Sector News

Fonterra's Kaikoura cheese factory closure 'a big blow'

March 16, 2016
Food & Drink

Fonterra has confirmed the permanent closure of its Kaikoura cheese factory, saying half the 30 employees had indicated they would be interested in working for the co-operative elsewhere.

Mark Leslie, director New Zealand manufacturing, said the decision to close the site had not been made lightly.

“While it is difficult for the people involved, we have a responsibility to our farmer shareholders and unit holders, and our customers to be as efficient as possible across our business, especially given the low milk price,” Leslie said.

Fonterra was one of the largest employers in the seaside town, with 22 full-time and eight temporary staff.

Kaikoura’s cheese volumes will be split between Fonterra’s Lichfield, Clandeboye, Stirling and Whareroa cheese plants, where cheese production is up to 16 per cent more cost effective than at Kaikoura, the company said.

Kaikoura Mayor Winston Gray said the closure would have a significant impact on the community, with many families now faced with having to relocate.

“Some of those workers have indicated they will look for work with Fonterra elsewhere and that means kids will be taken out of the schools,” he said.

“Many of the workers also have wives who work around town.

“It is a big blow for the community.”

Gray said the company paid about $2 million in salaries and wages to its Kaikoura workers annually, and the knock-on effects for the local economy would be significant.

There had been informal discussions about options for the site, including taking over the factory on a local level and even converting some farms to produce sheep’s milk, a highly sought-after product.

However at this stage there was no definite word on whether any of the options were viable, he said.

“We need to see what comes out of the ashes and whether we can look at some other options, although it’s going to take a lot to encourage dairy farmers to go out on a limb.

“But with the size of Kaikoura, and with our Earth Check status, here is an opportunity for a niche cheese market.”

Kaikoura Cheese, a family-owned business specialising in artisan cheese, was a burgeoning industry, he said, and there could be room for discussion with the operators.

“Whatever happens, it looks like it needs to be from the ground up. But we’ve got to stay positive.”

A Fonterra spokesperson said the site would most likely be sold, although no definitive decision had been made.

The equipment, much of which was relatively new, would be reused in other parts of the business, he said.

The focus at this stage was on the staff, shareholders and farmers in what was a difficult time for them.

Labour’s Primary Industries spokesman Damien O’Connor described the closure as a “lost opportunity”.

“But it’s no great surprise. Any consultation would have been token.

“It’s a pity Fonterra could not have seen the potential in the provenance story of the cheese,” O’Connor said.

When the news of the potential closure was announced at the beginning of March, O’Connor urged Fonterra to keep the factory open by creating a brand based on a visitor connection to the tourist town.

“If they are committed to the value-add idea they could build a story around Kaikoura, its heritage and the fact it’s a destination for so many tourists,” O’Connor said.

Last year 800,000 visitors visited the seaside town which is a magnet for whale and dolphin lovers. In December, 17 per cent more tourists visited than in December 2014.

A Fonterra spokesman disagreed, saying the company had continued to deliver on its value add proposition over recent years, with new capacity and capability in products such as mozzarella, cream cheese and protein powders like lactoferrin.

“Fonterra already has a premium cheese brand, Kapiti, in which the co-operative has built brand equity over a number of years, and is now a Kiwi favourite,” the spokesman said.

Source: Stuff.co.nz

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