Globalising New Zealand : Fonterra Co-operative Group, and shaping the future

Keynote

Globalising New Zealand : Fonterra Co-operativeGroup, and shaping the futurenzg_1173 1..13

Stuart Gray1 and Richard Le Heron2

1Fonterra Co-operative Ltd, Private Bag 92032, Auckland, New Zealand,2School of Environment, The University of Auckland, Box 92019, Auckland,New Zealand

Abstract: New Zealanders have little collective vision of their position and future in aglobalising world. Recent developments in New Zealand’s primary sector showpotential pathways to the future. We explore two claims: thinking about New Zealandis to think about the emergence of Fonterra Co-operative Group in New Zealand’sglobalising economy. Thinking about Fonterra is to think about New Zealand and theimplications that spring from globalising activities. Fonterra is a lens to understandbetter the possibilities and development options and the challenges that are arising asNew Zealand forges its place in a globalising world.

Key words: dairy spaces, dairy supply chain emergence, Fonterra, globalising dairy-ing, knowledge space, sustainability.

This paper discusses an experiment in geo-graphical knowledge production, combiningthe experience and skills of a dairy industryexecutive who graduated in geography withthat of an academic geographer with factoryoperator experience in the dairy industry. Theproject created a joint knowledge space inwhich ideas from geography and industry wereassembled into a geographically informed argu-ment, and then performed by us as a keynotepresentation at the New Zealand GeographicalSociety’s 2008 (NZGS2008) biennial confer-ence. The subject is the evolution of NewZealand’s dairy industry as it responds to theglobalising of both its markets and industryplayers, and in particular of FonterraCo-operative Group Ltd’s emerging role andimpact as the leading corporate in the globalis-ing dairy trade world and its prominence in

New Zealand’s wider globalising economy asNew Zealand’s largest company by far. Webegin with two propositions: thinking aboutNew Zealand is to think about Fonterra; think-ing about Fonterra is to think about NewZealand. Our concern is that Fonterra has apublic persona within New Zealand that sug-gests the company and its wider issues anddynamics are often poorly understood and mis-represented. These issues in many ways are buta reflection of the wider challenge facing NewZealand in understanding and building its posi-tion in the world. Fonterra is a lens throughwhich we can understand better the possibili-ties and development options, and theundoubted challenges that are arising as NewZealand forges its place in a globalising world.

Our paper has two interwoven strands: acommentary on how we thought and brought

Note about the authors: Stuart Gray is General Manager, GlobalTrade New Zealand, at Fonterra Co-operativeLtd. Richard Le Heron is Professor of Geography, School of Environment, The University of Auckland.

E-mail: [email protected]

This paper was first presented as the New Zealand Geographer keynote address at the New ZealandGeographical Society conference at Victoria University of Wellington in July 2008.

New Zealand Geographer (2010) 66, 1–13

© 2010 The AuthorsJournal compilation © 2010 The New Zealand Geographical Society

doi: 10.1111/j.1745-7939.2010.01173.x

our argument into existence, and an evidence-based discussion relating to dimensions ofwider dairy industry emergence, and thechanging relationships and interactions thatform Fonterra and its New Zealand and globaldairy scene. Readers need to be conscious ofthese strands, which are very deliberatelymade explicit. Acknowledging these strandsallows us to move among four interconnectedaspects: representations of the dairy worldthat we provide, pointers that highlightpractice-based economic and governance deci-sion making by key actors, the conditioningwork or influence that occurs because of theway we frame our knowledge statementsand the possibilities and potential of theco-production of knowledge. We begin bybriefly discussing the steps that led us to seeourselves as engaging in a joint knowledgespace. This initial discussion considers how wecame to recognise the different understand-ings and capacities we brought to framing oursubject, the key decisions we made about whatto include in the keynote, the form of presen-tation of the keynote and the tensions this allposed for the eventual paper.

A space of engagement

We are both geographers who professionallyinhabit different, but potentially intersectingknowledge spaces. For Stuart, this has meant a20+-year career operating globally as an execu-tive in the dairy industry and with an interest inhow the discipline of geography might assist inexplaining the organisational and industrydynamics within which he works. Richard alsooperates globally, as an academic with a keeninterest in the political economy of new eco-nomic spaces, and in following the rise ofFonterra as a transnational entity, and its eco-nomic and institutional strategies.

