As a former dairy farmer I was shocked to learn that Fonterra is selling its brands’ business. Call it emotional attachment rather than hard-headed commercial reality. For all my dairy farming years I heard that we needed to be closer to our consumers, that branding was an integral part of extracting profit from product sales and that we needed to better understand what our customers wanted. We needed to own the food chain – ‘plough to plate’.
Then I read the explanations from CEO Hurrell. They made sense. Why keep on investing into the black hole that is marketing? A return of 4 or 5% sounded lame compared to double that for ingredient sales. It sounded even more lame compared to the return from organic product sales which are in the 40% return range.
In passing, here’s a question the Fonterra board might answer for us oldies….. “How much value was built into those iconic, 100 year-old brands as a result of the Fonterra forerunner, the Dairy Board having regulatory protection – a single desk, monopolistic device granted by the taxpayers?” Churlish to ask, maybe? But I recall as National President of Federated Farmers, having a dingdong battle to get the proceeds of the old Phosphate Commission back into farmers’ hands when David Lange wanted it for his Pacific Island ‘nice-to-boast’ projects and told me it was the regulation, per kind favour of the taxpayers, that created the $60 million Commission fund. We split it down the middle and my wish for funding the Queen Elizabeth ll National Trust was achieved.
Will the taxpayers benefit from any of the $4 billion or so paid by the buyers of Anchor?
The problem with blaming a low return on the dollar invested in brand marketing is that it indicates poor performance. Yes, size matters. The much bigger multinationals with years of experience and highflying expertise have a huge advantage in the marketing business but small corporates can be equally, if not more successful, in such competitive markets. Were the low returns from the brand ownership properly analysed to determine where the challenges lay?
I ask because producer-owned coops have an inherent weakness they never like to contemplate. Farmer boards of directors have the added burden of having to determine whether to pay themselves more as shareholder/producers or reinvest in the business. Having been a director of a couple of such coops I know the dilemma. Payout too often wins especially near director election times.
I am sure Fonterra Chairman McBride would rush to tell me that his board were well above having to consider such unsophisticated pressures and, in any event, there were non-producer directors around the board table who would not fall for any such risky decision-making. However, I could point to other very large coops with independent directors who fell for such tempting traps and recently too.
Perhaps the most disappointing aspect of the brand sales is the opportunities in the rapidly emerging and, often chaotic area, of AI and social media marketing. Huge amounts of branded product are now marketed by individuals, totally untrained in modern marketing techniques, so-called influencers who can move millions of dollars of product in hours, very basic connections forged between people behind the product owner and customers on the other side of the world that lead to branded product sales and opportunities that must make the marketing gurus paid extravagant sums to run traditional campaigns pull their hair out.
It’s turning the marketing world upside down. Imagine an influencer selling over $1.3 million worth of product in less that 24 hours. Someone called Grace Beverly sold half a million value of her active wear in an hour. An energy drink company took sales to 800,000 items a day using social media in just a few weeks. It works. For the big and the small.
Nike got 50 million views and a massive spike in sales from one short online campaign. Dove sold boatloads of soap from a short sharp short social media campaign that reached 180 million watchers in a couple of weeks. Netflix used TikTok to reach millions with a single-story teaser that was very basic and homely.
Simple, spontaneous, unsophisticated are often the most successful. The experts must be horrified. Fonterra has 8,000 potential marketers called farmers, along with their families. Arm them, equip them and let them use their own initiative to talk to consumers around the globe. The most basic, everyday events on the farm could capture imaginations and sell multiple products.
We are regenerative farmers. Our cows are free range. Our climate is envied. Our miniscule methane emissions are swallowed by the grass we grow and the other vegetation on our farms. We have the lowest carbon footprint of any food exporter by a massive 40% but somehow, we are bogged down by buyers demanding we take immediate action on emissions.
It is all somewhat bewildering that we are kowtowing to a few buying agencies over our trivial methane emissions, but we never share the story of our unique, low carbon footprint or our superior farming practises. Is it wrong to smell a rat? Are we actually facing just one more price negotiation lightly dressed up as an environmental demand. After all, if they don’t buy from us they will only be able to buy from farmers doing greater harm to the planet.
What will upset a consumer more? A trace of methane, maybe causing 3 or 4 millionths of a degree of warming, or the same consumer learning we use minor amounts of a toxic product rammed down our cow’s throats every few months to remove half the emissions?
So, the very best channel for communicating our individual story direct to consumers is about to be cut off. The opportunity to use the exciting new tools that reach millions disappears.
Dairy farmers will vote to get a hefty tax free dollop of cash and confirm the sale of the brands business. Of course they will. Who could blame them? The hierarchy will have done their homework with the bigger voters and dairy farmers have typically been amenable to the calls from head office anyway.
I just hope that the future doesn’t come down hard on the sale as short-sighted, a lost opportunity and lacking imagination.