Fonterra repitching dairy, ‘tickling’ Chinese taste buds

AUCKLAND: Singleshot probiotics, pitching New Zealand milk as increasingly rare and valuable, and working dairy into Chinese cuisine are among Fonterra’s new moves in the massive China market as it gets its business strategy back on the rails.

As part of an operational ‘‘reset’’ after heavy financial losses in 2018 and 2019, when its China dealings became synonymous with disaster, New Zealand’s biggest company has ditched farms and company investments in China for what it does best — dreaming up new premium products for food businesses and consumers via intellectual property.

Greater China chief executive Tehhan Chow, appointed when

Fonterra last year reorganised itself into operating regions, said the new drive would ensure the ingredients and foodservice businesses, respectively its largest and secondlargest in China, and its consumer operation are all focused on product innovation.

The aim is to expand Fonterra’s product reach in China by moving innovations deeper into the country, beyond the major businesstobusiness and consumer markets to lowertier areas and smaller business operators.

To this end, earlier this year an innovation centre was set up in Shanghai to extend the work of Fonterra’s research and development science centre in Palmerston North directly into the China market.

The innovation centre supports investment in what Fonterra calls application centres, four kitchens where chefs and market specialists find and test new ways for business customers such as manufacturers, tea shops, bakeries and restaurants to use Fonterra products in their offerings.

A fifth application centre will open next year, in central China, and a sixth is planned.

One big advantage of regionalising operations is that new products from the 200strong science team at Palmerston North can be commercialised quickly in China, Mr Chow said.

Several new products were being launched off the back of the Covid pandemic, which has generated a sharpened Chinese appetite for health and wellness products.

Ready for launch next month is a probiotic singleserve sachet — similar to a sugar sachet — that consumers can add to a beverage or water.

Infant formula makers are keen on Fonterra’s probiotic focus and the company is eyeing opportunities with yoghurt and beverage producers.

‘‘Tickling taste buds’’ is another Fonterra aim in China, where consumer confidence and spending has recovered well after Covid, he said.

‘‘There continues to be a premiumisation trend, people looking for highquality products that resonate in terms of provenance or functional benefits.’’

There was a ‘‘huge’’ uptake in cake consumption after China’s Covid lockdown and while the surge has settled down, Chinese appetite for cream and cake, and cream in tea was growing, Mr Chow observed.

Another new Fonterra item for retailers is ambient cream.

‘‘In tier one and two Chinese cities, cold chain (refrigeration) is not an issue but further out it is more of a challenge, and cold chain comes at a cost. Ambient cream doesn’t need to be chilled. It’s easier for a small operator to take on without having to have dedicated refrigeration space,’’ Mr Chow said.

Fonterra’s second new thrust in China is to better market New Zealand milk provenance.

‘‘As part of the strategic reset we are looking at how we can, what I call, valourise New Zealand milk.’’

The pitch will be that its production is not increasing and that it’s becoming ‘‘rare and more valuable’’.