Both of us are members of an informalAuckland-based Globalising Dairy Researchgroup, which has been exploring Fonterra’semergence (Gray et al. 2007; Stringer et al.2008; Stringer et al. submitted; Tamasy et al.in press). The group, consisting of geo-graphers in the School of Environment and inInternational Business at The University ofAuckland and in Fonterra, has sought to usemaps and diagrams to help narrate the global-

ising dairy industry, grappled with the inescap-able political and normative/moral dimensionsof agri-food developments and refused to beconfined by the conventional norms and ques-tions of academic and industry knowledgesystems (Jackson et al. 2009; Le Heron 2009a).The research has reinforced for us the uniqueadvantages of New Zealand as a location inwhich to make substantive contributions tointernational geographical research and schol-arship. New Zealand’s position as relativelyperipheral in the world economy gives it greatvalue in providing a test and measuring forbroader claims about firm behaviour and loca-tion. The relatively intimate human scale of acountry of four million people encouragescross fertilisation between the academy andindustry. This is exemplified by the globalheadquarters of Fonterra being just a short3-min walk from The University of Auckland’sSchool of Environment. This has immeasur-ably helped face to face interactions.

The keynote address presented special chal-lenges. A range of decisions had to be made aswe sought to offer different perspectives andconceptualisations which needed to be meldedtogether. Foremost, deciding to talk about the‘elephant in the room’ in New Zealand devel-opment, that is, to confront and consider explic-itly Fonterra as a developing organisation inaddition to dairying, positioned us somewhatdifferently to many other commentators. Wesaw this as a landscaping exercise, which, as weexplored it, required full attention to not onlythe more conventional and well-known NewZealand public views of Fonterra, but alsodemanded that we consider Fonterra’s owninternal understandings of itself, and its manydynamics and its multiple roles in New Zealandand elsewhere. We realised too that wehad embarked on a distinctive collaboration,involving co-learning and co-production ofknowledge (Cook et al. 2006, 2007; Le Heronet al. 2006). Because of our background, wewere ‘thinking’ globalising dairying differently:teasing out understandings from inside andoutside of dairy enterprises, different compo-nents of the dairy industry, the locations andregions of dairy farming and processing, com-peting explanations and narratives about howthings worked and had evolved to where theywere. We probed the changing relationships

S. Gray and R. Le Heron2


and interactions both within the wider dairyindustry and within Fonterra the organisation.This left us wrestling with the challenges of‘representing’ what we knew about variousdynamics, and ‘presenting’ the basis on whichwe knew, because this latter aspect was a majorkey to the new knowledge we were trying toproduce. This became even more importantwhen we wished to include in our keynotein-the-making dimensions of new knowledgeand knowledge systems that are activelyre-shaping Fonterra’s trajectories. While thesesorts of knowledge production issues areincreasingly discussed in the international lit-erature (Jasanof 2004; Le Heron & Lewis 2007,2009; Lewis 2009; Munro et al. 2009), we felt thesynthesis and synergies from our collaborationwere substantially different to earlier effortsbecause we were working the academy–industry nexus in a new manner. These issuestook us beyond much contemporary corporategeographic (Coe et al. 2007; Rodrigue &Notteboom 2009) and international businessunderstandings (Buckley 2002; Buckley &Ghauri 2004). This created a problem for us,about how to place the keynote audience intothe trajectories of Fonterra and the globalisingdairy work in a manner that would meaning-fully frame and position for listeners the rel-evant dynamics and their constitutive actors,and open up the possibility of new thought andengagement.

We concluded that we needed to performsome of our knowledge production strategiesinto our address. We consciously used fourtechniques of performance to shape the in-the-room experience (Dewsbury et al. 2002; Law &Urry 2004; Le Heron 2007, 2009b; Thrift 2007;Gibson-Graham 2008). First, we centred thePowerPoint screen and ourselves by putting aNew Zealand map on one side and a map of theworld on the other. This simply, but effectively,signalled the relational nature of our keynote.As we explained to our audience, we wereforging New Zealand and international per-spectives, we were part of New Zealand yetelsewhere, we were knowledge producers at anacademic conference. Second, we gave equalvoice to each other – industry and academic –and ensured each offered critical reflections ofthe other. This demonstrated the joint thinkingbehind our conclusions. Third, to bring industry

