Reality check drives co-op's office move

By Hugh Stringleman

Friday 1st November 2002

Fonterra Co-operative Group's decision to reabsorb its NZMP division and move out of Wellington acknowledges political and economic realities.

Employees do not know yet whether Auckland or Hamilton will be the new location, but chief executive Craig Norgate and his board of directors must have a relocation plan.

Pastoral House on The Terrace, Wellington, was the headquarters of the Dairy Board and one of the centres of power in New Zealand for the past 50 years.

Up to 20% of annual export earnings flowed through its accounts, and more than 10,000 employees scattered around the world called it head office.

The chairmen of the Dairy Board, in company with the chairmen of the Wool and Meat boards, were at times accused of running the country, wielding undue influence over the Beehive and monetary policy.

Winter months were especially busy, as troops of farmer politicians held conferences in Wellington and politicians rotated between venues.

But the hundreds of Wellington-based producer board employees were sometimes viewed malevolently by farmers, for living in an unreal world and scheming to "capture" each crop of newly elected representatives.

Either disestablishment or decentralisation has hit the Dairy Board, Wool Board, Meat Board, Apple and Pear Marketing Board, Game Industry Board, Federated Farmers and a number of smaller entities.

Pastoral House was home to the last big single-seller, deregulated in the deal over the dairy industry mega-merger and the formation of Fonterra.

Somewhat symbolically, a 30-year veteran of the Dairy Board, former communications manager Neville Martin, finishes up this week. He is credited with explaining to media, farmers and the wide world just how his big board worked and what were its policies.

One of the last big media gatherings in Pastoral House was former chief executive Warren Larsen's announcement of the NZMP and New Zealand Milk divisional split in 1999. That reorganisation was forced by constant criticism over "bundling" of commodity with value-added product returns, which resulted in distorted market signals to dairy farmers.

When Fonterra inherited the structure, it had to find room for the massive processing and exporting operations of New Zealand Dairy Group and Kiwi Co-op Dairies. NZMP become a committee camel, with a large workforce, 29 manufacturing sites, several IT systems and a product mix of all of the basic dairy commodities.

Former managing director Chris Moller, a contender for Mr Norgate's job, welded the Dairy Board's ingredients business, plus components of Anchor Products, Kiwi Dairy Products, Food Solutions Group, New Zealand Dairy Ingredients, transport, milk quality and the board's global operations division into one company to collect milk, process it and manufacture and sell dairy commodities and food ingredients. That business had revenue of $7.8 billion in the first year, slightly more than half of Fonterra's total.

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