Saturday, April 20, 2024

Fonterra keeps it local for milk innovation

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Fewer cows and more old people provide promising opportunities for Fonterra in both existing and emerging markets over coming years, as the co-op scrapes more value from raw milk supplies.
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Fonterra chief executive Miles Hurrell says now that the company faces minimal growth in milk supply, it is capable of taking a more discerning view on where opportunities lie across its product and market portfolio.

“It is a case of ‘how do we open our minds to that?’” Hurrell said.

He says the co-op’s strategic reset in late 2019, after a period of seeking global milk pools, has left it focused and clear that “not all milk is equal”.

“We are now saying, ‘let’s keep any offshore milk we get separate’ versus just putting our brand on all of it. We will focus on the white gold we have in New Zealand,” he said.

One area that value falls in is the rapidly growing global population of seniors (65-plus), seeking higher protein in their diets.

While foodservice gains are falling largely in China, the protein market at this stage is more of a United States-Europe-Japan story, as those countries experience a sharp rise in their proportion of seniors.

Fonterra’s science manager Aaron Fanning says by 2050 the number of over 65-year-olds in the world will have doubled to about two billion people.

“There is an average loss of about 1% muscle mass a year from 40 to 50 due to age and a lack of exercise. Dairy is a concentrated protein source that can help with that,” Fanning said.

Estimates are also that a third of over 65s can be categorised as malnourished, a factor that almost tripled the number of hospital stays per 100,000 for over 85s, compared to 65 to 80-year-olds.

Concentrated protein supplements have been a key focus of the co-op’s research team in recent years, and the company’s trademarked SureProtein supplement has been developed specifically for this rapidly growing market.

With palatability ranked double that of competitors, it has come to be incorporated in dietary supplements sold by European medical nutrition companies.

The step to incorporate patented and registered ingredients, rather than create an entire new brand is resonating through much of the co-op’s product development work.

Technology, IP and techniques are now starting to play a greater role in revenue streams, rather than wholesale investment in bricks and mortar facilities in offshore markets.

Head of strategy and innovation Mark Piper says the protection of IP, technology and company-developed science now swung as much on being a corporate secret, as it did through patent protection.

“In the case of a patent, there is nothing to stop anyone looking it up and seeing what is behind it. Trade secrets are equally valuable now for protection. We are working hard now on how to commercialise our IP while protecting it. There are no trade barriers on IP, unlike physical product in some markets,” Piper said.

Royalties from IP and ingredients are increasingly a reality, including the protein compound in a “grass-fed” kumara drink sold in South Korea.

The company’s revolutionary mozzarella process used at Clandeboye to supply about half the Chinese pizza industry consists of a balance of both patents and secrets not even the chief executive was privy to.

The plant’s tech was also protected by having multiple contractors supply different components, with no contractor having access to the entire component line.

Hurrell says further growth opportunities beckon in China’s demand for cream cheeses, while covid lockdowns there were also prompting more development of cheeses capable of keeping their properties for duration of delivery times.

“China also leads the way in top-end bakeries, while the rest of South-East Asia has not moved that way, yet,” he said.

He cited Vietnam with its growing wealth, 100 million people and French dairy culture as a prime market for future development.

He noted Indonesia had looked promising earlier in his career, but continued to lag despite its potential.

“It’s a great business there, but has not really turned into the next China,” he said.

He says the co-op would consider formulating cow-plant milk hybrid blends as a future health choice for consumers and continued to see good opportunity for growth in the organic sector.

He also acknowledged the dairy sheep was now another protein source.

“But there is no mistaking, we are still very much a bovine milk company,” he said.

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