Two of New Zealand’s cornerstone farmer-owned cooperatives — Alliance Group and Fonterra — are simultaneously grappling with the brutal reality of global agribusiness economics.
Between Alliance’s proposal to sell 65 percent of its meat business to the Irish company Dawn Meats and Fonterra’s agreement to divest its consumer brands division to France’s Lactalis, some see sell-off, surrender or loss of sovereignty.
In fact, they are overdue acts of hard-headed realism needed to protect farmer value, not diminish it. And it is precisely why Winston Peters and other politicians must keep their hands off.
Let’s be clear: the Alliance situation is existential. The company is carrying high debt, has endured years of wafer-thin profitability - or as was the case in 2024, a $96 million dollar loss - and it sits in a processing sector with chronic over-capacity, low margins and extreme exposure to global commodity cycles.
While Fonterra has momentum and choice, Alliance does not. Stock retention is falling, farmers are shifting supply, and international competitors — especially in Australia and South America — are better capitalised, more technologically advanced, and scaling up faster than New Zealand. It is not melodramatic to say that unless Alliance brings in serious capital — quickly — it risks becoming another victim in a long list of primary sector failures that believed mutual ownership alone was a moat.
The co-operative model only works when underpinned by commercial strength. Nostalgia for farmer control doesn’t pay creditors or fund AI-driven robotics, sustainability investments or high-value brand expansion offshore. Alliance has reached the point where sentiment without scale will actively harm suppliers by trapping them in an under-performing structure. Selling 65 percent to a multinational partner with deep pockets is not selling out — it is buying survival and a future. Better to own 35 percent of a globally competitive business than 100 percent of a company gasping for cash.
Fonterra’s situation is very different — but equally rational. Its decision to exit the consumer brands arm is not an act of desperation, but of discipline. For years, Fonterra has known its brands unit — responsible for household names like Anchor and Mainland — has produced returns consistently below 10 percent. In real terms, according to independent analysts, these returns have been closer to 5 percent and sometimes negative. Meanwhile, the Ingredients and Food Service divisions have been delivering materially stronger returns — 10 to 15 percent — as global demand for functional proteins, specialty ingredients and food service partnerships has soared. Fonterra can no longer afford to be a national supermarket mascot when the real wealth lies in being the world’s premier business to business dairy innovation platform.
The consumer business uses only around eight percent of milk solids but absorbs a disproportionate share of organisational complexity and capital — while delivering a sub par return on investment. That alone answers the question. Strong businesses focus capital where it earns the highest return. Divesting Brands is not a retreat — it is a sharpening. It places engineers, scientists and trade-specialists over marketers and supermarket negotiation teams. Fonterra is not contracting; it is concentrating.
So why must Winston Peters — or any minister — stay out of this?
Because commercial capital decisions must be made according to return, risk and competitiveness — not electoral theatre. We have seen this movie before: political interference in commercial restructuring leads to zombie enterprises, capital flight and reputational damage for New Zealand as a place to do business. Peters’ instinct to “protect sovereignty” might sound patriotic, but an under-capitalised meat processor or a lagging consumer division is not sovereignty — it is strategic vulnerability. Foreign partners are not invaders; they are lifelines when local capital is insufficient or strategically misaligned.
Farmers do not need politicians to defend symbolism; they need prosperous balance sheets, competitive processing and per-kilogram returns that beat global rivals. Blocking sales does not preserve ownership — it erodes value. What politician will take personal responsibility if Alliance collapses for lack of capital? Who will compensate farmers if Fonterra misses its decade-defining pivot into high-margin ingredients because of populist optics?
The ultimate irony is that both these moves represent the strongest possible defence of farmer value. They are not acts of surrender — they are acts of optimisation. Alliance safeguarding its future via capital inflow is not weakness; it is leadership. Fonterra exiting a low-return division to double down on its winning engine is not neoliberalism; it is professionalism.
