Baking boom benefits Fonterra

If Fonterra’s experience in China is anything to go by, Kiwis are unlikely to give up the baked goods when the lockdown lifts.

Many New Zealanders have had a love affair with their cake mixers, taking up ‘‘panic baking’’ to pass the time while confined to their bubbles. And if overseas pandemic eating patterns are mirrored here, the country’s comfort eating is likely to continue.

The co-op’s chief executive for greater China, Teh-han Chow, said

Chinese consumers were indulging themselves as the country returned to normal post-isolation.

‘‘A large portion of our business in China has been the bakeries and we’ve seen that indulgence sector come back quickly,’’ he said. ‘‘Products like UHT cream have been strong sellers.’’

Chow said the behaviour was helping lift Fonterra’s food service business out of the lockdowninduced slump, which began when the coronavirus outbreak took hold in China in February.

While Fonterra’s ingredients business, which supplies powders, proteins and dairy fats to food manufacturers, was largely unaffected, its food service arm had been ‘‘hit hard’’, Chow said. The mass closure of restaurants, coffee shops and malls to prevent the spread of the virus meant demand for products aimed at chefs and bakers fell dramatically.

‘‘Our February numbers were quite bad but in March, as we started to come out of it, the sector began to recover,’’ he said.

However, as the country went into lockdown, there was a surge in demand for consumer products, particularly online, Chow said. ‘‘[It] was a bit of a mixed bag. Our offline sales were hurt quite badly but the online sales were up significantly.’’

Butter, cream and cream cheese, were in especially high demand as people had little choice but to cook at home.

However, China had turned the corner in the weeks since movement restrictions eased and most of the quick service restaurant chains supplied by Fonterra had reopened.

‘‘The traffic rate or transaction count has not fully come back so I think there is still a way to go for food service,’’ Chow said. ‘‘But all signals are that things were heading in the right direction.’’

Fonterra chief executive Miles Hurrell said the recovery in China could be an indication of how things would play out as lockdown restrictions eased in New Zealand.

‘‘There may not be a return to people lining up at top-end restaurants but I think we’ll see fast food really pick up,’’ he said.

Hurrell said having a foot in each of the food service, ingredients and consumer camps in several markets had given it valuable flexibility as the pandemic situation evolved but the looming recession would have an impact.

‘‘I’m confident in the categories and markets we play in but as that economic piece starts to bite, what is the long term economic outlook across all industries, and what does that mean for our milk price? It would be foolish not to recognise we are heading into recession and to be match fit for that.’’