Westland Milk makes case to be NZ poster-child for clean, green dairy, eyes other ingredients
By Jonathan Underhill
Nov. 9 (BusinessDesk) - Westland Milk Products says it's a better poster child for New Zealand's clean, green image than
some of its rivals and having returned to profit it is now focused on ensuring its returns to farmers stay competitive
as it grows.
"When people think of New Zealand they think of clean water, green pastures, forest-covered hills and snowy peaks," said
chief executive Toni Brendish, who started in September 2016. "Westland is the exemplar of this landscape. Our
shareholders’ farms literally border world heritage national parks. More than 90 percent of our rivers meet or exceed
the criteria for ‘swimmable’."
The company also has a simpler story to tell about the providence of its products, she says. "We can literally connect
our customers with our farmers whose families have farmed in the same place for generations. They have a passion for
their product and a story to tell that can connect the grower to the consumer in a way that a much larger entity would
struggle to do."
Hokitika-based Westland eked out a profit of $1.5 million in the 12 months ended July 31, from a loss of $10.3 million a
year earlier and has forecast a payout to farmers of $6.40-$6.80 per kilogram of milk solids. The company's 400-plus
shareholder-suppliers received an average payout of $5.18/kgMS for the 2016/17 season, compared with the $6.15/kgMS paid
by Fonterra Cooperative Group before dividends. Its payout for the 2015/16 season of $3.88/kgMS was the lowest of any
New Zealand dairy company.
Since starting with the company, Brendish has focused on reducing production costs, which had been running ahead of
rivals. Today she said Westland was on track to reach targeted savings of $78 million, or about $1.20/kgMS, by seeking
efficiencies from its processes and systems and trimming costs for transport and logistics.
"Everything we are doing is focused on improving return, growing the company, and diversifying and segregating product
to build a high value-high return base that puts a smaller company (compared with Fonterra) like ours on a much more
sustainable footing, than trying to survive in the far more volatile bulk commodities arena," she said.
The company has refreshed its governance and leadership team in the wake of criticism about its lagging returns to
farmers. Last month shareholders approved a plan to shrink its board to eight from 11 including three independents
chosen for their competence. In February it appointed Pete Morrison as chair, replacing seven-year veteran Matt O'Regan.
It also has a new chief operations officer, Craig Betty, and in August named Dorian Devers as chief financial officer.
Brendish said Westland's strategy is to grow as "a nutrition company", meaning it is interested in diversifying beyond
its milk-based business.
"Increasingly, Westland is moving away from being a 'dairy' company, to being a company that provides nourishment, and
that means we will not always be solely reliant on milk. Future products might well contain other ingredients to enable
us to reach into the small high-value niche markets where opportunities are still growing exponentially," she said.
Much of Westland's catchment is on the West Coast, where there is a natural barrier to rival processors seeking milk
suppliers. However, it also collects milk in Canterbury, where it jostles with rivals including Synlait Milk and
Fonterra.
"All Westland shareholders do have a choice. Those in Canterbury and the Maruia areas can choose other companies to
supply to, and even those on the Coast have choices," she said. "They can, for example, simply exit dairying and covert
to other forms of farming." She said while Westland collects milk in Canterbury, "it is this West Coast connection that
differentiates us and opens doors for our differentiated products."
"We have signalled that the 2017/18 payout will be competitive, and that has already seen shareholders express a
willingness to stay on with Westland whereas, it is fair to say, 12 months ago there was some talk about taking other
choices," Brendish said.
(BusinessDesk)