The turnaround is done. Now what?
Miles Hurrell resigned this week after 25 years at Fonterra, six of them as CEO, having completed one of the most consequential corporate overhauls in New Zealand history. He inherited a co-op carrying $5.7 billion in debt and a $605 million net loss in 2018, the wreckage of a decade of expensive global misadventures: Beingmate, China Farms, Sanlu, Motif, a stake in a Lithuanian dairy company. He leaves behind a business that posted $1.1 billion in net profit in FY2025 and paid farmers $10.16 per kgMS.
The likely successor is Richard Allen, currently President of Global Ingredients, whose remit was recently expanded to include Greater China and Middle East/Africa. He was named 2024 Young Executive of the Year in the Deloitte Top 200 awards, the same night Hurrell won CEO of the Year and Fonterra was named Company of 2024. The board has not confirmed the appointment, but the management reshuffle tells the story clearly enough.
Allen’s challenge is different from Hurrell’s. There is no crisis to fix. There is no bloated portfolio to prune. There is only a simplified B2B dairy business that has to deliver, quarter after quarter, without the diversification buffer of consumer brands.
The ROI case was clear, but the earnings gap is real
The $4.22 billion sale of Mainland Group to Lactalis went unconditional this year, completing Fonterra’s exit from consumer brands. More than 98% of shareholders voted in favour, and the logic was straightforward: as dairy commentator Alan Emerson noted, foodservice returned 19.6%, ingredients returned more than 10%, and the consumer business returned less than 7%. Sell the laggard, redeploy the capital.
Fonterra returned $2.00 per share, approximately $3.2 billion, to farmer-shareholders. But the continuing business tells a more complicated story. FY26 earnings guidance for continuing operations is 45-65 cents per share, down from the 55-75 cents guidance that included consumer. The 2025/26 forecast milk price midpoint is $9.50 per kgMS, 66 cents below last season’s payout.
That is not a disaster. But it is a reminder that selling a stable, lower-returning division for cash does not automatically make the remaining business grow faster.
Ingredients are surging, foodservice is not
The half-year numbers expose a split the new CEO cannot ignore. Ingredients EBIT hit $696 million in 1H25, up 49%, a strong result driven by favourable margin hedging and Australian performance. Foodservice EBIT fell to $230 million, down 33%. That is a material swing in the division that grew from $2 billion in 2017 to $4 billion in FY25 and was supposed to be a growth engine.
Allen’s background is almost perfectly aligned with the ingredients side. He runs the NZMP brand, which generates over $15 billion in annual revenue and represents the largest share of New Zealand’s merchandise exports. His instincts are right for the core business. But foodservice is where the earnings pressure sits, and it is the division he has less direct exposure to.
A billion dollars in capex with no room for Beingmate-era mistakes
Fonterra is committing up to $1 billion in capital investment over three to four years: a $75 million butter expansion at Clandeboye, a $75 million protein hub at Studholme, and a $150 million UHT cream plant at Edendale. These are processing investments designed to extract more value from the milk pool rather than chase brand premium overseas. They are the right kind of bets.
But net debt sits at $5.45 billion with gearing at 39.4%, and while the Lactalis proceeds will bring that down, the new CEO is inheriting significant capital commitments alongside significant leverage. As Hurrell himself put it: “We lost sight of where we truly create value for our farmers and for New Zealand: adding value to the milk supplied by our farmers.” Allen’s job is to prove that clarity translates into returns.
Allen has signalled he understands the stakes. “We have an extremely strong base for adding value to milk in our plants and our sales relationships,” he told Farmers Weekly. “But changes happen every day along the supply chains and we have to be in the best possible shape to continue to lead.”
No more excuses, only execution
The narrative around Hurrell’s departure is triumphant, and largely deserved. His total compensation reached $6.1 million in 2025, and given the scale of the turnaround, few shareholders would begrudge it. But the triumphalism obscures the transition risk. NZ First’s Winston Peters argued that farmers gave away more than a century of brand-building work, and while the 98% vote settled that debate commercially, the strategic question remains: can a pure-play B2B dairy company sustain premium returns in a global market where European and American competitors are well-capitalised and aggressive?
Allen will not have the luxury of blaming the previous strategy. The reset is complete. The $4.22 billion has been banked. What comes next is execution, and the co-op’s 8,000-plus farmer-owners will be watching the milk price, not the press releases.
Sources
- Fonterra chief executive Miles Hurrell resigns – RNZ News (2025-05-27)
- Fonterra’s next CEO faces crucial test amid strategy shift – NZ Herald (2025-05-27)
- Fonterra’s $4.22 billion sale of its Mainland Group to Lactalis unconditional – RNZ News (2025-04-01)
- Fonterra agrees sale of Consumer and associated businesses to Lactalis – Fonterra (2024-10-10)
- Fonterra provides FY26 Q1 business update – Fonterra (2025-05-22)
- Fonterra Co-operative Group Limited – Review of 1H25 Performance – Fonterra (2025-05-22)
- Adieu, Mainland. Now back to core business, says Fonterra chief – BusinessDesk (2025-05-27)
- Fonterra reshuffles top management before sale – NZ Herald (2025-03-19)
- Ingredients chief to shape strategy cornerstone – Farmers Weekly (2025-05-28)
- Lactalis deal is good news all round – Farmers Weekly (2025-02-20)
- Fonterra’s Next CEO Faces Crucial Strategy Test – EDairy News (2025-05-28)