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Case study 5: Fonterra

Published November 2011

Cows grazing on a NZ farm.

Fonterra is the world's leading exporter of dairy products, responsible for more than a third of international dairy trade and one of the top six dairy companies in the world by turnover. Their global supply chain stretches from farms all over New Zealand to customers and consumers in more than 140 countries. Around 10,485 New Zealand dairy farmers, representing about 96 percent of all dairy farmers in the country, co-operatively own Fonterra. These farmers supply more than 14 billion litres of milk each year.

"New Zealand’s pastured-based farms are the start of Fonterra’s supply chain, which extends to customers in 140 countries and into consumers’ homes in Australasia, Asia, Africa and the Middle East, and Latin America."

As a co-operative, Fonterra is owned and controlled by the people who use its services. Co-op members share equally in the earnings of the business. In order to be a Fonterra shareholder, farmers have to supply milk to the company in New Zealand. Fonterra shareholders hold one share for each kilogram of milk solids they supply to the co-operative, with the exception of a limited number of shareholders supplying milk under contract arrangements. As a co-operative, Fonterra distributes virtually all its income to shareholders in the form of payout. This comprises a farm gate milk price for every kilogram of milk solids provided and a distributable profit per share.

A 13-strong board, made up of nine directors elected by shareholders and four externally appointed directors, governs the co-operative. This mix ensures a blend of farming and commercial acumen is represented on the board.

In addition, Fonterra has a shareholders’ council, with 35 councillors elected by farmers to represent the interests of shareholders as Fonterra suppliers, owners and investors. The council monitors the performance of the board of directors and the direction of the co-operative on behalf of Fonterra shareholders, and represents Fonterra farmers’ interests on current issues and in co-operative decision-making.

Fonterra employs 16,800 people worldwide, with assets worth NZ$15.5 billion and an annual turnover of NZ $19.9 billion in the year ended July 31 2011.

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