into the narrative and the room, we highlightedStuart’s direct involvement in Fonterra’slaunch of the globalDairyTrade (gDT) tradingwebsite (http://www.globaldairytrade.info/) inthe USA on the morning of the keynote. Thisimmediacy demonstrated insider positioningand confirmed the New Zealand–rest of theworld relationship that Fonterra implies.Fourth, images of Fonterra from companyreports and of newspaper cartoons centredFonterra’s public persona and showed conten-tious issues in the dairy world. This includedbasic information about the globalising dairyscene that was often missing from mostaccounts. This was both up-to-date and morecomplete as we had a better sense of what sta-tistics would reveal Fonterra as a player and thesize of the game in which Fonterra was playing.Our hope with our presentation techniques wasto provide a coherent view of the contempo-rary moment in New Zealand and dairying,as seen through the multiple dimensions ofFonterra.

While the rest of the paper abridges thekeynote, it foregrounds some realities thaturgently need to be understood by policymakers, academics, the public and the dairyindustry. We consider such understanding vitalin building frameworks of engagement overissues, challenges and aspirations that manyin New Zealand and overseas find hard tocomprehend.

Setting the scene

On the morning of our keynote address, 3 July2008, Fonterra conducted the world’s firstglobal Internet trading of dairy products.Managed out of Boston by independent con-tractors, the trading website gDT allows cus-tomers around the world to bid once a monthon Fonterra whole milk powder contractsacross three delivery periods: spot, 3–6 monthsand 6–9 months. This introduced to the worlddairy industry basic risk management tools thatare widely used for other commodities likecoal, oil, sugar, coffee and even ship charters.That initial event opened at 1:00 am NewZealand time to ensure optimal timing indifferent time zones; had more than 100 cus-tomers registered from Africa, Middle East,Asia and Latin America; and lasted 3 hours.

Globalising Fonterra 3


Only Fonterra among the world’s top 10 dairycorporates had the global stretch to conductsuch an event around the globe. The impact onworld buying behaviour has been immediatewith gDT seen as a leading market price indi-cator and with extensive press coverage (Fox2009a,c). We asked at the keynote address,as geographers, and as New Zealanders, howwe should respond to such an event.

What is the commercial mindset withinFonterra that enabled such a global industrygame changer as gDT to happen from a NewZealand location? And how does this align withthe popular New Zealand-centric view of dairyfarming – one of ‘established industry’ andimpacting on local river quality with nutrientrun-off, and milk tankers slowing the flow oftraffic on the roads? Indeed, how does theglobal reality of Fonterra’s markets, and thelarge and vital foreign exchange earnings gen-erated from them intersect with the oftenuncomfortable public response to the growth indairy farming and its impacts on local land-scapes? And as Fonterra globalises, and investsin production elsewhere (e.g. Chile, Brazil,Australia), the debate moves beyond NewZealand’s borders, with Fonterra now generat-ing economic activity in other countries andwith inevitable local impacts ‘over there’ –environmental, organisational and cultural,with, for example, inevitable changes in farmproduction methods and labour employment.New Zealand’s links into world circuits oftrade, production and finance have frequentlyaltered. Earlier internationalising episodes forNew Zealand occurred in the 19th century (e.g.New Zealand Insurance; see Hunter 2007) andas part of the 1980s restructuring (e.g. brewingand forestry). In the 2000s, globalising NewZealand is entwined with a globalising dairyindustry. New Zealand has to work through theimplications of this: economically, environmen-tally and socially.

The popular perception and discourse inNew Zealand are of Fonterra as a nationalcompany, yet inside Fonterra the discourses areinternational, and have been for some time.This came into stark relief with the 2008melamine tragedy in China. Within NewZealand, it was Fonterra’s response that wasthe predominant theme in the media, withFonterra holding 46% of San Lu, one of the

numerous impacted Chinese dairy companies.While certainly very important to Fonterra’sshareholders, and some hard lessons werelearnt by Fonterra, this issue was presented bythe New Zealand press as a national issueinvolving Brand New Zealand (Hembry 2008).Yet, internationally, the media paid virtually noattention to San Lu having a New Zealandcompany on its share register. There, focus wason the substantive issue of widespread con-tamination of the dairy supply chain in China,which had led to a public health scandal andthe tragic deaths of babies.

