Over a year ago, Fonterra announced it was severely curtailing its organic milk business, concentrating processing in one area and significantly reducing the number of suppliers. The rationale was that the organics side of the business was not doing well. That was somewhat ironic, given that soon after the announcement came news stories from Europe and UK that there was a shortage of organic dairy products and companies were struggling to meet consumer demand.

Now, 18 months later, Fonterra is reviving the organic trade, saying it has turned around its business and is now looking to renew contracts with suppliers.
While some suppliers have welcomed this, others are frustrated at being messed around.
Farming organically is a significant and long-term commitment. It takes a minimum of three years to gain full certification and regular auditing to maintain that status.
Demand for organic food, particularly in the more well-off middle classes, is growing.

While it is encouraging to see Fonterra recommitting to that market segment, it is still a puzzle why it was so quick to pull the plug on committed suppliers and a growing market. The lesson may be that a longer-term vision is needed when it comes to new markets and that a temporary slowdown is not always a good reason to pull out.

We’re trialling a quick link section this week for some of the hottest topics in the dairy industry.
At the end of this newsletter you’ll find quick reference links to a wide range of coverage on the new Coles milk supply proposals in Australia and on the global impact of Chinese infant formula demand.
We would welcome your feedback on whether this idea works for you.

Source: Dairy Week