Fonterra rebrands RD1 to Farm Source, unveils new farmer-centric strategy

Fonterra rebrands RD1 to Farm Source,
unveils new farmer-centric strategy
By Damien Venuto, October 7th, 2014

Fonterra has taken a page out of the mainstream retailer’s playbook by establishing a rewards initiative
that gives its members access to a range of perks to those in the co-operative.

The introduction of the loyalty programme is part of a series of changes, which also includes plans to
rebrand all 67 of Fonterra’s RD1 stores to NZ Farm Source hubs (there are also plans to introduce four new
stores), launch new digital technology, introduce on-site support and initiate a range of financial options
exclusive to members. (image credit: odt.co.nz)

Auckland-based indie agency Federation was involved in the launch of the loyalty programme, while
DesignWorks assisted in creating the new branding.*

“The first task completed on our side is the launch of the NZ Farm Source rewards programme to farmers,”
says a spokesperson from Federation. “This is a major new initiative and innovation to the relationship
between Farm Source and its dairy farmers. There are more exciting new initiatives planned off the back of
the launch of Farm Source.”

Under the rewards programme, members will earn Farm Source Dollars for every dollar they spend with
Farm Source and its partners. And, in addition, members will also be able to take advantage of discounts
that have been facilitated by Fonterra’s commercial partners.

Ecolab will give farmers a 40 percent discount on XY-12 (chlorinated cleaning liquid often used in the dairy
industry), Holden is offering a 30 percent saving on the purchase or lease of a Colorado LT Ute, Mobil is
providing fuel savings of 18 cents per litre from 1 November, Spark is discounting broadband and home
phone plans by $10, Southern Cross is offering a 10 percent saving on all health insurance policies and
Carters Tyres is offering up to 25 percent saving on a range of different tyres.

Given that those in the dairy industry are always looking for ways to reduce costs, this move is designed to
ensure that members stay loyal to the co-operative rather than looking elsewhere for cheaper alternatives.

In a jointly authored letter published on the Fonterra website, chair John Wilson and chief executive Theo
Spierings say that the decision to update the brand from RD1 to Farm Source has been made in an effort
better support farmers.

“We want to help you make the most of the access you have to the exclusive benefits of being part of a Co-
op as strong as Fonterra is,” says the statement. “We also want to help you take your farming business
from strength to strength, to take advantage of local knowledge in your region and be able to access a
whole new world of information and advice.”

Stores

The first of the rebranded Farm Source hubs was unveiled in Methven earlier this month, and this provided
a glimpse at the changes that will soon be rolled out throughout the nation.

At the time of the launch, Spierings said that Farm Source should not be understood as “a programme or a
collection of benefits”.

“[It] is about connecting farmers with the full strength of our co-operative,” he said. “Ultimately, we see
Farm Source as setting the benchmark when it comes to supporting farmers and providing exclusive
benefits beyond the milk price. Farm Source is an enabler for Fonterra’s volume and value strategy because
it is all about the milk. By supporting farmers to succeed and grow, the Co-operative will also grow its milk
pool in New Zealand which is core to the business.”

In addition to bearing a new brand identity, The Methven Farm Source hub also has rural supplies retailing,
a drop-in lounge for farmers and facilities such as meetings rooms. (image credit: Radio NZ)

Each new hub that is rolled out throughout the nation will also feature home bases for Fonterra’s regional
on-farm support teams, which will provide assistance—based on regional nous—to the farmers in the
region.

“We’re strengthening our regional networks, increasing our regional knowledge and creating stronger links
between all our people who work with our farmers including store staff, tanker operators, service centre,
Area Managers, sustainable dairying advisors, technical sales reps, the vat assets team, food safety advisors
and your local networkers and shareholders’ Council members,” explained a Fonterra release.

Through these online support teams, Farm Source aims to rectify any problems that customers might have
and also provide tips on how farmers can get the most out of their purchases.

In some ways, this support team is reminiscent of the tech assistants that are often employed at electronic
stores to ensure that customers understand the full potential of the purchases they are making.

This trend of providing additional support was also recently prevalent in mainstream retail during the
rebrand of Noel Leeming, which coincided with the introduction of the Tech Solutions and Open Learning,
two brand extensions designed to help customers get the most out of their purchases.

And given that many of the purchases dairy farmers tend to make are pricy and often technical, Farm
Source’s additional support provides a means by which to encourage farmers to establish an ongoing
relationship with the stores.

