Peters Threatens Regulation Over Fonterra’s $4.2 Billion Sale

New Zealand First leader Winston Peters has issued a warning regarding the potential for increased regulation of Fonterra, following the dairy cooperative’s plans to sell its iconic brands to French company Lactalis for over $3.8 billion. This move could see the total sale amount exceed $4.2 billion when including Bega licenses held by Fonterra’s Australian operations. Peters’ stance is unlikely to gain traction among his coalition partners, as both the National Party and the ACT Party have expressed that farmers should have the autonomy to make their own decisions.

In an open letter directed at farmers, Peters criticized the sale of Fonterra’s retail brands, which include well-known names such as Anchor and Mainland. He cautioned that the deal, expected to finalize in the first half of 2024, is contingent upon approvals from farmer shareholders and regulatory bodies. Peters highlighted a concerning clause in the sale terms: “after three years, Lactalis can terminate milk supply from Fonterra for Anchor and Mainland.” He emphasized that farmers would lose control over critical aspects of their business that have historically contributed to their success.

Peters raised questions about the current regulatory environment, suggesting that if the sale proceeds, it might be time to reconsider regulations governing Fonterra’s milk distribution. He noted that Fonterra has been required to sell a portion of its raw milk to other New Zealand producers, a regulation that has seen some relaxation in recent years. “Without the value-add of consumer brands owned by Fonterra, it is reasonable to ask whether Fonterra should sell more of its milk to other producers so they can develop New Zealand products,” he stated.

In response to Peters’ position, Prime Minister Christopher Luxon asserted that “politicians shouldn’t be telling farmers what to do.” He emphasized that the decision lies with farmers and not with politicians. “We can have our respective views, but ultimately it’s a decision for farmers, and they’re quite capable of making that decision,” Luxon said.

David Seymour, leader of the ACT Party and Deputy Prime Minister, echoed Luxon’s sentiment, stating that it is up to Fonterra’s shareholders to determine the future of the company. He remarked, “I don’t think politicians should try and tell businesspeople how to run their businesses. This is not a socialist country.”

The opposition Labour Party has voiced concerns regarding the sale of “iconic Kiwi brands,” describing it as a sad day, yet they have also acknowledged the farmers’ right to make the final decision.

As the debate intensifies, Fonterra’s chairperson Peter McBride defended the sale, explaining that farmers have invested in the company over time and that the capital returned would be reinvested into regional New Zealand. “It has been a long journey for Fonterra shareholders,” he said, noting that even a smaller farm producing 100,000 kg of milk solids annually could expect a payout of $200,000 from the deal.

Peters has criticized Fonterra’s leadership for what he perceives as a lack of transparency and engagement with stakeholders. He questioned the company’s commitment to its shareholders after accusing executives of avoiding discussions with select committees. “Their ‘she’ll be right’ mentality is not the sign of hard-nosed commercial realism,” he stated, emphasizing the need for accountability from a company that operates under specific legislative frameworks.

As the situation unfolds, the future of Fonterra and its brands remains uncertain, with the final outcomes heavily dependent on farmer shareholders and regulatory approvals.