Westland Milk Products Chairman Pete Morrison at the awards ceremony

Westland Milk Products’ Chairman, Pete Morrison, pictured, collected the 2018 Co-operative Business of the Year award on behalf of the Hokitika-based, farmer-owned dairy co-operative. Westland won recognition for successfully re-inventing itself using the enduring co-operative model as a strength, while promoting to its customers the productive relationship it has with its 350 shareholding farmers.

Co-operative Business of the Year Award – Westland Milk Products

CRITERIA

This award is presented to a Cooperative Business NZ Member (organisation) that has made a significant and positive impact within the co-operative community during the 2017/18 year.

The award is about celebrating the success of the co-operative business model, and the winner will have clearly demonstrated the value of the model in returning benefits to its Members, and in addition possibly to local communities.

CITATION:

Purpose

Westland Milk Products’ purpose is “Nourishment Made Beautifully for Generations”. A farmer-owned co-operative formed in 1937, it now has 350 shareholders and some 500 staff. The co-operative produces high-quality dairy commodities and value-add products from its plants in Hokitika and Rolleston. The co-operative’s purpose focuses on nourishment and differentiates its products by linking customers directly to the places, people and stories from where its milk is produced.

The co-operative model as an advantage

Westland Milk Products exemplifies how the co-operative model can compete internationally in an increasingly complex and highly competitive industry. Westland is also competing in a cyclic market, well-known for producing dramatic highs and lows. To manage the effects of the extremes in the global dairy market, Westland has successfully re-invented itself during the past two years using the co-operative model as a strength, promoting to its customers the productive relationship that they can have with its shareholding farmers.

This is demonstrated in the company’s new purpose of “Nourishment Made Beautifully for Generations”, highlighting the inter-generational farmer-owned structure, emphasising the importance of time and place, dedication to quality, and the personal investment farmers have in the products that Westland’s customers consume. This strategy grew from Westland listening to a range of customers in markets across the globe. Through these insights, Westland learned that customers want products with the functional attributes they valued, such as containing high protein, good fats, bio-actives needed for good health and grass-fed milk products.

Reviving the Board

Leading up to this strategy were two simultaneous actions: A governance review and the appointment of an almost entirely new leadership team at management level.

The Board engaged support to help it refresh its co-operative structure, so it was best suited to growing the company, re-fitting it for a sustainable future, and ensuring key skill levels were available, now and into the future, including the wealth of knowledge from its own shareholder base. The board was downsized from 11 to eight, while retaining the proud history of shareholder elected directors as the majority – the hallmark of a true co-operative.

Election processes were made more transparent to ensure shareholders had an enhanced understanding of the skills and attributes needed, and what board candidates were offering as reasons for their election. A specialist committee was set up, comprising board members and external experts, to analyse potential elected director candidates and provide shareholders with an unbiased, independent analysis.

In addition, the board introduced a programme to grow its potential shareholder-elected director pool by providing opportunities for shareholders and/or their family members to gain the skills they need to become competent directors.

The start of a new CEO in September 2016 provided an opportunity to establish a new executive leadership team. New and re-defined roles were created and advertised widely, drawing high quality applicants with global experience. What this clearly demonstrated was that the co-operative model was not a hindrance to attracting managers of international calibre. Indeed, for many of the new team, this was part of the attraction of the role.

A similar process was undertaken across staff to ensure all roles were aligned to Westland’s purpose and strategy. Key Performance Indicators (KPIs) were introduced into all staff contracts, directly relating to delivery on the co-operatives’ purpose and strategy.

Internal communications were also strengthened to ensure there were regular opportunities for staff to ‘hear from the top’ and understand how every position in the company had a direct role to play in ensuring the company delivered for its shareholders.

Outcomes

Improvement in shareholder incomes increased year on year following a $5.18 / kg average payout in 2016/17 compared to the currently forecasted $6.10 to $6.40 / kg in 2017/18, with Fonterra currently projecting $6.40 for the year just completed.

Operational improvements included improved levels of “right first time” production, while there were significant increases in the production of value-add products such as infant formulas and UHT cream, the latter alone resulting in the creation of 12 additional jobs in Canterbury alone. The introduction of Westgold butter into an already crowded New Zealand consumer market was a spectacular success. Westland identified that there was a gap between consumer brand standard butters and the high-end gourmet butters and met this gap within a year with sales reaching more than one million packs, while Westgold is now outselling all other gourmet butters across NZ.

Local impact

Westland is well aware of its social and community wellbeing role in the West Coast region. It is the biggest single contributor to regional GDP and the biggest business employer – an outstanding example of the success of the co-operative model in itself. Westland focusses its ‘good corporate citizen’ role through targeted sponsorship of youth and family interests, junior sport and primary school programmes on the West Coast while it sponsors a room at Ronald McDonald House in Christchurch.

With the bulk of Westland’s business operating within one of the most spectacular environmental resources in New Zealand, the ‘wet and wild’ West Coast, Westland introduced a Farm Excellence Programme with compliance standards ranging from animal welfare to environment, to staff wellbeing, quality and food safety. These standards apply equally in Canterbury. Compliance with irrigation and effluent standards, for example, has risen from 56% to 84% over the past two years.

Westland continues to work actively to reduce its carbon footprint, including purchasing bio-diesel capable tankers and greatly improving the efficiency of its boilers. The co-operative is also researching use of giant miscanthus grass as a carbon sink crop for marginal farm lands, which can also be harvested for bio-fuel for on-farm use. It is also investigating a multi-million-dollar project to take its treated wastewater disposal out of the Hokitika River.

Earlier this year, Westland was awarded a silver medal by corporate social responsibility auditor EcoVadis. This reflected a high level of compliance with various corporate social responsibility components such as environmental standards, health and safety, human resources and sustainable procurement.