Fonterra suspends dairy shipments to Russia as sanctions kick in

The New Zealand dairy co-op has still to decide the future of its two small business operations in Russia

New Zealand dairy co-op Fonterra has suspended shipments of dairy products to Russia over its invasion of Ukraine, and issued a statement citing “the rapidly changing situation and sanctions being taken against the country”.

Dairy products – which make up more than half of New Zealand’s exports to Russia, are generally exempt from international sanctions, said Simon Tucker, director of global stakeholder affairs at the co-op. But the organisation has suspended shipments “while we continue to monitor developments”, he added.

Russia accounts for less than 1% of of its export business, he added – although Fonterra has seven staff based in Moscow and 35 at its Unifood joint venture in St Petersburg.

Both entities continue to operate, but Mr Tucker said the safety of its people was top priority, adding: “We are keeping an eye on the situation and will take actions as required. The businesses do not supply sanctioned individuals or entities, including Russian military or security forces.”

Fonterra’s Russian businesses have come under scrutiny in New Zealand, with Andrew Hoggard, president of agricultural lobbying group Federated Farmers, condemning Russia’s actions and suggesting it would be wise for Fonterra to pull out.

Related: Northern European co-ops respond to Ukraine war

Expanding on the comments in an interview for Newstalk radio, Mr Hoggard, who is a dairy farmer and Fonterra shareholder, said: “It’s probably a lost cause and I imagine Fonterra is working out how they get out of there. The Russian economy is pretty much stuffed, the rouble is worthless, you can’t get money in or out and we’ve stopped shipping product there so it’s just a matter of time … they’ve got staff there, they need to do the right thing by them, make sure they’re safe, I imagine in their working on how to get themselves out of it.

“I doubt this is simple stuff to work their way through … it’s a pretty volatile situation.”

In other Fonterra news, the co-op has reached a mutual agreement with Future Consumer Ltd to wind down their 50:50 joint venture in India – Fonterra Future Dairy Private Limited. Established in 2018, the business has 22 employees, all of whom will receive appropriate entitlements, including career transition support and access to counselling.

The regulatory filing said the Indian market had suffered significant disruption from Covid-19 but the venture “has delivered some important initiatives, including the launch of the Dreamery brand, a range of consumer products made using Indian milk, and distribution of Fonterra’s New Zealand Anchor Food Professionals products for the foodservice sector – both of which have received positive feedback from consumers and customers.

“India with its large and growing dairy consuming population remains a viable market for Fonterra and it will continue to have a presence and explore opportunities as they open up.”