’s achievements across the whole spectrum of Fonterra Milk Supply. He has championed the sustainability strategy which is so critical to future milk growth and our farmers’ futures and put structures in place which are enabling us to build stronger shareholder support and loyalty. During his time, Fonterra has also achieved significant milk collection efficiencies with our tanker scheduling and collection system.”