By Ian MacIntyre
Fonterra has recently initiated a four-point plan with its organic farmers in order to bring this loss-making business sector into a break-even situation.
While apparently remaining “committed” to the organic market, Fonterra is now:
1. concentrating North Island organic suppliers in one hub around its key certified organic processing site, Hautapu, which will also reduce overall supplier numbers reducing the amount of product processed at its other two certified organic sites, Waitoa and Morrinsville
2. prioritising the organic product range to focus on cheese which provides the best returns
3. focusing on emerging Asian and Australasian organics markets where there are stronger returns and growth potential
Fonterra supplier and external relations group director Kelvin Wickham says the organics market has been particularly hit hard by the global financial crisis and market indications are it will not recover to previous levels.
“All categories felt the effects but particularly the category in which we sell – packaged dairy foods – where prices and volumes are still below 2008 levels,” he says.
“Research shows people are now less willing to pay the premium for organic products. In addition, consumers are gaining more confidence that everyday products are being produced more sustainably and are more acceptable so they no longer see the need to pay the premium for most organic products.”
