Fonterra expects firm demand from China for its dairy products in the medium- to long-term but it doesn’t expect sales volumes to grow beyond the present 30% of all dairy exports.
Chief executive Miles Hurrell told the annual China Business Seminar in Auckland that younger Chinese consumers are preferring to buy locally produced dairy products.
“I take my hat off to the Chinese government for the way they have built that reputation for confidence in food safety in domestically produced dairy.
“Who would have thought 10 or 15 years ago that consumers would prefer national brands over international ones.”
Answering a question about over-reliance on China as a market, Hurrell said he doesn’t expect that market to continue to grow in volume.
New Zealand has flat or declining milk production and other markets are coming to the Chinese understanding of the provenance of NZ dairy products.
“I have just been to South Korea, which is one of our fastest growing markets off a smaller base,” Hurrell said.
“Our volumes into China are not expected to increase, but I don’t see them falling away any time soon.”
In the 2022 financial year Fonterra’s ingredients business continued to benefit from strong demand and good margins, especially for proteins.
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Foodservice products expanded across China into second- and third-tier cities, now numbering more than 400 in total.
“We are growing value in China by focusing on innovation, sustainability and our NZ provenance.”
Innovation has taken the form of new ways of using Fonterra products in local cuisine.
Hurrell mentioned a Cheese-Pro combination of cheese and cream for use in tea macchiatos.
Fernleaf fresh milk was recently launched, along with new probiotics for the health and wellness market, which has been growing strongly in covid times.
Fonterra worked with the Chinese government in boosting the intake of dairy products and working toward emissions reduction targets.
It launched carbon-zero butter at the 2021 China International Import Expo and will attend the 2022 expo in November, its fifth participation.
Fonterra was a sponsor of the China Business Seminar, which was addressed by Prime Minister Jacinda Ardern, Trade Minister Damien O’Connor and Chinese Ambassador Wang Xiaolong.
