Keith on Fonterra consumer brands sale....

Keith on Fonterra consumer brands sale.

https://keithwoodford.wordpress.com/2024/05/20/fonterra-takes-u-turn-on-consumer-products/

Not directly relevant to A2's current situation. In essence, the post comments on Fonterra's board capability and how it has influenced/limited strategy and execution.

To that end, it does give pause for thought on the conversations that will be bounding around the A2 board right now - in the interests of security of supply and growth, with all this cash, and with distressed sales everywhere, to steel up or not to steel up? Or where along the spectrum to land. Multiple assets coming up on market must be capnip to any director/chair with 'integrated producer' or 'taking on the world' aspirations. If not acquiring production capacity, then framing strategic supply agreements remains critical to execution, Given the likely contenders to purchase Fonterra's consumer brands assets, this must surely be setting off orange lights on the bridge of the A2 board deck.

As new chair, Greenwood, with a background nowhere near marketing, FMCG or manufacturing (or running a decent company) sure has picked the wrong time to give up smoking, as it were! Her 'neutral experience' could of course be an asset. Much made of her 'dealmaker' capability from her legal career - I'd be very leary to give this much weight though. But, deals will need to be made by A2, that's for certain! A 'more of the same / As Is' strategy, seems not to be an option for A2 now.

One point made by Woordford resonated - the slope to re-enter a consumer brand position once this part is flogged off is "very great". Woodford then highlights risks in a pure B2B model - losing "signal" from the customer / market frontend. Made me nostalgic about criticisms of A2 in the early days, being a milk marketing company-only, with no steel of its own (a progression from the first model based on A2 herd testing patents!).

No matter what choice the A2 board make, the days of high ROIC are behind us. And regardless of their supply-side choices, focus has to remain on marketing and brand. Would like to see the focus placed more strongely on the health propositions of A2-A2, including framing of the devilishness of the A1. To me, this has always been the compelling strategic asset.

The call at A2 has to be Action Stations, surely? Eagerly await announcements ...