Miles Hurrell is the chief executive of Fonterra. Fonterra is an advertising sponsor of the Herald’s Agribusiness and Trade report.
OPINION
We’re already seeing the enormous potential of the foodservice business as it continues to grow in China and other parts of Asia. As China’s economy continues to grow, demand for dairy will not only increase but also change.
For many people here in New Zealand, our ingredients and foodservice businesses might appear somewhat opaque. These are largely export businesses connecting directly with customers and partners who are primarily in our global markets.
But our ingredients and foodservice brands, alongside the Fonterra corporate brand, are well known to our customers and partners offshore – including China’s Premier, who Fonterra recently hosted in Auckland.
What possibly surprised Premier Li the most, when I showed him around a product showcase at Fonterra’s headquarters in Auckland during his state visit in June, was the number of consumer-branded products in China that use our ingredients.
Producing world-class ingredients for customers to take to consumers is one of Fonterra’s greatest strengths, not only in terms of the China market but right around the world including North Asia, the United States and European Union.
Ingredients make up the bulk of our exports, with the business representing 80% of Fonterra’s milk solids sold in FY23, contributing $17.4 billion in revenue and $2.6b in gross profit. Its return on capital was 16.4%.
Also key to Fonterra’s strategy is the part of the business that sells products such as UHT cream, cream cheese and mozzarella to customers including restaurants, bakeries and hospitality businesses.
Our foodservice business represents about 13% of Fonterra’s New Zealand milk solids sold and returned $3.9b in revenue last financial year with a healthy return on capital of 15.7%.
Our foodservice business already has a strong position in China with further growth potential in other markets seeing economic growth, such as Southeast Asia.
Focusing on what the co-operative does well does not mean shying away from shifting more milk into high-value products.
Already Fonterra is a leader in the manufacture of high-value ingredients solutions as well as high-performing foodservice products.
It’s Fonterra’s unique expertise in dairy science and innovation that underpins its success in these two areas.
When I talk to customers, I hear how Fonterra’s ingredients and foodservice products consistently perform better than those of competitors. It’s always good to hear such feedback, but there’s no room for complacency and the co-operative must continue to innovate and evolve to stay competitive.
We’re already seeing the enormous potential of the foodservice business as it continues to grow in China and other parts of Asia. As China’s economy continues to grow, demand for dairy will not only increase but also change.
To help cater to these evolving taste preferences, we will be opening a sixth application centre in China later this year. These application centres drive innovation and tailor our foodservice offerings to the tastes, culture and trends of the area in which they are located.
This product alone is used in about 400 million beverages and 260 million cakes in Chinese bakery stores each year and we’ve seen a continued increase in demand since 2014.
At the same time, demand is increasing for dairy ingredients, particularly in the rapidly growing health and wellness markets in North Asia and North America.
Ingredients such as our functional proteins allow Fonterra to tap into the rapidly growing health and wellness market, targeting the areas of physical, patient, digestive and mental wellness, plus immunity.
Fonterra actively works with customers, technical experts in the market, and FRDC to develop innovative products that meet the changing needs of consumers.
In Japan, the co-op is well placed to meet this increase in demand.
Ingredients such as our functional proteins allow Fonterra to tap into the rapidly growing health and wellness market.
Fonterra’s proteins are designed to help people maintain muscle mass for a better quality of life, our dairy lipids help to improve mood and our probiotics support immunity and digestion. Many of Fonterra’s proteins have been specifically developed for the Japanese market and, in some cases, individual customer applications.
In North America, our proteins are being used in the incredibly popular ready-to-drink beverages market.
If you walk into a Walmart in the United States, you will see shelves stacked with protein drinks. We provide proteins to one of the most popular players in this market in the US.
By concentrating on being a B2B dairy nutrition provider, Fonterra can focus on what the business does best. There is no doubt in my mind that by working closely with customers through our high-performing ingredients and foodservice channels, Fonterra can create more value not only for farmer shareholders but New Zealand as a whole.
Fonterra products
· Whey Protein Concentrate – A rapid absorbing protein containing naturally high levels of amino acids compared with other protein sources. It has high nutritional properties, helping to support muscle and tissue health which makes it an ideal source of protein for athletes through to the elderly and patients.
· Hydrolysate – a form of “pre-digested” protein that is easily digested and rapidly absorbed, and suitable for paediatric use. Used in medical nutrition to provide high-protein, high-calorie nutrition products for patients requiring tube feeding, it can also be used to protein-fortify food and beverages.
· Rennet Casein – a naturally occurring protein found in human and cow’s milk and used to deliver maximum levels of body and functionality to processed cheese. Made from pasteurised NZ skim milk, it is a natural source of amino acids and carbohydrates.
· Whole Milk Powder UHT – a creamy and highly stable whole milk powder for UHT, ideal for recombined UHT milk and milk drinks. Its many uses include bakery goods, confectionery, ice cream, yoghurt and supplements.
