Should Fonterra be broken up into two businesses – one processing commodities and the other making value-added products?

The discussion has started within Fonterra and among some of its shareholders. It is on the mind of the Government too.

In the recent Cabinet paper launching the dairy industry review, the fourth of five main focus areas for the review was “Fonterra’s co-operative structure and its impact on Fonterra’s ability to raise capital to invest in innovation and value creation.”

It’s an urgent question. As a co-op, it can only raise more equity capital when farmers want it to process more milk. But gone are the days when booming dairy production allowed Fonterra to raise lots more capital to make itself more sophisticated.