Fonterra to cut hundreds of office jobs

Fonterra is cutting hundreds of office jobs and boosting its sales force as it tries to tackle its poor performance.

But the chief executive Theo Spierings is ruling out splitting the company.

The dairy co operative has brought in external consultants to review its operation as it faces growing criticism from farmer shareholders.

Fonterra's shake-up comes amid a weak global milk price, poor payouts and ballooning farm debt.

Mr Spierings told Nine to Noon the company needed hundreds of people at the front line and the equivalent number in support jobs would be cut.

"You talk about hundreds of people more in marketing, that that means less in group functions," he said.

He said the support jobs would be cut in the first phase of restructure, which would be unveiled to the Fonterra board next week, followed by meetings with farmers.

"We need to be global best practice, we need to play in the global league, in the champions league," Mr Spierings said.

"That's a promise from me to our farmers and to the family. It is tough, it is a journey, but we are absolutely committed and accountable and we will deliver this and there's nobody else who delivers this."

Fonterra employs 18,000 people globally and has 17 staff earning more than $1 million a year.

It has instituted what it calls a performance improvement programme called Velocity and has hired consultancy McKinsey, which specialises in helping distressed companies to restructure.

But Mr Spierings said an internal review had been under way since December, led by 15 of the company's "key talents" from throughout the world.

"It's much tougher out there, so where do we need to amend, where do we need to trim the sails?

"Everything is in scope. This is a complete business review from our management team. We started that debate in December because it was very clear that the global dairy scene was not recovering.

"We want to have a fresh set of eyes, we want to have a global bench mark but we are leading it, our key talents are leading it."

The company needed more people "actually rolling up sleeves and selling" the company's product, Mr Spierings said.

"So it's a shift of people and capabilities. That will have some consequences but that is what I mean with trimming the sails."

Mr Spierings disagreed with recent criticism that the company was trying to do too much by processing, branding, marketing and selling, and ruled out splitting the company.

Processing milk always created by-products, and it made sense to deal with them all in the same place.

"If you start splitting the company, you create so many inefficiencies and ineffectiveness, we're going to lose value," he said.

Prime Minister John Key said low dairy prices were forcing Fonterra to cut jobs and costs.

The long-term outlook for the dairy industry was strong but it currently was in the middle of a perfect storm, he said.

"Probably, given the reduction in the payout and the impact that that's going to have, they need to demonstrate to their owners, which effectively are the farmers of New Zealand, that they're cutting their own costs."

The low dairy payout was, ironically, likely to encourage innovation in the dairy industry, Mr Key said.