New Zealand farmers have every right to expect their cooperative boards to act like first-class global corporations, not curators of sentiment. And New Zealand politicians, however loud their instincts for intervention, must have the discipline to let commercial logic prevail.
Farmer value is not protected by emotion. It is protected by capital, performance, specialisation and strategic independence built from financial strength.
Seen this way, the proposed sales are not a threat to New Zealand’s agricultural future — they are its gateway.
Peter Williams was a writer and broadcaster for half a century. Now watching from the sidelines. Peter blogs regularly on Peter’s Substack - where this article was sourced.
Let’s be clear: the Alliance situation is existential. The company is carrying high debt, has endured years of wafer-thin profitability - or as was the case in 2024, a $96 million dollar loss - and it sits in a processing sector with chronic over-capacity, low margins and extreme exposure to global commodity cycles.
While Fonterra has momentum and choice, Alliance does not. Stock retention is falling, farmers are shifting supply, and international competitors — especially in Australia and South America — are better capitalised, more technologically advanced, and scaling up faster than New Zealand. It is not melodramatic to say that unless Alliance brings in serious capital — quickly — it risks becoming another victim in a long list of primary sector failures that believed mutual ownership alone was a moat.
The co-operative model only works when underpinned by commercial strength. Nostalgia for farmer control doesn’t pay creditors or fund AI-driven robotics, sustainability investments or high-value brand expansion offshore. Alliance has reached the point where sentiment without scale will actively harm suppliers by trapping them in an under-performing structure. Selling 65 percent to a multinational partner with deep pockets is not selling out — it is buying survival and a future. Better to own 35 percent of a globally competitive business than 100 percent of a company gasping for cash.
Fonterra’s situation is very different — but equally rational. Its decision to exit the consumer brands arm is not an act of desperation, but of discipline. For years, Fonterra has known its brands unit — responsible for household names like Anchor and Mainland — has produced returns consistently below 10 percent. In real terms, according to independent analysts, these returns have been closer to 5 percent and sometimes negative. Meanwhile, the Ingredients and Food Service divisions have been delivering materially stronger returns — 10 to 15 percent — as global demand for functional proteins, specialty ingredients and food service partnerships has soared. Fonterra can no longer afford to be a national supermarket mascot when the real wealth lies in being the world’s premier business to business dairy innovation platform.
The consumer business uses only around eight percent of milk solids but absorbs a disproportionate share of organisational complexity and capital — while delivering a sub par return on investment. That alone answers the question. Strong businesses focus capital where it earns the highest return. Divesting Brands is not a retreat — it is a sharpening. It places engineers, scientists and trade-specialists over marketers and supermarket negotiation teams. Fonterra is not contracting; it is concentrating.
So why must Winston Peters — or any minister — stay out of this?
Because commercial capital decisions must be made according to return, risk and competitiveness — not electoral theatre. We have seen this movie before: political interference in commercial restructuring leads to zombie enterprises, capital flight and reputational damage for New Zealand as a place to do business. Peters’ instinct to “protect sovereignty” might sound patriotic, but an under-capitalised meat processor or a lagging consumer division is not sovereignty — it is strategic vulnerability. Foreign partners are not invaders; they are lifelines when local capital is insufficient or strategically misaligned.
Farmers do not need politicians to defend symbolism; they need prosperous balance sheets, competitive processing and per-kilogram returns that beat global rivals. Blocking sales does not preserve ownership — it erodes value. What politician will take personal responsibility if Alliance collapses for lack of capital? Who will compensate farmers if Fonterra misses its decade-defining pivot into high-margin ingredients because of populist optics?
The ultimate irony is that both these moves represent the strongest possible defence of farmer value. They are not acts of surrender — they are acts of optimisation. Alliance safeguarding its future via capital inflow is not weakness; it is leadership. Fonterra exiting a low-return division to double down on its winning engine is not neoliberalism; it is professionalism.
