Fonterra Shake-Up in China
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China Business Wednesday, April 16, 2014 Section F Fonterra On the waterfront shake-up in China Fran O’Sullivan and Alexander Speirs onterra CEO Theo Spierings has centralised control of the company’s Chinese farming hubs into a new standalone Fbusiness unit to make faster progress growing its milk pools in China. The move comes as the Beijing-led consolidation of the Chinese dairy sector ramps up, making the competi- tive environment in China much Fonterra’s Theo Spierings chats to more difficult for international firms. Chinese consumers. Spierings has catapulted highly ex- perienced international dairy execu- mula manufacturers — are pushed tive Henk Bles into the newly-created from the market in favour of major role of Managing Director Interna- players with robust, integrated tional Farming Ventures reporting supply chains. directly to him. Sarah Kennedy — The Herald visited the two largest vice-president International Farming dairy players at their headquarters in — leaves Fonterra this month. Inner Mongolia. Mengniu and Yili The management changes follow each have substantial investments in astrategicreviewofFonterra’sChina New Zealand. They share their views business dubbed Operation Friesian. on why the consolidation is neces- In a note to staff, Spierings said sary to sustain the future of Chinese work was under way to make sure dairy and what is required to make Fonterra has the structure, capital the industry overhaul a success. and resources needed to accelerate In Shanghai, Kelvin Wickham its strategy. explains how Fonterra is having to Spierings revealed to the Herald adapt to the new market and the that Fonterra is setting up a holding moves it took to cleanse its brand company (‘‘Farm Co’’) in China and following last year’s botulism scare, will also appoint a Chinese advisory which initially frightened off Chinese board within the next year. consumers from New Zealand milk The Herald travelled to China to products. explore the major changes ahead as The Herald also travelled up to the Chinese Government pushes out Heihe in Heilongjiang, close to the Above is an artist’s impression of a The development agreement was terminating leasehold interest on the cowboy operators and creates a new Russian border, to inspect a major 200-room hotel on the western edge signed with Fu Wah in Beijing late last site and will remain the landowner. landscape which will be dominated dairy farm where Kiwi entrepreneur of Viaduct Harbour, which a Beijing month. Fu Wah will open an office in by‘‘NationalChampions’’likeMeng- Howard Moore is looking to partner developer will build by late 2016. The hotel, on the site of the former Auckland soon and is already in the niu and Yili. up with major international players The $200 million investment is Team New Zealand HQ, will be a five process of appointing local consul- Araftofnewregulationsimposed like Nestle, private equity participants being touted as one of the biggest to six star building with a world-class tants with specialist skills. byBeijingarehavingasubstantial and local government. foreign investments in public signature design, a premium This is believed to be the first impact on domestic and international infrastructure in New Zealand and international hotel brand, and will be Chinese-built premium hotel in producers alike, as small and difficult G F12-18 China’s dairy consolidation the first major deal to come out of built to the highest sustainability Australasia and is expected to help to regulate players — including some changes the competitive landscape the mayoral taskforce visit to China standards. maximise the likely benefits to Auck- of New Zealand’s smaller infant for- G F18 Michael Barnett in 2012. Waterfront Auckland is granting a land of the new convention centre. Karen Silk, Westpac David Green, ANZ Mark Heer, ASB Paul Gestro, BNZ For New Zealand to Being one of the first We’re seeing a much We want to see how continue to benefit nations to secure a greater awareness of we can create a from trade with direct currency New Zealand and pathway into China China focus needs trading deal with what it has to offer — for SMEs by using to remain on China says a lot we need to see that partnerships. ensuring the about New Zealand’s as a compliment. Page 22 economy is as close and growing Page 21 productive as it can ties with China. be. Page 6 Page 8 F2 nzherald.co.nz The New Zealand Herald | Wednesday, April 16, 2014 China Business Inside It is our dependence on too few sectors of the economy, not on China, which needs to be addressed. says David Mahon Page 7 The design of New Zealand’s stunning the right) is the Chancery, accommo- the left) is integrated with