12 Dec 2013

Fonterra's model could be wrong says academic

1:31 pm on 12 December 2013

A professor of Agribusiness at Waikato University says Fonterra's decision to slash its forecast dividend by two thirds could be sign its business model is wrong.

The co-operative announced dividend payments would decrease from 32 cents to 10 cents a share on Wednesday.

Professor Jacqueline Rowarth said the dividend cut has removed an estimated $250,000 from the share holding that the average dairy farm has in Fonterra - with potential far reaching consequences for those farms.

She said Fonterra's current model is not coping with the value of milk powder versus its added-value products.

She feels sympathy for Fonterra for being in this position.

"The company was urged to move higher up the value chain and right at the moment that's not what the world wants."

Professor Rowarth said it's only a year into Fonterra's new business model and it doesn't seem to be working.