Tuesday, 25 June 2024 11:55

Retired marketing exec wants co-op to keep consumer business

Written by  Sudesh Kissun
Fonterra’s Fernleaf consumer brands business is a market leader in Malaysia. Fonterra’s Fernleaf consumer brands business is a market leader in Malaysia.

A former New Zealand Dairy Board marketing executive believes Fonterra should retain its consumer business but change the way it's running the business.

Dr Poh Seng Ong, a former chief executive officer Asia region of NZDB, says he's sad to read that Fonterra is deliberating to sell its consumer business.

Ong believes Fonterra's consumer business will continue to perform strongly is there's support from the top, who are usually non-consumer professionals.

He also believes Fonterra must recruit suitable people to run its consumer business.

"I use the word 'suitable' instead of 'top marketing' because different phases of marketing consumer growth require different marketing people."

Speaking to Dairy News from Singapore, where the 79-year-old lives in retirement, Ong noted that during the era of the NZDB, the consumer business was a steady business with non-volatile pricing/revenue.

He says the returns were much better than the commodity business.

"The consumer business helped the farmers in two ways: consistently higher returns buffered the low payout to farmers when commodity prices were down. Remember that commodity business competes on price," he says.

"Secondly, with more milk going into our own consumer business. it meant there was less milk to sell as a commodity. This resulted in less pressure on the commodity prices."

Last month, Fonterra announced a step-change in its strategic direction, setting out on becoming a world-leading provider of high-value, innovative dairy ingredients.

As part of this, the co-op said it was exploring full or partial divestment options for some or all of its global Consumer business, as well as its integrated business Fonterra Oceania and Fonterra Sri Lanka. Fonterra's global Consumer business includes a portfolio of market leading brands such as Anchor, Mainland, Kāpiti, Anlene, Anmum, Fernleaf, Western Star, Perfect Italiano and others.

Ong recalls that in the 1980s, NZDB bosses decided to extract more value out of milk by going into the consumer business. Commodity prices were depressing, he adds.

"In 1986, I was recruited in Singapore to turn the Malaysia company around. The Malaysian company was mainly in the consumer business. It was losing money for several years. None of the consumer brands were market leader or close to market leadership. The two brands of milk powder, Anchor and Fernleaf, were the lowest-priced milk powder in the market, and each had market share, at no more than 1% or 2%," he says.

In 1988, Fernleaf full cream milk powder was 're-launched'. The Anchor brand was discontinued.

Ong says, within three years, the Ferneaf full cream milk powder became either No. 1 in market share, with a market share of around 23%, or a close No.2 to Nespray, a Nestle brand, which was the unchallenged market leader in Malaysia for year, until then.

"The company became highly profitable and all the initial investments in the launch were recouped.

"In 1991, I created the brand Anlene for the skim milk powder category. In a record time of less than six months, I pushed the R&D to formulate the product I wanted in Anlene." 

Anlene skim milk powder was launched in Malaysia in 1991. It was the most expensive skim milk powder in Malaysia and the gross product margin was over 45%.

Ong says it was a resounding success.

"Within one year, Anlene was market leader with market share at over 60%. By then the Malaysian company was the biggest consumer milk powder company in Malaysia, giving higher returns to dairy farmers than the commodity milk powder business.

"I then got the R&D to develop a milk powder for pregnant and breastfeeding women. I called this brand Anmum. Again, it immediately became No. 1, outselling Sustagen, a brand owned by American company Mead Johnson. The gross profit margin of Anum was even higher than Anlene: it was 60%."

Ong says the success was repeated in Singapore and Taiwan.

All these three markets - Malaysia, Singapore and Taiwan - were highly profitable, giving higher returns to dairy farmers than the commodity milk powder.

Dr Poh Seng Ong FBTW

Dr Poh Seng Ong, a former chief executive officer Asia region of NZ Dairy Board.

Good Old Days

Dr Poh Seng Ong says that during time, New Zealand Dairy Board had several strengths – top R&D and support for the consumer business from the board and management.

“During my time, the scientists at the Dairy Research Institute at Palmerston North were top class. We had one-week meetings, twice a year. At each meeting, we were pushing the other to get things going forward.

“On my marketing side, I pushed the R&D to develop products that I believed the market needed, while the R&D kept pushing me to market-research their new ideas/development. Those meetings were very productive.”

Ong says back then the consumer business had the full support of the NZDB board including then chair Sir Dryden Spring and senior management.

“Farmer directors from NZ Dairy Group, Kiwi Dairy Co-op and Northland Dairy Co-op visited the Asian markets and were very supportive.

“All these farmers were inspiring, interfacing with us in the marketplace. We in the marketplace appreciated that dairy farmers worked all day long, every day, seven days a week, except for the one or two winter months. We were a team together. Morale was high.”

More like this

Objection!

OPINION: In 2021 a group of prominent academics got ’cancelled’ for daring to oppose changes to the school curriculum that put all mātauranga Māori (Māori knowledge), which can incorporate spiritual elements, on par with empirical science.

Farmer feedback

OPINION: Sticking with the NZ Primary Industries Summit, Fonterra chief executive Miles Hurrell’s quip about the milk price has been doing the rounds on Twitter.

Humble achievers

"I'm not what you would consider a Formula One farmer, but I must be doing something right,” says Fonterra farmer Francis Smits, who is quick to point out that he and his wife Regina have a simple set up on their Reporoa farm.

Featured

Insurance Council urges bold action

The Insurance Council of New Zealand (ICNZ) is urging the Government to take a leadership role on climate adaptation and build New Zealand’s resilience against the impacts of climate change on lives and property.

Draft emissions plan a mixed bag

Beef + Lamb New Zealand (B+LNZ) says documents released as part of the Government’s second emissions reduction plan consultation contain some positive elements, but also concerning ones.

Feral cattle wreak havoc

According to John Roche, MPI, the saviour for Chatham Island farmers this season has been the weather.

National

Cream of the crop

One of New Zealand's largest dairy farmers won the 2024 'Food, Beverage and Fibre Producer' award at the NZ Primary…

Machinery & Products

Revamped automatic calf feeder

JFC Agri, the family-owned manufacturer of agricultural products from Galway, Ireland, used Fieldays to launch its innovative Evolution range of…

ErgoPOD set for 2025 farm debut

Waikato Milking Systems has unveiled the final production version of its ErgoPOD, a state-of-the-art semi-robotic technology designed to increase milking…

» Latest Print Issues Online

Milking It

100-year-old milk powder

OPINION: A 100-year-old sample of milk powder from Ernest Shackletons’ first solo expedition to Antarctica has been analysed by scientists.

Farmer feedback

OPINION: Sticking with the NZ Primary Industries Summit, Fonterra chief executive Miles Hurrell’s quip about the milk price has been…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter