Fonterra Unveils Integrated Structure

Fonterra Unveils Integrated Structure

Fonterra has unveiled a new structure that will see the majority of its Wellington-based roles move to Hamilton, Palmerston North and Auckland. The new structure accommodates the transition of NZMP, as the world’s largest dairy ingredients business, from a stand-alone unit to the heart of Fonterra’s operations.

Today’s announcement involves around 400 positions in total with up to 150 roles transferring to Auckland, 50 to Hamilton and 20 to Palmerston North. Approximately 200 positions could ultimately become redundant as a result of duplication or business improvement initiatives currently underway. Wellington will remain home to around 100 of Fonterra’s staff involved in the Trade Strategy and Compliance groups and Fonterra’s $5.5 billion consumer goods business, NEW ZEALAND MILK.

Chief Executive Officer, Craig Norgate, said today decisions on the new structure followed recommendations from project teams in every area of the business and had the support of Fonterra’s leadership and Board.

“Just over a year ago farmers voted to become part of a world-class dairy co-operative,” Mr Norgate said.

“Recently Fonterra’s leadership team and the Board signed off on The Fonterra Strategy, which gives us the roadmap to our Vision, to lead in dairy. This new structure will enable us to deliver on this vision, to attract world-class staff and to be the chosen partner for customers around the world.

“It is about integrating our people in the functions and locations where they logically belong and where they can work most effectively. We have a tremendous pool of knowledge and it’s vital we use it as effectively as possible.

“ We set ourselves the goal of a minimum 3% annual productivity improvement in our strategic plan. Achieving that goal requires an integrated and efficient structure and it is plain common sense to have functions located where there is a logical relationship between one part of the business and another.”

The new structure consolidates into Fonterra functions in finance, human resources, information services, sales and operations, research and development and manufacturing to create one integrated organisation.

A key decision will see Supply Chain and Manufacturing combined into a new Operations Group that will ultimately be based in Hamilton.

The bulk of Fonterra’s Finance operations will be based in Auckland and cover the five key areas of compliance and financial management and control, commercial decision support, transactions and performance management and strategic support. It will also include a new group procurement function. Mr Norgate said this structure would give Fonterra faster access to the critical financial information needed for decision-making across a range of areas from pricing to performance improvement.

Fonterra’s Marketing and Innovation group will be based in Palmerston North to strengthen that group’s ability to drive product development and be integrated with the Fonterra Research Centre. Sales and strategy roles will move to Auckland.

“Our future earnings in value-added areas are increasingly going to come from the rapid development of new products sought by the market. Just over 50% of our consumer goods revenue in Asia last year came from new products introduced in the past five years. We want to increase the speed of innovation and to do that we have to have close links between the people working with our customers and those working in R&D,” said Mr Norgate.

Group-wide Fonterra Human Resources functions such as ethics and community relationships, performance and rewards and staff development will be centred in Auckland, with HR support personnel based in businesses to provide day-to-day support. Mr Norgate said such a structure would ensure Fonterra would be better placed to lead and develop the talent available right across the organisation.

Information Services will also be Auckland based and Mr Norgate said a project was underway to ensure the company’s technology infrastructure would continue to improve Fonterra’s commodity cost advantage.

“Essentially our new structure ensures that the leadership of the organisation is no longer at arm’s length from the parts of the business that are directly related to them. In the last year we have worked very hard to integrate the three legacy companies into one tight, efficient and cost-effective organisation. Our new structure sees the last piece of the jigsaw completed so we have Fonterra very closely aligned to pursue our vision to lead in dairy.”

Mr Norgate said Fonterra was acutely aware that the reorganisation could have an impact on staff and the company would continue to consult and work closely with those potentially affected.

“One of the unfortunate side effects of any changes is uncertainty and there has been a significant amount of that since we announced the proposal to integrate NZMP into Fonterra. However, we have endeavoured to keep our staff informed and we have consulted with them about this proposal. We can now give our people a clearer picture of the Fonterra of the future.”

The company accepted not all employees would want to make a move because of their individual circumstances, but would be working very hard to keep valued people in the organisation.

Fonterra will sell Pastoral House in Wellington, more than offsetting the development of new premises at Auckland airport to house all the operating groups that need to be housed with the leadership of the organisation.

Mr Norgate said this development was in line with the decision made at the time of merger to have Auckland as the corporate base for the company since it was New Zealand’s largest city, the centre of New Zealand business and home to the largest and most diverse talent pool.

“However Fonterra is not an Auckland company, or a Wellington or Hamilton company. We are a New Zealand company operating around the world and generating 7% of New Zealand’s GDP. Where and how we work has to be about delivering better returns to our shareholders while enhancing that national economic contribution.”

He stressed that the changes announced today would take time to take effect. It was expected that the transition would be completed by the end of 2004.

ENDS

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