Fonterra Co-op has revised its 2025-2030 strategy, aimed at streamlining the business and returning more earnings to shareholders through increased dividends payouts.

The co-op announced that policy will be updated to return between 60% and 80% of earnings to shareholders, while it has also hiked its targeted return on capital to 10%-12%, up from a five-year average of 8.6%. It remains the plan to sell Fonterra’s consumer businesses, which would allow further returns to shareholders.

The updated strategy came less than a week after the co-op published its results for its financial year, which results showed a drop in profit-after-tax to NZ$1.13bn (€642m). The final milk price for the 2023/2024 season came in at NZ$7.83(€4.45)/Kg MS and the co-op raised its forecast for the 2024-2025 season to a new midpoint of NZ$9 (€5.11)/Kg MS.

Looking across the co-op’s divisions, the annual report showed that ingredients and food service accounted for 85% of the earnings, with its consumer business making up the other 15%.

A breakdown of earnings in that business showed it was loss-making in China and made a loss overall in Fonterra’s fourth quarter.

On the update to the strategic review, CEO Miles Hurrell said: “We are clear on the parts of the business that create the most value today and where there is further headroom for growth. These are our innovative ingredients and food service businesses.”

He added that by “streamlining the co-op” to focus on these areas, Fonterra can grow greater value for shareholders, even if the consumer businesses are sold.

The co-op aims to further increase its presence in the market for sophisticated dairy ingredients, while also concentrating on its food service business in China and other key markets.

Fonterra said that it will provide farmers with an updated three-year forward-looking view of projections and performance every year.

Greenpeace

Away from the strategic review, Fonterra is facing a challenge to the branding on its Anchor butter, which uses the tagline that it is “100% New Zealand grass fed”.

Greenpeace has launched court proceedings against the company, saying that claim is misleading, as under Fonterra’s own rules up to 20% of a cow’s diet can be from other feed.

Greenpeace is particularly targeting the import of palm kernel for animal feed, with it says is a product of the palm oil industry, which it maintains is responsible for deforestation in tropical regions.

“We think shoppers would be shocked to know that the block of ‘grass-fed’ butter they pick up at the supermarket could actually be linked to the destruction of orangutan habitats in southeast Asia,” said spokesperson Sinéad Deighton-O’Flynn.

Greenpeace added that New Zealand is the largest importer of palm kernel in the world, buying nearly 2m tonnes every year.

Fonterra reportedly declined to comment on the lawsuit.