Fonterra boosts innovation spend in China's foodservice sector

The new application centre in Wuhan is under construction. It will add to those in Beijing, Chengdu, Guangzhou, Shanghai and Shenzhen.

The centres play an important role in the coop’s Foodservice business by enabling Fonterra to partner with local customers and develop product applications designed to meet local consumer tastes and trends.

Fonterra opened its first-ever application centre in Shanghai in 2014. The same year it opened Waitoa UHT manufacturing site in the Waikato, which specialises in producing highvalue cream products sought after by Fonterra’s Foodservice customers.

Fonterra chief executive Miles Hurrell says its Greater China foodservice business is a key part of the co-op’s value-add strategy, with the cream products produced at Waitoa UHT contributing strongly to this success.

“The formula for our foodservice Whipping Cream was developed by our expert team at Fonterra’s Research and Development Centre in Palmerston North and is an excellent example of how we use innovation to add value to farmers’ milk.

“This product alone is used in approximately 400 million beverages and 260 million cakes in Chinese bakery stores each year and we’ve seen a continued increase in demand since 2014.

“Our application centres play a pivotal role in driving innovation and tailoring Fonterra’s Foodservice offerings to the tastes, culture and trends of the area in which they’re located.

“They include different spaces and equipment to enable technical experts and experienced chefs to test and develop new products, often in collaboration with customers.

“The addition of a new application centre in China signals the continued growth we expect to see from our Greater China Foodservice business and this will likely lead to further growth in demand for our foodservice cream products, which we are well set up to cater for,” says Hurrell.

In FY23, Fonterra’s Greater China foodservice business reported $2.2 billion in revenue with gross margins of 17.9%.

Fonterra’s Greater China chief executive Teh-han Chow says the high-quality product coupled with the local expertise the application centres provide gives Fonterra a competitive edge in China.

“While we already have a strong Foodservice business in China, we’re looking to continue to grow. By working closely with customers to create product applications that help their businesses to thrive, we can all benefit from the opportunities the China market presents.”

Fonterra’s Foodservice business is also growing in Southeast Asia, particularly in the bakery channel, with the emergence of specialty bakery and lifestyle cafes across the region. Like China, in-market chefs assist the team in developing new local applications based on consumer needs.

It sells to businesses that cater for out of home consumption – bakeries, cafes and global quick service restaurant chains.

Fonterra partners with Foodservice customers to test and develop products for their kitchens, using its network of Fonterra Application Centres (FACs) and professional chefs.

Fonterra chair Miles Hurrell (left) meets Chinese Premier Li Qiang at the co-op head office.

Premier's Visit

As part of an official visit to New Zealand this month, Chinese Premier Li Qiang visited the Fonterra Centre in Auckland. He was accompanied by New Zealand Prime Minister, Christopher Luxon and other officials.

Speaking at the event, Fonterra’s chief executive Miles Hurrell says Fonterra has built a strong relationship with its partners in China over the years.

“China’s economic growth has gone hand in hand with increasing demand for our high-quality dairy ingredients and growth of our Foodservice business in China,” says Hurrell.

“Underpinning Fonterra and our customers’ shared successes is the strong relationship between our two countries.”

During the event, Fonterra showcased the co-op’s business in China with a range of its Foodservice and Ingredients products on display.

Hurrell says Fonterra continues to invest in innovation in China’s dairy sector.