Fonterra was formed in 2001 through the merger of the New Zealand Dairy Board (NZDB), the export marketing arm of the New Zealand dairy industry, and two large dairy co-operative companies – the New Zealand Dairy Group and Kiwi Co-operative Dairies. Fonterra, New Zealand’s largest company is owned by 11,200 New Zealand dairy farmers; 95 percent of all New Zealand dairy farmers are supplying shareholders of the co-operative. Fonterra represents today more than 20 percent of the country’s export earnings and 7 percent of GDP. Fonterra was created as a culmination of 30 years of dairy company rationalisation and mergers within New Zealand and intense industry debate about the structure needed to drive scale economies at the supply end in order to counteract market forces with the power to drive prices down. The dairy industry globally is a localised industry with the vast majority of the world dairy production consumed in the country of manufacture predominately as liquid milk. Only 7 percent of product is traded across borders

today and it is in this traded space that Fonterra mainly operates. The New Zealand dairy industry is unusual in that from its foundation it has always had a focus beyond its limited home market. Fonterra, today, is a major player in the global cross-border trade in dairy products. The company’s supply chain reaches from the farm to consumers in 140 countries with processing occurring on four continents (Gray et al. 2007). Fonterra is engaged in a range of supply agreements and joint venture arrangements and partnerships with global food companies such as Nestlé, Kraft and Masterfoods, in addition to supplying food retail chains and the hospitality sector with its own branded products.