Local prominence, global reach

New Zealand has a long history as an exporterof dairy products. About 95% of its productionis exported around the world. It is the world’sninth largest producer of milk, producing 16.3billion litres of liquid milk in the 2008 season.New Zealand’s annual milk production islarger, for example, than the United Kingdom,Poland, Australia or The Netherlands. Theworld’s largest producers are India, USA andChina (International Dairy Federation 2008).

Fonterra is New Zealand’s largest companyby a large margin with a turnover in 2008 ofNZ$17 billion, and alone generating fully onequarter of New Zealand’s export earnings in2008 (New Zealand’s next biggest exportearning sector, tourism, consists mainly of smallcompanies). It is commonly reported thatFonterra alone makes up 7% of New Zealand’sGDP.

Fonterra itself is the world’s largest proces-sor of raw milk, processing nearly 20 billionlitres of milk, and is the fifth largest dairycompany by revenue. This includes 15 billionlitres or 93% of New Zealand’s milk, andanother 4 billion litres offshore from othercompanies and suppliers. It processes milk onfour continents. Approximately 95% of itsearnings are generated outside New Zealandby direct sales to more than 100 countries andthrough a network of international processingand distribution investments. Fonterra is aprivate company, co-operatively owned by its10 600 farmer shareholders who supply themilk. Fonterra has 16 000 employees (6000 ofthese offshore).



Geographic framings

At the keynote, we wanted to highlight twomutually constitutive developments: first, bothNew Zealand and international dairying haveevolved dramatically over the past decade, andsecond, Fonterra is undergoing significantinternal transformations in thinking, especiallyaround the centrality of sustainability to itsoperations and future. In order to highlightthese aspects, we drew on the scholarship ofinternational economic geographers, which,since the early 1990s, has sought to show theinterdependencies and co-construction of glo-balising and localising processes (Peck &Yeung 2003; Coe et al. 2007; Dicken 2007), andthe potential of place-centred ideas about sus-tainability (Bowler et al. 2001; Hinchliffe et al.2007; Lowe & Ward 2007). Dairy develop-ments were discussed using a national devel-opment lens and then a globalising world lens.To point to the effects of new knowledgeframeworks on action, we include several dia-grams to progressively deepen and problema-tise perspectives on sustainability. The left-hand portion of Figure 1 is a stylisedknowledge framework about sustainabilitythat has been developed by the academy exter-nal to industry and to key actors. Its specialvalue is that exposes the multidimensionalityof sustainability ideas, which serves as a frameof reference when considering the nature ofactual sustainability practices. The later dia-

grams enable us to examine issues and impli-cations of Fonterra’s rapidly evolving supplychain thinking in quite different terms.

National development lens(milk and ingredients)

Dairy has been a key part of the New Zealandeconomy since the 1880s, and is responsible forrural economic development and landscape inmuch of the North Island. The small NewZealand domestic market meant that from thestart the industry focused on export of com-modities such as butter, cheese and latterlymilk powder. Centralised, regulated exportmarketing through producer marketing boardswas the norm from the 1920s. Over the secondhalf of the 20th century, consolidation ofsmaller dairy cooperatives into larger regionalcompanies and the closure of small processingfactories have been a distinctive aspect of ruralchange in New Zealand. In 2001, the culmina-tion of this was the merger of two large coop-eratives (Kiwi Dairies and the New ZealandDairy Group) with the sole exporter and mar-keter by law, the New Zealand Dairy Board(NZDB) to create Fonterra.This was accompa-nied by repeal of sole exporter status inheritedfrom the NZDB, opening the door for anyindependent New Zealand or internationalcompany to engage in export. Along with theeconomic processes consolidating dairy manu-

Figure 1 Geographic overview of dimensions of sustainability.



facturing and exporting similar drivers werealso transforming behaviours on the farm.

Intensification of dairy farmingThe intensification of dairying is one of thedominant themes apparent to the observer ofthe rural landscape in New Zealand over thelast 20 years. Figure 2 identifies several compo-nents. Cow productivity has increased 20% inthe last 15 years, from 260 to 307 kg milk solidsproduction per cow. There are nearly 4000fewer herds now than 20 years ago (11 400 vs.14 800), but the average herd size has morethan doubled in that time from 154 cows to 350cows. A marked movement of dairying intoCanterbury and Otago, and back into South-land (an early centre of dairying) has occurredwith much larger average herd sizes in theSouth Island than the national average. Withthe expansion of the Edendale (Southland)manufacturing site now underway, the world’stwo largest dairy manufacturing sites are nowin the South Island (the other is Clandeboye,in South Canterbury).

