April 2, 2004

 

 

Fonterra Plans Dairy Expansion In Asia, China

 

New Zealand dairy company Fonterra Cooperative Group Ltd has plans to expand in Asia, particularly in China, according to a Fonterra's chief operations executive, Jay Waldvogel.

 

Mr Waldvogel told about 400 dairy farmers at this week's Large Herds' Association annual conference in Taradale that Asia was the focus of the company's efforts as the company sought to improve farmers' profits.

 

New Zealand produced 14 billion litres of milk a year compared with China's 10 billion litres.

 

Chinese production and consumption was growing which was good news for New Zealand because it meant there was room for us.

 

"We have to make certain the Chinese drink more milk."

 

Because Fonterra controlled 40 per cent of the world's dairy food market share it was able to drive growth in the market rather than just take another company's share.

 

Although the company could not set prices it was big enough to stabilise and manage them.

 

"If we behave rationally the market should too."

 

Mr Waldvogel said commodity production accounted for 80 per cent of farmers' returns and should not be regarded as a dirty word.

 

It allowed the company to expand into value-added products such as specialised milks, health and nutritional solutions, infant formulas and pharmaceutical lactose.

 

Milk was once regarded as the healthiest food of all but is now fighting the perception that it is partly responsible for the world obesity epidemic.

 

"Dairy products eaten properly help with losing weight and maintaining health."

 

Mr Waldvogel said New Zealand was concentrating on selling into markets such as Asia, where obesity was not a problem.

 

In answer to a question from the floor Mr Waldvogel said dairy price cycles were becoming shorter and less pronounced as companies around the world disposed of stockpiles.

 

"The market is becoming more stable as Fonterra leads it."

 

Supply and demand "were in a good place," he said.

 

The Australian drought, a massive cow cull in the US and growing demand meant there was no reason to think prices would fall, he said.

 

Fonterra sold products from all over the world, not just New Zealand, but that created space for New Zealand products along those supply chains and into those markets, he said.