New Zealand farmers have every right to expect their cooperative boards to act like first-class global corporations, not curators of sentiment. And New Zealand politicians, however loud their instincts for intervention, must have the discipline to let commercial logic prevail.
Farmer value is not protected by emotion. It is protected by capital, performance, specialisation and strategic independence built from financial strength.
Seen this way, the proposed sales are not a threat to New Zealand’s agricultural future — they are its gateway.
Peter Williams was a writer and broadcaster for half a century. Now watching from the sidelines. Peter blogs regularly on Peter’s Substack - where this article was sourced.
3 comments:
I have a lot more confidence that fonterra is making good business decisions, than I do in our finance minister.
While breaking Luxon's promises to bring down suspicious, world beating electricity and supermarket prices / profits, Willis is preparing to gift her dad's mates total control of cable internet pricing!
You have changed my mind Peter.
I previously thought selling off the “value adding” consumer brand division was a dumb idea as that’s where future value growth lay.
But now you have changed my mind with details and logical reasoning not found in the so-called mainstream media.
Keep up the good work.
Peter, in a sense I would agree with you, but sadly the question that has to be asked - "In relinquishing control of end of line produced product, what can New Zealand expect as a financial return to this Country"
My other concern is that as a Nation that has produced product, to be refined into a sellable end product, that over the past years we have seen the business in the middle, the factories etc, suddenly being 'brought out' by an overseas, monied Company who have "voice parrot fashion", how they will maintained our production systems, only to have them close "up shop in NZ" and move that production overseas.
Cadbury Chocolate, Dunedin is a good example.
Wattie's of Hastings. A proud history of establishing a local business, that once Sir James Wattie died, declined into a mismanaged empire, that they could not wait to sell to Heinz.
Now what do we hear of this business -
1.- no longer buying locally grown peaches, and "enforcing" the growers to remove from the ground, with financial incentive to do so. Why - it is cheaper to import.
Will this then transfer to other locally produced food crops?
2. - under pressure with above announcement, they then stated that they had a financial issue.
End result, watch Heinz sell up and move production offshore.
You make mention of Fonterra - "decision to exit the consumer brands arm". Are you aware that when "the roll out" of establishing Fonterra occurred (buying up literally every Milk Producing entity they could)- there was a concerted effort by that Company to ensure they controlled "consumer brands", and on sell at a price.
You may find that West Farmers on the West Coast, S.I. at the time, did a "TSB" and said Nah, not happening. They remained a stand alone Dairy Company, but sadly they are now owned by an offshore Company.
It would explain why the two major supermarkets then went and sourced their own production of dairy product.
Similar with the Warehouse and the milk they sell.
I have recently walked thru many of our local supermarkets, and I failed to find anything that said "Mainland".
Anchor milk, and lots of milk produced for the supermarkets, by alternative suppliers. Also had interesting discussions with owner/operators on dairy product, butter especially.
I put it to you, Peter, that we have lost control of a product, that the French Company will now rebrand and sell via the EU systems, something that NZ has had great difficulty in doing so, with our own "Brands".
Again what is NZ going to gain in return for producing, manufacturing dairy product, to be on sold by a European Company. I wonder how the Irish feel about this?
Fonterra was 'supposed' to replace the NZ Dairy Board, who was an inept government organization, the staff that worked at "the coal face" struggled with HO (Wellington) ineptitude, and attitudes but diligently provided a service to the Dairy Farmer, NZ and produced and sold the end product overseas. What undid that was the establishment of the Common Market and the UK's attempt to join "that club". The moment they achieved that, we then faced the demise of sales of NZ Dairy product in the UK and Europe, which became a "closed shop" to our product.
Oh and the Irish had a "hand" in that action.
I am picking we will see Carter Holt Harvey (CHH) be sold, they to have major financial issues - I wonder when the Chinese will arrive to facilitate that purchase?
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