This investment dynamic is part of a moregeneral, but episodic and conflicted, scaling upof New Zealand’s land-based industries in par-

ticular regions. Recent episodes have includedexotic forestry in the 1960s and 1970s (LeHeron & Roche 1985), sheep/beef on marginalhill country in the 1970s (Le Heron 1989a,b)and apple production in the 1970s and 1980s(Le Heron & Roche 1996). Viticulture for wine(Lewis 2008), and dairying in the 1990s and2000s are the dominant contemporary dynam-ics of land use change (Blackett & Le Heron2008). The changes have resulted in re-imagingof New Zealand’s landscape, new identities andbehavioural changes.

Intensified dairying is attracting significantpublic and media attention. Dairying is becom-ing larger and larger. The water and effluentmanagement requirements of dairying con-tinue to mount. Non-point pollution is a featureof farm environments, local river catchmentsand river estuaries in dairying areas. Theseaspects are integral to overseas perceptionsabout farming and processing, but becauseof historically limited feedback loops frommarkets (Campbell 2009; Campbell et al. 2009;Le Heron & Lewis 2009), behaviours thatdownplayed environmental implications (Jay2007; Jay & Morad 2007) have only recentlybeen seen as potentially risking New Zealand

Figure 2 Dimensions of New Zealand dairy intensification. Source: Livestock Improvement Corporation(2007).



export markets. Fonterra’s response to this hasbeen an ongoing and continuing re-alignmentof corporate strategy to increasingly place avision of sustainability at the heart of thebusiness.

Globalising world lens(adding value and adding values)

For much of its history, the New Zealand dairyindustry was outwardly focused on the UnitedKingdom ‘home’ market. The entry of theUnited Kingdom into the European EconomicCommunity set in motion a market diversifica-tion strategy. The 2001 merger of the largestremaining co-operatives and NZDB to formFonterra enabled the industry to expand andbuild on the outward international focus as asingle large integrated corporate entity focusedon international customers and markets.

A globalising network of trade flowsIn academic and company presentationsaround the world, maps revealing Fonterra’strading development from the NZDB era intoa global corporate have helped situate Fonterraas a truly global actor (Fig. 3). The emergenceexemplified by Figure 3 is built on several foun-dations: New Zealand remains central toFonterra both as the key milk supply source,manufacturing base, and it is where its share-holders are located; but some 20% of milksupply is now being sourced from other coun-tries, but New Zealand standards remain thebenchmarks with the NZMP brands (Fonterracommodity brand), for example, being printedon 100 million bags, cartons and drums eachseason; 70% of Fonterra’s sales are bulk dairyingredients, meaning the company is predomi-nantly organised around a business-to-businessmodel. The consumer (retail) brand businessesare organised as stand-alone strategic businessunits that buy their requirements from theFonterra core as another customer. Of the top10 global dairy corporates, Fonterra alone has amajor trade and processing presence in fourcontinents. Behind the trade flows shown inFigure 3 lie a series of strategic supply, marketchannel and innovation partnerships (Grayet al. 2007). The evidence clearly demonstratesmuch complexity and ambiguity aboutFonterra. Is it a national or an international

company? Should it use national or corporatebranding? How does Fonterra build value-added consumer activities when its mainstrength is ingredients and scale processing, andingredients customers may also be consumercompetitors? Will Auckland always make bestsense as a headquarters location, given thatmost customers are located internationally?

Globalising the leadership spaceFonterra should not be read-off conventionalbusiness models. It is a creation of specific his-torical conditions with a particular legal struc-ture. Its cooperative status both constrains andoffers opportunities on how it operates andhow it can seek to grow. Led by AndrewFerrier, a Canadian, six of the ten members ofthe Fonterra Leadership Team in 2008 werenon-New Zealanders (Fig. 4), compared to twoof six at Fonterra’s inception. This is a sharpbreak with the traditional make-up of a farmerco-operative, and more than anything illus-trates the outward focused global mindset ofFonterra. Fonterra is a very active shaper of theglobal dairy scene, at the forefront of globaldairy supply chain development, and promi-nent in phyto-sanitary and sustainability initia-tives internationally. By 2015, it is possible thatas much as half of its milk will come fromsources other than New Zealand. Not surpris-ingly, the issue of capital structure keeps surfac-ing (Editorial 2009; Fox 2009b; Gaynor 2009).This is frequently reduced to a binary choice,between a cooperative or corporate model, theformer being simplistically projected by somemedia commentators as an impediment togrowth, and the latter equally simplisticallybeing hailed as a vehicle for growth. Such adichotomy masks many organisational dynam-ics that would exist under either scenario –issues of performance, returns to shareholders,energy efficiency, resilience of environmentalprocesses, sourcing of milk supply, strength ofglobal customer relationships and innovation.

