KEY POINTS:
New Zealand may have the world's biggest dairy exporter, but its domestic consumer business is being managed from Australia.
Fonterra has long said it needs to treat both New Zealand and Australia as its "domestic market" because a population of four million is not a big enough platform for its global operations. It runs its branded retail foods in New Zealand from Melbourne.
John Doumani, managing director of Fonterra Australia, has been running both the New Zealand and Australian branded businesses for five months.
In New Zealand, Fonterra was the leader in every market category, and on both sides of the Tasman it has brands and products in common.
Most consumer companies were bringing their Australian and New Zealand businesses together, and leveraging initiatives across both.
"Australians and New Zealanders may beat each other up on the rugby field - and I'm sure there'll be a lot of ribbing between each side of the Tasman over the next six weeks - but there's a lot of similarities between the consumers," Doumani said.
"What tends to work in one market will work in the other."
By putting the businesses together, "we get a bigger bang for the buck".
Asked whether New Zealanders had reacted to having their domestic dairy foods controlled from Australia, Doumani said that was not the way consumers saw it.
"We are Fonterra, and we are a New Zealand company," he said. "That doesn't change."
In Australia, Doumani said Fonterra had had a strong year, increasing its operating profit by 47 per cent to A$71 million.
"We're starting to capture some significant opportunities for efficiencies and we also grew our top line by just under 4 per cent."
More than two-thirds of Fonterra's business in Australia is fast moving consumer goods (FMCG) and it is the market leader in cheese with a 30 per cent market share with brands such as Bega, Mainland and Perfect Italiano. It is also the market leader in spreads, with an 18 per cent share, mainly based on the second-ranked brand, Western Star.
But it is a relatively small player in liquid milk and yoghurts, relying on a few regional-based brands, including Peters and Browns, which has 32 per cent of the Western Australian market, and the Norco brand in northern New South Wales.
"We're trying to build a stronger presence, starting at a regional level, that hopefully will give us a leverage beyond that," Doumani said. Most importantly, the company would be more efficient in generating growth by applying initiatives in two markets at once.
"Our success is going to be in consumer products - that's where the growth is going to come from."
Fonterra has the advantage that dairy products were seen as good food across a wide range of product types and consumer ages, though "there is a skew towards younger people".
Fonterra was well developed in catering to children whose parents bought food for them, but was "somewhat underdeveloped" in older age groups.
Children could be retained as dairy consumers as they moved out of adolescence and into adulthood, and products such as the calcium-reinforced milks could be used to drive dairy among older people.
Fonterra is marketing its calcium-reinforced Anlene milk as a snack bar for adults.
The co-operative's biggest single opportunity was in snackfoods, because of the way people "graze" though the day. Doumani said there was a strong focus on school lunchboxes for children up the age of 12 or 13, but the perception that dairy foods are fattening made it harder to reach older children.
* Kent Atkinson travelled to Melbourne courtesy of Fonterra.
- NZPA
