The purpose of this thesis is to examine how the New Zealand dairy co-operatives have adjusted their market strategies and organisational structures as a result of changing market characteristics, and to investigate what were the driving forces behind these adjustments. The thesis gives an introduction to the industry and its development. The three dairy co-operatives which operate in New Zealand are analysed from a strategy (Porter’s generic strategies) and structure (collective versus individualised) perspective. The main part of the empirical material was collected during a study trip in New Zealand in March and April 2003. Interviews were carried out with representatives of the three dairy co-operatives and with persons in other ways active in the dairy sector.
With excellent conditions for pastoral agriculture, New Zealand has a dairy industry that successfully exports dairy products on the world market. The majority of products are exported as commodities, such as milk powder, butter and cheese. The dairy industry has undergone major structural changes. During the last decades, the industry has seen the number of co-operatives decline as a result of mergers between co-operatives. In 2001, only two major co-operatives remained, New Zealand Dairy Group and Kiwi, along with two minor co-operatives, Tatua and Westland. The industry has also undergone deregulation, after being regulated since 1935. An export monopoly, which allowed for dairy products to be exported solely through the New Zealand Dairy Board, was abolished in 2001. At the time of the deregulation, the two larger co-operatives merged to form the dairy giant Fonterra, a co-operative with over 13,000 shareholders. The operations of the New Zealand Dairy Board were integrated into the new co-operative. Westland and Tatua chose not to join the so-called mega-merger.
A number of driving forces can be identified, which explain these changes. Early mergers were mainly driven by technical improvements and economies of scale, while later mergers also were the results of the export pricing system, the power balance between co-operatives and personal prestige for persons in leading positions. The deregulation of the Dairy Board can be explained by the political (deregulation) climate in New Zealand, international and domestic pressure to deregulate and the understanding within the dairy industry that the system with one export organisation and few dairy co-operatives was no longer functional. The formation of Fonterra can be explained similarly, along with the expectation that the New Zealand dairy industry would have a stronger position on the international market as one single operator.
The dairy co-operatives have different strategies and structures. The focus of Fonterra is on commodities, but with an increasing interest for consumer goods and value-added products. The structure of Fonterra is rather individualised, with close to all equity being allocated to shareholders. Membership is open. The shares are valued by an independent valuer every season and are thus appreciable. Shareholder influence is related to delivery, the number of votes being proportional to milk supply. Westland is mainly a commodity processor, but has made significant investments to increase the share of value-added products. Westland has a somewhat more collective structure than the other two co-operatives. The shares have a nominal value and the number of votes per member is calculated on the basis of larger quantities. The membership is open, but limited by geographical boundaries. Tatua is the most specialised co-operative and produces value-added ingredients and consumer products. Structurally, it is the most individualised co-operative of...