Global supply chain developmentSince its inception, Fonterra has faced majorsupply chain constraints – it cannot get enoughraw milk from New Zealand to meet thedemand from large global coporate customers;the distance from New Zealand to markets hascosts in energy and time; the seasonality of milk



Figure 3 Emergence of Fonterra’s trade flows. (Note: Gray et al. 2007, 12–13 for fuller details).



production imposes a need to hold inventory ofproduct; and the complexity of networks andrelationships from new supplier sources, cus-tomers and regulatory agencies are demandingof resources. Fonterra’s presence in the globaldairy supply chain is exemplified by theFonterra–Nestlé relationship. Fonterra isNestlé’s largest dairy ingredient supplier, whileNestlé is Fonterra’s largest customer.

Cross-cutting supply chain pressures interna-tionally (Lawrence & Burch 2007; Le Heron2009a), combined with New Zealand demands,has resulted in a series of initiatives withinFonterra that are gradually altering what isknown about the company’s whole supplychain, from the farm through processing to finalpurchase by an end customer. Figure 5 depictsthree ‘faces’ of Fonterra’s internal learning,and re-assessment of its supply chain character-istics and challenges. A ‘sustainable dairyco-operative’ has to mean more than acompany-centred notion of financial sustain-ability. It includes confronting a number ofrealities. In New Zealand, Fonterra needs a‘licence to operate’ that is publicly and politi-cally acceptable. Consumer sentiment in theUSA and Europe is increasingly influential;supermarket power along with ‘buy local’ and‘food miles’ campaigns can impact rapidly onmarket performance for branded products; thesupply chain increasingly involves more thanproduct, for instance, extending to animalwelfare and environmental impacts. Foodindustry customers increasingly demandinformation about practices claimed to besustainable.

In a multi-pronged approach, Fonterrasought to benchmark its sustainability perfor-mance at every level in its global supply chain,beginning with its New Zealand dairy farmersand off-farm operations, including transport,processing and logistics. John Hutchings(2008a,b), Fonterra’s general manager of sus-tainable production, notes that the companyhas systematically embarked on measuringand benchmarking different dimensions of awide range of indicators. A major carbon footprinting exercise right through the supplychain is underway. The use of new metrics hasbeen shown by international scholars to havebeen pivotal in the rise of new industries andeconomic performance (Barry 2002; Larner &Le Heron 2002; Callon & Law 2005; Busch2007; Mitchell 2008). The new knowledgesystems that are being created are allowingFonterra to work with different stakeholdergroups in its supply chain to make immediatesustainability gains through efficiencies andlonger-term gains from changing practices. TheGlobal Dairy Agenda for Action on ClimateChange among global dairy corporates,launched in 2009, was in large part spear-headed by Fonterra (www.dairy-sustainability-initiative.org).

What do these new understandings mean forhow Fonterra engages in its multiple dairyspaces around the world? In 2008, global inven-tories were almost zero and demand for milkingredients in food was at an all time high.Prices rose to record highs. But the world foodscene is confronted with contrasting drivers(Jackson et al. 2006; Morgan et al. 2006; Lang

Figure 4 Fonterra’s globalising leadership space.



