Fonterra signs US distribution deal with coop Land O’Lakes

FONTERRA has signed a fiveyear sales and marketing agreement with one of the United States’ biggest dairy coops — Land O’Lakes — to distribute its food service products there.

Under the deal, Minnesotabased Land O’Lakes will promote and sell Fonterra cooking creams and cream cheese, with potential to branch out into cheese products further down the track.

Fonterra global director food service Paul Harvey said Land O’Lakes worked with all major US national and top regional food service distributors and the deal would enable potential national distribution of Fonterra products.

The New Zealand coop 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.

The Land O’Lakes deal also shows it is keen to diversify away from China, which makes up 60% of its food service business.

Mr Harvey said China represented a ‘‘significant concentration of risk’’.

While Fonterra had been in the US food service market for a number of years, breaking into it on any great scale required a fresh approach, he said.

‘‘By working with Land O’Lakes, we will have access to a strong, wellestablished distribution network and their large customer base,’’ Mr Harvey said.

Land O’Lakes Dairy Foods vicepresident Greg Somerville said as a result of Covid19, ‘‘performance’’ products in food service 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.

Mr Harvey said when Fonterra launched its valuefocused strategy last year, it was clear it would develop its food service markets.

‘‘We want to do this by collaborating more with likeminded partners, leveraging our intellectual products and skills, rather than making significant capital investments of our own,’’ he said.

Fonterra AsiaPacific chief executive Judith Swales, who oversees Fonterra’s global food service strategy, said Covid19 had had a big impact on the food service sector.

‘‘As part of that, we have had to think about the future and what a refreshed food service strategy looks like,’’ she said.

‘‘Outofhome’’ dining had been one of the hardesthit sectors as many parts of the world were still in forms of Covid19 lockdown.

And it appeared restaurants and bars were going to be one of the last groups to get back to normal.

About 80% of the world’s food service industry shut down when Covid19 became widespread.

Mr Harvey said those restaurants that survived were typically set up for home delivery or takeouts.

But Fonterra was starting to see some signs of recovery, particularly in China. —The New Zealand Herald