Lactalis billions for Fonterra stir emotions

This concern revolves around two things: Isn't Fonterra, by selling what it calls the "mainland group," cutting itself off from future revenue opportunities by leaving the high-yield products to others? There is also concern that Fonterra is relying too much on Lactalis's trustworthiness when it comes to purchasing raw milk and other raw materials.

Part of the sales agreement is that Fonterra and Lactalis make two agreements about the supply of New Zealand milk. This concerns a Global Supply Agreement (GSA) which runs for three years at a time and which gives Fonterra a premium on the regular milk price. The delivery volume is unknown. In addition, it concerns a Raw Milk Supply Agreement (RMSA), with a term of ten years and an annual volume of at least 350 million kilos, and can be increased to 550 million kilos, but at an extra high price. 

Who guarantees that Lactalis won't quickly back out of these agreements, leaving Fonterra to pick up the pieces? Even more serious analysts have expressed concern, but the strongest opposition to divesting the consumer business comes from Winston Peters. He leads the nationalist coalition party New Zealand First and is also Minister of Foreign Affairs. He grumbles that "iconic" consumer brands like Anchor (butter) and Kapiti are effectively being given away to Lactalis and writes in a letter to Fonterra members that the French cannot be trusted and will ultimately opt for financial advantage. This means buying milk other than the high-quality but expensive New Zealand milk and leaving them with the problems. Peters wants dairy farmers to reject the deal with Lactalis and for Fonterra management to improve its own business practices. 

On October 30th, it will become clear what choice Fonterra members will make: will they follow management and go for an extra sales bonus, or will they agree that Fonterra should not overextend itself to other companies?