2007; Maye et al. 2007). Basic food demand isgrowing in Asia, Middle East and LatinAmerica as hundreds of millions move out ofdire poverty, and a protein shortage is appear-ing. On the other hand, demand for functionalfoods, mostly from rich economies, is accompa-nied by concerns about health, nutrition,obesity and ageing (Dixon 2009). Global corpo-rates involved in dairying are reviewing how torespond strategically. The French multinationalDanone Group, the no. 3 global dairy corpo-

rate, for example, has switched out of biscuitsinto water and child nutrition. Fonterra is inevi-tably part of this process, with its core businessbeing a supplier to food ingredient manufactur-ers who are asking for greater assurances aboutfood safety, and looking for new ingredients toassist their moves into healthy nutritional prod-ucts. But, it has also actively sought to grow itsown value-added activities. Fonterra estimatesthat by 2015, potentially up to half of its milkcould be sourced outside New Zealand. The

Figure 5 Emergent framings and metrics of sustainability in Fonterra.



company has the stated aspiration of being the‘world’s most sustainable supply chain fordairy’, and a world leader in sustainable andprofitable farming systems.

Engaging and working with andin the world, going forward

We have argued that Fonterra has come toknow its New Zealand dairy space differentlybecause of growing awareness of world envi-ronmental, food safety, nutritional, animalwelfare and other issues. Because of its particu-lar New Zealand constraints, understandings,issues and challenges, Fonterra is learning howit needs to evolve and develop in differentways. Equally, it is learning about its organisa-tional capabilities and getting to know what itoffers as a global operator and how to interactin other dairy spaces. This corporate under-standing of the interlinkages and feedbackloops between its New Zealand dairy space andits wider global footprint is a major develop-ment.This is setting in train a continuous learn-ing in the organisation that is not just aboutNew Zealand or just its global developments,but is about the interdependencies of all thedairy spaces, local and global, within whichFonterra operates.

We identify four main conclusions. Theserelate to how we co-produced knowledge,insights into how sustainability issues canbe framed, documentation about the actualdynamics of Fonterra as it evolves and attemptsto configure a sustainable supply chain and theurgency to understanding more about NewZealand’s globalising economic activities.

First, in the keynote, we stepped into eachother’s globalising spaces – industry and aca-demic – to consider what sorts of knowledgemight be produced about Fonterra and NewZealand. In doing so, we framed discussion toproduce different dairyscapes and foodscapesthat are inescapable mixes of global and localinfluences. The presentation and the paperreveal that without the joint knowledge spacewe created, certain knowledge could not havebeen produced by either of us on our own. Forthe academic, fuller representations of corpo-rate dynamics and global issues as understoodby dairy industry practitioners would not havebeen possible. For the industry manager, the

geography, and moral and political economy inwhich the actions and issues surrounding par-ticular actors can be seen and understood infresh terms.

Second, the keynote gave content to theNZGS2008 conference theme of sustainability.The second part of Figure 1 shows geographyas central, integral and active, whether in theinitial holistic academic conception or in themore business-grounded conception. The ines-capable reality that is revealed from followinga New Zealand corporate as it responds toinshore and offshore demands is that under-standing the many dimensions of organisationacross and in spaces is fundamental to knowingthe world we are now living in.

Third, Fonterra has a vision of being theworld’s most sustainable (dairy) supply chain,leading the world in terms of sustainablefarming systems. Will this be brought to centre-stage? Will Fonterra become a thought leaderin the world dairy industry? Will New Zealandas a nation support such aspirations? The basisof authority to engage in dairying and dairyspaces can no longer be assumed. Instead,supply chain aspirations and development areembedded in complex politics, requiring action,assurances and answers on matters as diverseas trade negotiations, genetic engineering,labour rights, local economic impacts, animalwelfare, phyto-sanitary protocols, soil health,ecosystem resilience, dietary needs and foodsafety.

Finally, in thinking about New Zealand as anation, the primary sector cannot be dismissedas traditional or without merit or insight, orlacking significance to New Zealand’s develop-ment debate. It is simply too important. Exam-ining the primary sector players is a key way ofgaining insight into how New Zealand and NewZealanders are engaging in the globalisingworld economy. By focusing on Fonterra (as asignificant actor), we have shown that NewZealanders are beginning to know themselvesin different ways, as differently positioned, withdifferent possibilities open to them.

Acknowledgements

We wish to thank Professor Eric Pawson, Man-aging Editor, New Zealand Geographer, for theinvitation to give the 2008 New Zealand Geog-



rapher keynote address at the NZGS2008 bien-nial conference. The viewpoints expressed inthe paper do not necessarily reflect those ofFonterra Cooperative Ltd. We are grateful toIgor Drecki, Geographic Unit Manager, Schoolof Environment, The University of Auckland,for the preparation of the figures.

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Globalising New Zealand : Fonterra Co-operative Group, and shaping the future

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