the to celebrate 40 years of diplomatic new ‘‘embassy’’ — now under dating the majority of the NZ Inc Chancery at the ground floor and will relations. He said ait would cost in construction in Beijing — is intended agencies including the Ministry of house the NZ Inc representational excess of $40 million. ‘‘The current to represent an enduring image of New Foreign Affairs and Trade, NZ Trade centre and the Official Residence on chancery has served us well since 1973, Zealand (including our bi-cultural and Enterprise, Ministry of Primary the upper floors. Prime Minister John but it is now time for it to reflect the heritage). Industries, Customs, Police and Key announced plans for the chancery status and importance of New Adrian Littlewood is creating The larger of the two buildings (on Immigration. The smaller building (on during an official visit to China last year Zealand’s relationship with China.’’ an ‘‘Aeropolis’’ at Auckland International Airport that will service growing numbers of Chinese tourists Our China footprint Page 9 et’s try to agree on one simple But when it comes to real estate, point: making sure we have The showpiece of the NZ the showpiece of the NZ presence in the right people in the right China will be the new NZ Embassy places overseas to advance presence in China will be the in Beijing. This is a $40 million project, LNew Zealand’s external economic, being built on the site of the existing political, development assistance and new embassy being built in Embassy and Ambassadorial Resi- other interests is a classic example of dence. It will be built fit-for purpose. a‘‘workinprogress’’. Beijing, says Tim Groser As you can see from the repre- By definition, we will never settle sentation above, it will be a distinc- this ‘‘once and for all’’. Power — poli- tive, modern building conveying the tical, cultural and economic — is right message to all our Chinese visi- always changing. NZ’s interests and date. Last year our exports increased China operations, and has recently tors about the NZ brand. our view of the world also change. by a phenomenal 45 per cent. The beefed up the number of Wellington- It is not just a numbers game. The New Zealand’s shift to China is the If someone had told me in the mid- annual increment alone of our based policy officers working full quality of staff needs to be most fundamental change to our 1970s that in a few decades hence we exports ($3.1 billion) was roughly time on the China relationship. maintained at a high level and lan- external relations for at least two would be exporting more than twice equivalent to adding ‘‘two Koreas’’ The commitment of NZ Trade and guage skills are essential. generations, says Sir Don as much to Africa and the Middle East (our total exports to South Korea Enterprise (NZTE) to the China re- MFAT and NZTE have always had McKinnon than the UK (which then took some around $1.6 billion) in one year, and lationship is similarly being Chinese speakers in their teams and Page 19 50 per cent of NZ exports) I would we regard our economic relationship upgraded. IamdelightedthatMPIarenow never have believed them. I would with South Korea as very important. The context here is a bit broader committed to having in any one year have been flat out wrong. As this phenomenal growth has than China alone. The Prime Minister two to three expert staff in language The big story of our age is the shift occurred, we should hardly be sur- recently announced a funding boost training. in relative power to the emerging prised that we have encountered a for NZTE of an additional $69 million Finally, we are talking here about economies. It is not just a China story, few severe speed bumps. I would, of over the next four years to enhance atrueNZInc.approachandthis but that is by far the largest part of course, rather be dealing with the our capacity to drive further the cannot be a matter for Government the emerging economies story. We price of success than the cost of Government’s strategic objective of alone. It is, in my view, essential that are seeing the fastest process of failure. But when in August 2013 increasing by 10 percentage points NZ businesses with a strong interest urbanisation and wealth creation on Ministers reviewed our ‘‘NZ Inc.’’ the share of GDP in exports (from 30 in the China market think carefully aglobalscaletheworldhasever China strategy, we decided on heavy- per cent to 40 per cent by 2025). and strategically about their own witnessed. It still has a long way to duty upgrades of our China footprint. There is a domestic component to business plans and the quantity and go. We needed to lift our game just to this too: given the strong demand for quality of the human resources they It has been estimated that as re- keep up.