Paul Harvey, global director foodservice for Fonterra. Photo / Supplied
Paul Harvey, global director foodservice for Fonterra. Photo / Supplied
Fonterra has signed a five-year sales and marketing agreement with one of America's biggest dairy co-ops - Land O'Lakes - to distribute its foodservice products there.
Under the deal, Minnesota-based Land O'Lakes will promote and sell Fonterra cooking creams and cream cheese, with potential to branch out into cheese productsfurther down the track.
Fonterra's global director foodservice, Paul Harvey, said Land O'Lakes works with all major US national and top regional foodservice distributors and the deal would enable potential national distribution of Fonterra products.
The Kiwi co-op has been moving away from a volume business model to one of value. It is also in the process of selling overseas assets and has said the way forward will be through business partnerships, as opposed to taking equity positions in overseas entities.
Greg Somerville, vice-president, Land O'Lakes Dairy Foods, said that as a result of Covid-19, "performance" products in foodservice would be more important.
Having Fonterra's products in its portfolio would enable Land O'Lakes to provide an expanded range of solutions to existing and new segments and operators," he said in a statement.
Harvey said that when Fonterra launched its value-focused strategy last year, it was clear it would develop its foodservice markets.
Fonterra has stated a preference for partnerships with other businesses rather than taking equity stakes. Photo / NZ Herald
"We want to do this by collaborating more with like-minded partners, leveraging our intellectual products and skills, rather than making significant capital investments of our own," he said.
Fonterra' s chief executive for Asia-Pacific, Judith Swales, who oversees Fonterra's global foodservice strategy, said Covid-19 had had a big impact on the foodservice sector.
"As part of that, we have had to think about the future and what a refreshed foodservice strategy looks like," she said at a news briefing.
The "out-of-home" eating area had been one of the hardest-hit sectors, with many parts of the world still in varying forms of Covid-19 lockdown.
And it appeared that restaurants and bars are going to be one of the last groups to get back to normal.
About 80 per cent of the world's foodservice industry shut down when Covid-19 became widespread.
Those restaurants that survived were typically set up for home delivery or takeouts, Harvey said.
He said that it was a significant shock to the industry but that Fonterra was starting to see some signs of recovery, particularly in China.
"In many markets around the world we are seeing countries go in and out of lockdown, so there is volatility going forward," he said.
In the US, 700,000 restaurants across the US shut their doors in response to the pandemic.
Leading US restaurant chain Starbucks' second-quarter earnings fell by 46 per cent and McDonald's closed around a quarter of its stores at one point.
Big tourism destinations and key Fonterra markets such as Sri Lanka, Thailand and Vietnam all suffered.
Swales said parts of Fonterra's foodservice business were "tracking pretty well" despite Covid-19.
She said the pandemic would have far-reaching implications for restaurant trade.
"We are seeing significant simplification of the menu items that our foodservice customers are operating, mainly to keep staff further apart and to reduce the amount of labour in kitchens," she said.
Food outlets had focused on providing core items and on cost management.
"We expect restaurants to outsource more and more of their preparation to large-scale industrial kitchens off-site, who continue to manage their costs in these challenging times," she said.
"The good news for us is that we are well connected to those scale industrial kitchens," said.
"We have already started to divert our focus to these customer channels," she said.
Extensive use of digital technology would also have implications for the sector, she said, adding Covid-19 had accelerated the trends that were already evident prior to the outbreak.
In late trading, Fonterra's NZX-traded units were up 17c at $4.60.
