Tuesday, May 21, 2024

Ageing market holds rewards for Fonterra

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South Korea’s demographic receptive to functional fortified protein drinks.
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While much of Fonterra’s success in China was built on the burgeoning infant formula market over a decade ago, the other end of the human lifespan is providing the opportunities for growth in South Korea.

With a population that has shrunk over 100,000 in the past year, has the world’s lowest birth rate, and faces a surge in its over-65 demographic, it could outwardly appear that South Korea’s growth prospects for dairy would be limited. 

But the market is a sophisticated, increasingly wealthy one where the opportunities are opening to provide ingredient formulations to the “active lifestyle” 65-plus demographic.

Fonterra’s general manager for planning in North Asia, Bryn Rowdon, says the “grass-fed” label for dairy is not in itself compelling enough to provide a higher value selling proposition to this market.

“Just as in Japan, the perception is that all cows, regardless of where they are from, are fed grass in some form.” 

However, linking “grass-fed” back to a health benefit is where the gold in the claim lies. 

Along with proteins for ready-to-drink formulations, Fonterra is also working on building its butter and cheese trade in the market, and the health benefits that come from being “grass-fed” are to play a big role in an upcoming campaign.

Meantime, the company – with a staff of 18 in Seoul – is enjoying having a long-established, trusted relationship in the market. New Zealand has been engaged since the Dairy Board days, selling caseinate commodities.

South Korea’s domestic raw milk production is flatlining, with most committed to raw milk supply at a subsidised high price that rules it out as an option for further processing and protein supply, leaving Fonterra to help fill the widening gap. 

It is a trend also echoed across the Sea of Japan, or the East Sea as it is known to South Koreans.

The 65-plus demographic will consist of 20% of Korea’s population by 2025 (it is 17% at present) – one that is committed to aging healthily, said Jack Stenhouse, Fonterra’s business manager in the active living category.

“They want to enjoy their older years as healthily as possible. It is not just an awareness of the need to maintain bone density but also of the need to retain muscle mass as you age.”

Studies have shown after 45 muscle mass loss can be 1% a year, accelerating after 65. 

“Fifty-year-olds want to be 30,” he said.

An emerging trend to help them achieve better health is the consumption of functional fortified protein drinks.

It’s an unfolding market, with brands competing to pack in as much protein as is possible, with some 250ml servings offering 32g of protein. Stenhouse said Fonterra is expecting to see typical levels of 8% protein in some categories to lift higher to 10-plus.

“Which is great for us. The higher levels are harder to formulate successfully, and we can do it. We have been lucky to be here at the start of this growth.

“What we have managed to do in this liquid space is to develop formulations that retain a very good mouth feel and taste, something you don’t always get with high-protein supplements in western markets,” Stenhouse said.

Koreans are particularly sensitive to taste profiles, with mouth feel and taste non-negotiables regardless of a product’s health claim, and the lessons learnt in perfecting the products here could apply well to other developing markets globally.

He said typically the South Korean market will go from little change, to a very large market very quickly for specific products.  

Alongside the healthy active segment, the liquid protein sector includes medical nutrition for cancer, diabetes and malnourished patients, and “lifestyle protein” beverages starting to fill the shelves of convenience stores.  

Further opportunities also lie in the phospholipids sector – extracting lipids from buttermilk to use for stress relief and wellness – an area the company has most recently delved into with its BioKodeLab range in NZ.

Richard Rennie travelled to Seoul thanks to funding from the Asian New Zealand Foundation.

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