July 4, 2023


Fonterra to expand premium dairy segment in China



New Zealand-based Fonterra Group has announced plans to expand its presence in China by entering premium categories to meet the demands of health-conscious consumers, China Daily reported.


Executives at the company, specialising in dairy and nutrition, said that their strategy focuses on product innovation to promote the consumption of cheese and butter in Chinese restaurants.


Peter McBride, chairman of Fonterra, said that there are immense opportunities that China's vast market and growing economy present to New Zealand companies, including Fonterra, to expand their reach and achieve success.


Since the signing of the bilateral free trade agreement in 2008, New Zealand's dairy exports to China have experienced significant growth, now accounting for over 30% of total exports. In 2020, the China-New Zealand Free Trade Agreement and the Regional Comprehensive Economic Partnership pact took effect, further strengthening trade relations.


McBride described the Chinese market as dynamic and strategically important for Fonterra. The ongoing bilateral cooperation enables the company to continuously introduce exciting new products that cater to the evolving tastes of Chinese consumers.


Fonterra's presence in China extends across consumer brands, food, and ingredients. The company's financial results for the third quarter of the 2022-23 fiscal year showed a 12% year-on-year increase in normalized earnings before interest and tax, reaching NZD 342 million (~US$210 million; NZD 1 = US$0.62) in the Chinese market. This growth was attributed to reduced tariffs on liquid milk, butter, and cheese under the New Zealand-China Free Trade Agreement, which came into effect on January 1, 2022.


Fonterra's current priority is to introduce high-quality, nutritious dairy products from New Zealand into the Chinese market. McBride said that their strategy is to make premium dairy products available to a wider audience, both online and in physical stores.


Teh-Han Chow, Fonterra Greater China CEO, said that dairy consumption in China has experienced significant growth and is expected to continue on this trajectory.


The China Agriculture Outlook 2023-32 report, published by China's Ministry of Agriculture and Rural Affairs in May, forecasts that dairy consumption in the country will reach 60.98 million metric tonnes this year, a nearly 4% increase compared to the previous year. By 2032, it is projected to reach 79.02 million tonnes with an average annual growth rate of 3.3%.


To meet the growing demand for health and wellness-related products in China, Fonterra has developed new brands like Nutiani and introduced probiotics and protein drinks that aim to enhance immunity and cognition. In line with its commitment to research and development, Fonterra recently opened its fifth Fonterra Application Centre in Shenzhen, Guangdong province, joining existing centres in Beijing, Shanghai, Chengdu in Sichuan province, and Guangzhou in Guangdong province.


-      China Daily

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