Businesses that supply Fonterra are railing against what they say are crippling payment demands that no other company could get away with.
Fonterra's headquarters on Princes Street in central Auckland. Photo: RNZ / Kim Baker Wilson
Fonterra has extended by two months the time it takes to pay suppliers, from 30 to 90 days, saying that matches what it does in other countries.
It has also asked them to cut their charges, which it says is about boosting efficiency.
But the suppliers are hitting back, warning Fonterra risks a backlash in the provinces.
Chester Borrows Photo: NATIONAL PARTY
National's Whanganui MP Chester Borrows said the cooperative had asked for a 10 percent cut in what suppliers charged it, but was now asking for 20 percent in some cases.
One supplier in the central North Island agreed to talk about the issue even though he said he risked "commercial suicide" - a term also used by one other of the half dozen suppliers spoken to by RNZ News.
The supplier, who did not want to be named, said Fonterra was generating animosity and rupturing relationships going back years.
"A lot of the businesses break their backsides, we put ourselves out, we give them priority - well, that loyalty is disappearing," the supplier said.
"A lot of contractors won't give the same loyalty and drop everything to help them out when their plant goes down, because they are not good creditors.
"The other thing I say is because they are paying their bills three months late, that scares me - what guarantees does Fonterra give all their creditors that they're good to pay their bills on time?"
He gave as an example going out on an urgent job last week for a major international company.
"We got a call from Fonterra, they want us to do a job for them urgently, and I said, well, look, I'm already doing an urgent job and I'm going to get paid next month on the 20th - you are going to stretch me out for 60 days, so I'll come and do your job but it will be when I can fit it in.
"And they got annoyed and went and chose somebody else to do their work."
The supplier had heard from several business owners he said had been given an ultimatum to agree to the extended payment terms and cuts, or lose Fonterra's business entirely.
A large services firm owner told RNZ News that when he raised the question of liquidity with Fonterra in a recent meeting to discuss payment terms, he got very short shrift.
Discontent in Waikato and Taranaki
There is discontent in Waikato, too.
Dave Strong runs one of Morrinsville's larger firms of electricians with 16 workers, and 20 percent of his business is with Fonterra.
He swallowed the 10 percent cut, but refused to buckle to the long wait for payment, and he won out.
"It wasn't going to be a negotiable factor for us," Mr Strong said. "We made the call that if it was going to be 90 days then we were not going to accept it. If it had of been 30 to 40 percent of our business we may have had to have approached it a little bit differently.
"I think they really have to understand that a lot of small businesses can't operate on a 90-day past the invoice date payment."
Mr Strong said Fonterra was making a lot of firms in his region suffer.
Central Taranaki farmer and Fonterra shareholder Wendy Kalin called it a bullying approach to suppliers and she, too, worried how it reflected on Fonterra's own liquidity.
Other alarm bells were going off for her as well.
"We farmers are going to wear the cost again," Ms Kalin said.
"You know, for an electrician, for instance, if Fonterra isn't going to pay them for 61 days and they have to wear all those costs, they are going to recoup that somewhere so they will recoup it from all their other little clientele and put up all our charges."
Fonterra said in a statement it had been working closely for months over its payment requirements with fewer than a fifth of its suppliers. It said this was aimed at larger suppliers.
But suppliers refuted that, saying it was across the board with anyone who did a reasonable amount of work with Fonterra.
The Taranaki Chamber of Commerce wrote to Fonterra in January after hearing the payment changes were upsetting businesses.
In its reply, Fonterra said in part that "each of our suppliers is integral to our cooperative's success."