Fonterra warns about the threat of energy conservation for milk processing

Matt Bolger, corporate affairs manager for the cooperative, stated that the company is preparing to increase capital and IT expenditures, while also forecasting growth in revenue and profit. At the same time, management expressed concern about energy supply security against the backdrop of the coal ban after 2037 and the faster-than-expected depletion of natural gas reserves. Since the processing of perishable products does not allow for any disruption in the flow of raw materials, power outages lasting more than a few hours could lead to severe consequences for factories, customers, farmers, and the economy as a whole.

To reduce the carbon footprint, the company's facilities on the North Island have abandoned coal and are actively transitioning to biomass and wood pellets for boilers. According to the Fonterra representative, other companies are already shutting down due to uncertainty regarding energy prices and supplies, which is why energy security must become a priority for any economic development on the part of the state.

Among other restraining factors, Matt Bolger noted the slow growth of national labor productivity and the low scale of technology adoption, which is partly due to the country's status as a small and medium-sized business economy. At the same time, farmers are steadily increasing their productivity through breeding, pasture management, and livestock management.

The main growth driver for the company remains the US market, where consumers have come to better understand the value of functional and dairy proteins amidst a growing interest in nutritional quality and GLP-1 medications. The company forecasts significant revenue growth from specialized proteins and plans to channel the majority of its returns back to New Zealand farmers and shareholders, since the overwhelming share of products originates from New Zealand.

In addition, the company is evaluating access to global trade markets: according to Bolger's estimates, New Zealand has access to only about 14% of global dairy consumption at tariffs below 10%. Nevertheless, New Zealand butter consistently trades at a premium compared to American and European butter due to its taste, texture, and pasture-based livestock farming.