New Zealand dairy cooperative Fonterra has unveiled a new ‘revised’ business strategy that highlights a stronger commitment to high-performing ingredients and foodservice sectors.

According to the cooperative, this approach aims to ‘grow value’ for its farmer shareholders and unit holders.

This strategy follows a strategic review that, Fonterra claims, confirmed its position as a leading provider of dairy nutrition in the business-to-business market.

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As a result, the cooperative has decided to investigate divestment opportunities for its global consumer operations to ‘free-up capital and allow the co-op to focus on what it does best’.

Fonterra has outlined several ‘strategic choices’. The leading goal is to ‘deliver the strongest farmer offering’.

The cooperative intends to collaborate with farmers to ‘enable on-farm profitability and productivity and support the strongest payout’.

Additionally, Fonterra aims to strengthen its role as a supplier of ‘sophisticated’ dairy ingredients and enhance its trading capabilities.

The new strategy will also involve expanding its foodservice operations in China and other regions.

Key areas of focus within the strategy include investments in manufacturing and supply chain networks, enhancing the company’s sustainability credentials, and increasing the application of science and technology.

Progress will be assessed against specific targets, including achieving a return on capital of 10% to 12%, compared to the recent five-year average of 8.6%, and raising its dividend to 60% to 80%, up from the latest average of 50%.

Fonterra also aims for an annual capital investment of NZ$1b, in contrast to its current average of about NZ$650m.

Fonterra chairperson Peter McBride commented on the new strategy, stating: “Through implementation of our strategy, we can grow returns to our owners while continuing to invest in the co-op, maintaining the financial discipline and strong balance sheet we’ve worked hard to build over recent years.”

The cooperative plans to offer farmers an annual rolling three-year forecast of the financial assumptions that support its performance targets.

Fonterra CEO Miles Hurrell noted: “This is the right strategy for the co-op. It has a clear-eyed view of where we best generate returns for farmer shareholders and unit holders and will see us unlock value at every point in our supply chain by focusing on our strengths.”