New chief executive Toni Brendish has promised to return the co-operative to profitability, but said she cannot offer a better return than in the $5.40-$5.80 per kilogram of milksolids range for this season.
About eight farmers in the Maruia, North Westland region are eyeing up contracts with Fonterra, with a similar number in Canterbury talking of following them.
Maruia farmer Peter Brooker, a Westland supplier, who is not one of the ones threatening to break away, said if Westland could offer $5.64 – 36c less than Fonterra’s payout forecast of $6 – suppliers would support the co-op.
Last year Westland posted a net loss after tax of $14.5 million for the year ended July 2016.
Brendish pulled no punches in criticising the way the Hokitika-based co-op was run in recent years but said changes she had made since taking over late last year were already paying dividends.
Just days ago an infant formula customer increased its volume order by more than 35 per cent, and changes to transport and storage have produced savings of «up to $1 million a year».
She said the decision by new chairman Peter Morrison to commit supplying to Westland from his dairy farms was a «huge show of faith».
Morrison is one of a number of farmers in Canterbury who have the option of supplying Fonterra or Synlait.
«I have to show them [suppliers] that it’s worth staying in Westland. I’ve told the shareholders: I can’t close the gap this season, it’s just irresponsible, we would cripple the business for the future, but what I can do is that for the following season we will absolutely close the gap and be competitive,» Brendish said.
She said the strategy remained the same as before she arrived but there was a difference in how it was carried out.
«The strategy is still to build raw products that we can sell at a higher margin and maximise the value we get from a bucket of milk.»
Previous management had built «fantastic assets, but they said build them and [customers] will come».
«It doesn’t work that way, you have to use your customer base and you have to know what the customer wants.»
Brendish said she was using her experience in Asia where she had worked in the manufacture, supply chain and sales and marketing of value-added dairy products.
She spent a large part of her career within the Danone Group as managing director of Nutricia Australia and New Zealand; managing director of Danone Dumex (Malaysia); and managing director of the Danone dairy business in Indonesia.
Harihari farmer Jon Sullivan described farmers being in «survival» mode, and that for their sake and for that of the West Coast economy, WMP had to get its act together.
West Coast Tasman MP Damien O’Connor said it was the biggest company in the region, and it had to gain the confidence of farmers.
The prospect of losing suppliers was not welcome. While it would be only a «drop in the Fonterra bucket», any loss of milk would have a significant impact on Westland.
Morrison’s election as chairman followed the resignation of Matt O’Regan after serving seven years in the role. Katie Milne, best known for her roles in Federated Farmers, is the new deputy.
Morrison said it would take more than one season to get back to a more competitive position.
«It will be the 2017-18 season before we have got our payout back to where shareholders need it to be.»
Morrison has owned and operated a number of companies, mainly in agriculture but also including gold mining, manufacturing, forestry, aviation and a mechanical workshop; and director (and major shareholder) for computer company EStar Online, which facilitates online sales for such companies as Briscoes and Country Road.
Fonterra refused to disclose if it had been approached by farmers. It currently collects milk from the Maruia and Murchison areas.
Under dairy industry regulations, Fonterra would be required to accept all applications to supply with only two limited exceptions – a minimum supply volume (10,000 kgMS per season) and transport costs not exceeding the most expensive existing farmer’s.