Miles Hurrell: Fonterra weathering the storm (NZ INC.)

Miles Hurrell, chief executive of Fonterra, gave a Q&A through the Trans-Tasman Business Circle on resilient leadership in challenging times. Tim McCready gives an overview of what was discussed.

Fonterra started to become aware of the escalating Covid-19 situation in China in January, says chief executive Miles Hurrell. Fonterra mobilised its team to consider the impact Covid-19 would have on the cooperative’s business – including a large piece of work early on considering the New Zealand context.

“That is where it ramped up, as we started to see that the impact on New Zealand was going to be real,” he says.

“We really mobilised our crisis team – about a dozen people across our entire business came together.”

Hurrell says Fonterra responded quickly to the Covid situation, moving most of its workforce to Level Four working arrangements well ahead of government requirements.

“We decided to get people working from home early. Everyone is mobile now with communication.”

That was relatively straightforward with the corporate office and with farmers who are easily able to work remotely and often already operate in a situation where self-isolation is not much different – but a little harder for those working in Fonterra’s factories.

“Since we are making food, all our facilities around the world already have stringent food safety and quality controls in place. It was just a step up to add a two-metre separation and record the temperature of staff.”

It was these strict measures that Hurrell attributes to keeping cases within Fonterra’s workforce low. There has been less than ten Covid cases across its global network of 21,000 staff, with most cases being the result of people returning from an overseas holiday.

“The early intervention by Fonterra, and making sure that people come nowhere near a factory or office, meant that there was no cross-contamination,” he says.

Regardless of any shift in Covid alert level from the Government, Fonterra will continue to operate as if under Level Four conditions.

“We can’t have risk of disruption. We will stay with Level Four for quite some time,” says Hurrell.

Dealing with crisis

The crisis team is well versed. Hurrell says as unfortunate as it sounds, Fonterra has two or three significant events on an annual basis – although most of these do not hit the media.

“We see an emerging issue, we get on top of it, and we manage it 99 out of 100 times. The way the team is geared up now, it is almost second nature.”

One of the early risks identified early on from a New Zealand context was the impact on shipping containers and space availability through the ports. But Hurrell says Fonterra’s long-term relationship with Maersk and the Port of Tauranga meant they were able to get a commitment they wouldn’t be impacted.

Hurrell and the senior management team at Fonterra works alongside the crisis team to clear the runway – allowing them to make decisions on behalf of the business. Hurrell says that although he wouldn’t call work right now ‘business as usual’, there is a sense of calm whenever he goes down to visit the crisis centre.

Weathering the storm

Fonterra has been through a rough couple of years, with billions of dollars of shareholder capital wasted on its failed transformation strategy under the leadership of former chief executive Theo Spierings.

Hurrell says Fonterra got “a bit ambitious”, and under his leadership has reduced debt significantly and changed to be more targeted in what it does and focused on taking New Zealand’s goodness to the world.

He says this will help Fonterra weather the upcoming storm, and will put it in good stead as it refines its strategy.

“We’ve just started to look at what Fonterra looks like on the 5-10-year horizon,” he says. “That has completely changed. Some things will still be there, but Covid has made us recognise the world will be different.”

Hurrell says despite some commentators saying Fonterra should only be in a single category or in single markets – it is this spread and diversity that has helped it. He points to restaurant trade, and says if Fonterra was solely focused on those businesses it would now be in significant strife:

“But because we are in base ingredients, advanced ingredients that go into medical foods, retail products, as well as those food services that are now starting to come back on in China, we have had the flexibility when we see something fall over and that has really helped us.”

Hurrell says his main role in navigating New Zealand’s largest organisation through Covid is providing a sense of calm across the business – giving commitment and confidence to the team that although there will be bumpy roads along the way, Fonterra is well placed to get through the crisis.

He says that providing that sense of calm is important. “But you also have to let your hair down and have a Zoom call with your mates on a Friday and Saturday night – you need that outlet.”