The New Zealand members of the Fonterra cooperative will be allowed to vote on other ownership ratios next month. The aim is to maintain Fonterra's share in the flattening milk supply until 2030, reports chairman Peter McBride.
This requires that the Fonterra shares - which can only be traded internally - remain in the hands of the active members and that it remains attractive and affordable enough for newcomers to join.
Limit retirees and hybrid shareholders
The proposal is therefore that a maximum of 25% of the shares are held by retired members and that share ownership by hybrid parties, such as investors who want to benefit from Fonterra's success through farmers, is also under control.
An initial action to limit the influence of hybrid parties earlier this year already brought the share price down considerably. This initially caused unrest, because shareholders saw their prices fall, but later there was understanding and agreement, says McBride.
Affordable shares
Affordable shares help keep Fonterra truly owned by members. Fonterra has two types of shares: dry en law shares. The first type is not linked to delivery rights, the second is. The law shares are obviously the most important. The Fonterra board wants to keep this in the hands of the active members as much as possible, in order to maintain the strongest possible link with milk production.
Competition in the home market
The New Zealand dairy giant sees increasing competition in its home market from other parties, such as Chinese investors. This puts pressure on Fonterra's share of the milk supply. If milk supplies level off or even decline from 2030 onwards, this could put pressure on the company's position. Fonterra wants to prevent that.
Government must also agree
Fonterra's board has already agreed to the proposed changes. In December it is the members' turn. They must agree with 75% of the votes. After that, the cooperative itself will be ready, but the government must also approve. This is because Fonterra, as the dominant market party, is bound by legislation, the so-called DIRA (Dairy Industry Restructuring Act). The government is not expected to agree before June 1, 2022. It would not be surprising if it took even longer, parties in New Zealand indicate. Not all ministers in the current cabinet would be enthusiastic about the adjustments.