Digital

The revamp of Fonterra’s offering will also involve the modernisation of the co-op’s website, Fencepost. In
addition to still providing standard information on milk production and quality, the expanded Farm Source
online offering will offer those in the dairy industry access to an expanded source of advice, tools and
information.

Earlier this year, when BrandWorld launched its agricultural masthead Field Trials, Andy Walker, the
managing director of agri-focused agency Tracta, pointed out that famers don’t suffer from the
technophobia so often portrayed in popular culture.

“Farmers are moderate to heavy internet users (though slightly behind the wider population) but not so
much for news which is delivered to their door via a number of industry publications every week/month,”
he said at the time. “They tend to use Google quite a lot and online tools such as cloud software. Dairy
farmers also tend to use it more than their cousins. The key to online usage remains the same – relevance,
you just need to be where they are.”

Walker’s insights resonate with Fonterra’s statistics, which show that nearly 90 percent of its 10,600
members are online daily while over 5,000 users have also downloaded the co-op’s milk production app.

So, in an effort to provide this massive audience with content that meets its needs, the new website, which
has been reworked by Federation, will be updated regularly with stories, presentations and market
announcements that aim to give farmers information on the current state of the dairy industry.

Financial changes

Between 1992 and 2012, dairy exports rose from $2.4 billion to $11.4 billion, making the industry integral
to the New Zealand economy. In that time, diary farmers have come to establish themselves as shrewd
business people capable of running massive enterprises.

So, given the financial nous that dairy farmers have, the newly revamped Farm Source service will also
provide farmers with access to a financial toolbox that features a range of investment options.

Included within this list of options is a ‘dividend reinvestment plan’ that “allows farmers to receive shares in
lieu of all or part of their cash dividend”. This reduces the need to borrow the large sum of money that is
often required to meet the minimum share-holding requirement.

The second financial benefit included under the rebranded offering is dubbed ‘share-up over time’ and
enables farmers to share their share purchase requirements over three to ten years, thereby also reducing
the need for lump sum borrowing.

The ‘invest as you earn’ offer allows farmers to invest some of their milk payment into shares each month.
According to the release, “the shares are purchased on behalf of the farmer who receives an average share
price over time.”

Fonterra has also initiated a consultation process to determine the merits of establishing an equity fund for
farmers in New Zealand and Australia by sourcing equity from investors, with the aim of providing support
to farmers in managing the volatility of the market. However, this plan has not yet been put into action as
Fonterra is still gauging whether or not it is practicable.

The final financial option that has been introduced comes in the shape of a ‘guaranteed milk price,’ which
provides farmers with the opportunity lock in the price they receive for a percentage of their milk. As is this
case with many of these financial initiatives, the locked down milk price gives farmers a degree of certainty
in an industry that is heavily influenced by extraneous factors, such as the weather, international demand,
disease and the exchange rate.

So what’s in it for Farm Source?
Much of the PR attributed to the rebrand has been focused on customers, and this is only fitting given that
these changes come at a difficult time for dairy farmers.

According to an NBR article published in September, dairy prices have plummeted to their lowest since
2012, with the recent Global Dairy Trade price index dropping six percent to US2,787.

This drop was reflected across the board, with rennet casein deflating by 14.3 percent to US$8,232 a
tonne, butter milk powder shrinking by 12.9 percent to US$3,174, skim milk powder dropping by 9.5
percent to US$2,600, anhydrous milk fat slipping by 5.8 percent to US$3,360, and butter declining by 5.6
percent to US$2,753.

These figures indicate that dairy farmers don't have quite as much cash coming in, which in turn puts a
strain on Fonterra's retail efforts.

In an article published on the Herald, Spierings admitted that there was a "defensive" element to launching
the changes, in the sense that many are designed to support cash-strapped dairy farmers. However, he also
expressed optimism, saying that Fonterra is keeping its eye on other markets and looking to expand beyond
Kiwi borders in the near future.

“We want to access a 30 billion litre global milk pool by 2025,” he says. “Farm Source starts here in New
Zealand, [but] we will also look to adopt it in other markets where we are growing our milk pools, tailoring
it for those local markets.”

The likelihood of this happening will however be determined by how successful the revamped business
model is in the local context.

*Correction: this article previously incorrectly stated that Federation led the changes.

Source: http://stoppress.co.nz/blog/2014/10/farm-source-story