“I admire a lot about what Fonterra does, but they have invested badly in China.”

With those words, business journalist Rod Oram delivered an informed examination of Fonterra’s performance in China – a performance he said has been marked by strategic missteps, a failure to recognise and manage reputational crises, and a governance structure that risks being literally lost in translation.

The main focus of Mr Oram’s talk was Fonterra’s 2015 investment in Beingmate Baby and Child Food, at that time a leading domestic player in China’s infant formula market. Now, Fonterra has written down its investment with Beingmate from $750 million to $244 million, a 67% loss to shareholders.

What, then, has gone wrong?

Rod Oram CV photo 2017.jpeg

Mr Oram cited a Chinese proverb that perhaps best exemplifies the relationship between Fonterra and its business relationships in China: ‘One bed, two dreams’. He said the proverb epitomises what can happen when business ‘bedmates’ have different strategic ‘dreams’ or priorities.

In the wake of experiencing numerous crises in China between 2008 and 2013 (including a tainted-milk scandal and an internationally-reported but ultimately false botulism scare), Fonterra felt under pressure to make a significant strategic investment there, to rectify its failures in the market and rebuild its relationship with the Chinese government. Beingmate took advantage of this weak position and drove a hard investment bargain.

Mr Oram also cited a lack of transparency between the two companies at the governance level: Beingmate’s leadership is a fast-rotating cast of characters, and Fonterra is largely shut out of insights because only one of Fonterra’s appointees to the Beingmate board is a fluent Mandarin-speaker.


Most worrying, said Mr Oram, is Fonterra’s apparent determination to downplay its losses, instead arguing that Beingmate is only a minor part of its global and, indeed, China, strategy. Fonterra maintains they are both on track.

“They seem to have hoped for the best but never prepared for the worst,” he said.

Fundamentally, Fonterra failed to take a key step before getting into bed with Beingmate – that is, ensuring a way out.

“When relationships begin, there is one bed, one dream. But over time, they can diverge. Even the most well-founded, clear-eyed relationships need to have an exit mechanism.”

Where to from here for Fonterra?

Following the resignation in March of its CEO Theo Spierrings, Fonterra is actively searching for a new boss. Mr Oram said he hopes this is an opportunity for the Fonterra board to build its talent, culture and practices, including by increasing the diversity and expression of independent views, establishing a more rigorous approach to performance monitoring and investment, and ensuring the development of senior executives and CEO candidates within the company.

Watch the video of Rod Oram's presentation: One bed, two dreams: Fonterra's travails in China (approx 48 mins)

Watch additional videos with summaries and key insights from Rod Oram's presentation

Need to Know: Rod Oram discusses Fonterra in China (Q & A approx 17 mins)

Need to Know: A guide for NZ businesses in China (Q & A approx 7 mins)

Quick Take: Governance at Fonterra (approx 4 mins)


Read or download Rod Oram's PowerPoint presentation

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