Last Wednesday, 88.5% of Fonterra’s farmer shareholders voted to sell Mainland, Anchor, and Kāpiti to French dairy giant Lactalis for $4.2 billion. Farmers are celebrating their average $392,000 windfall. But here’s what nobody wants to discuss: we’ve just sold our economic future for a one-time payout.
Fonterra, formed in 2001 under special legislation that overrode normal competition law, is retreating from consumer brands to become a bulk ingredient supplier. We’re reversing the value-chain journey that every development economist says is essential for prosperity.
The brands we’re selling are profitable businesses with genuine equity built over generations. Mainland has been in Kiwi kitchens since 1954. Anchor butter is recognised globally. These are consumer relationships that command premium prices.
In return? A 10-year supply agreement, after which Lactalis can source milk anywhere. Winston Peters, one of the few voices opposing this deal, nailed it: “Three years after this deal starts, Lactalis can begin the three-year notice to terminate the milk supply to these brands. Six years is meaningless for a long-term exporter.“
Fonterra chairman Peter McBride dismissed this as “hysterical nonsense,” claiming Lactalis wouldn’t invest $4.2 billion to walk away. But once Lactalis owns these brands, they control quality standards, sourcing decisions, and strategy. They’ll maximise their returns, not ours.
Want to see a successful value-chain strategy? Look at Iceland. They’ve doubled their fisheries export value while halving their catch by focusing on value-added. They don’t just ship frozen fillets. They’ve built an “ocean cluster” extracting value from every fish part—premium restaurant products, medical-grade oils, even fashion leather from fish skin. They achieve 80% utilisation per fish versus Europe’s 50-60%.
Iceland’s government actively supports this strategy. Meanwhile, our government-controlled dairy co-operative is selling off the brands that capture consumer value and retreating to commodity supply.
Fonterra’s pitch: take $4.2 billion, keep $1 billion for ingredients investment, return $3.2 billion to farmers, then earn better returns on ingredients than brands delivered. It’s a nice story, but ingredients are commodities. When you’re selling milk powder or whey protein, you compete primarily on price. Nothing like the premium from owning brands on supermarket shelves.
When a London consumer picks up Anchor butter, they’re buying New Zealand, trust, and brand equity. Lactalis knows this—that’s why they’re paying $4.2 billion. They’re buying decades of brand equity that Fonterra built and farmers supported. And we’ve sold it off.
Every government report says the same thing: capture more value from our resources, move beyond commodities, build high-value businesses. Then we do the opposite. We sell consumer brands to foreign companies, retreat to raw ingredients, take short-term cash and call it strategy.
The $392,000 payout sounds great until you realise what we’ve surrendered: control over quality standards, direct consumer relationships, ability to capture the full value chain, and long-term strategic positioning from owning trusted brands.
ASB estimated $4.5 billion would be injected into the economy. Except it’s one-time, not sustainable development. Once spent—much going to banks for debt—what’s left? A supply contract and the status of being Lactalis’s milk powder supplier.
Peters called this “economic self-sabotage,” and he’s right. Farmers deserve a payout, but are we building prosperity or liquidating strategic assets?
Look at the Ministry of Business, Innovation and Employment’s strategy documents. They stress capturing more export value, moving beyond commodities, and building international brands. Fonterra does the opposite.
The farmers aren’t the problem—they’re making rational decisions given immediate circumstances. The problem is we’ve created conditions where selling long-term strategic assets for short-term cash makes sense to 88% of voters.
Every successful small country—Iceland, Denmark, Singapore—understands you must capture value at the consumer end, not just production. Fonterra’s response to strategic drift is abandoning consumer brands. It’s like a runner having a bad season and deciding to sell their running shoes.
The deal completes in early 2026. Farmers get their payouts. Some pay down debt, upgrade equipment, and take holidays. All fair enough.
But in five years, when Lactalis decides where to source milk and what standards to require, we’ll have no say. In ten years, when supply contracts need renewal, we negotiate from weakness. In twenty years, we’ll wonder why we sold brands that took generations to build for what will seem a modest one-time payment.
We had choices. Keep the brands, invest in them, build on decades of equity. Look at Iceland’s fish strategy and ask how we could replicate it with dairy. Have a serious conversation about long-term strategy versus short-term returns.
Instead, we took the money. We sold the farm—or at least the brands that made farming here worth more than commodity prices. And we called it progress.
That’s not economic strategy. That’s economic surrender.
Steve Baron is a New Zealand-based political commentator and author. He holds a BA with a double major in Economics and Political Science from the University of Waikato and an Honours Degree in Political Science from Victoria University of Wellington. A former businessman in the advertising industry, he founded the political lobby group Better Democracy NZ. https://stevebaron.co.nz