January 24, 2018


Fonterra partners with Hema Fresh to launch milk product in China


Fonterra has launched a new fresh milk product in China in parternership with Hema Fresh, Alibaba's new retail concept which combines traditional bricks-and-mortar shopping with a digital experience.

The new Daily Fresh milk range is now available in Hema's 14 stores in Shanghai and Suzhou, China, in 750mL bottles. The product is sourced directly from Fonterra's farm hub in Hebei province. It boasts unique labels to match each day of the week in order to emphasise freshness, with stock being replenished overnight and ready by the next day.

Initial volumes are currently around three metric tonnes daily, with plans to scale up over time and expand with the retailer as it rapidly grows its footprint of stores across China.

The president of Fonterra Greater China, Christina Zhu, said this new product delivers to the growing domestic demand for higher-quality fresh products, as part of the 'premiumisation' of China's consumer categories.


"Shoppers here in China are becoming increasingly sophisticated in terms of their tastes and preferences, which are being driven by rising household incomes," said Zhu. "More than ever before, consumers are consciously seeking products that are fresh, nutritious and safe, and our new product for Hema caters to this."

According to figures from McKinsey, it is expected that more than 75% of China's urban consumers will earn RMB60,000 (US$9,387) to RMB 229,000 (US$35,826) each year by 2022. This is up from just 4% in 2000, prompting a marked shift in consumer behaviour and purchasing power.

Linked to this trend is the rise of Hema, which emerged on the scene in early 2016. It is a major milestone of China's 'new retail' trend, which Alibaba founder Jack Ma coined as being the intersection of online and offline shopping, logistics and data.

At Hema, consumers can either shop in-store using their mobile phones to browse and purchase, or order online for a 30-minute delivery within a three kilometre radius. Hema then utilises the wealth of data it gathers to provide a tailored, personalised shopping experience for each customer.

In addition to the brand new fresh milk range, Anchor UHT milk products and the Anchor Dairy Foods range of butter, cream and cheese items are sold through Hema. The retailer is also a foodservice customer, using Fonterra's Anchor Food Professionals products in its in-store bakery.

Hema Fresh's CEO and founder Hou Yi said he is excited by the strategic co-operation between the two companies.

"This co-operation between two powerful companies is set to redefine the concept of fresh milk in the new retail era," said Hou. "As a global leader in the dairy industry, Fonterra is well-known for quality milk pools, world-class breeding techniques and advanced experience in food safety and quality, which matches well with what we advocate."

Zhu said the new product highlights how Fonterra's business in China is leveraging the strength of its local milk pool, spread across three farming hubs.

"No other multinational dairy company in China has a local milk pool to draw from, so we are in an advantageous position," Zhu added. "This milestone with Hema is a sign of things to come and indicates that our push to shift more of our local milk into higher-yielding consumer and foodservice products is well-and-truly underway."

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