Thursday, 06 October 2016 12:55

Fonterra claims No.1 spot in China

Written by  Pam Tipa
Fonterra chief executive Theo Spierings. Fonterra chief executive Theo Spierings.

Fonterra is number-one in China in business and in reputation, claims Fonterra chief executive Theo Spierings.

“We have just gone to the number-one position in China when we measure our reputation,” he says.

Fonterra’s market share is 11% -- 5 billion L sales in a market consuming 45b L of milk per year.

“When I [refer to] share in litres of milk sold in China by our ingredients, consumer and food service business, we are by far number-one,” Spierings said at the release of the annual results last week.

In food service Fonterra has gone from zero in 2011, to 400m L in 2013 and now 1b L of milk of high added value.

“All the milk comes from New Zealand so that is massive value creation for our farmers.”

Spierings says Fonterra is building its partnership with Beingmate, the co-op’s first priority because China is its top market.

“A whole lot of things have changed in China… the regulations will change drastically. The regulations will say that each legal entity in China can have only three brands with three recipes.”

That may eliminate about 1800 of the country’s 2000 brands in the next 15-18 months.

“You need to have a local partnership in China to be in the game. That is the strategic rationale.”

Spierings believes investing in a listed company in China will give Fonterra a dividend. But most important for the company is the global supply agreement with Beingmate and the necessarily huge volume of NZ milk. They also have the Darnum joint venture in Australia for which the co-op just got approval from the Chinese authorities.

Beingmate is a “massive partnership” which is tapping into Fonterra’s entire strategy and its milk hub strategy, Spierings says.

Chairman John Wilson says China inventories and demand growth are back to normal levels. The co-op’s business in China is an integrated strategy with many facets and on balance the business is performing well there, he says.

“The China farms business has been through a significant period of growth with the two main farming hubs completed and operating well.”

However, the Chinese business has been hit by very low global dairy prices, as have NZ farmers.

Wilson says now that milk has reached critical mass, Fonterra is confident it will integrate into the Chinese consumer and food service business.

More like this

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

Editorial: A new era for two co-ops

OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.

Should co-op sell its consumer brands?

OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.

Featured

'One more push' to eliminate FE

Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

National

Machinery & Products

New McHale terra drive axle option

Well-known for its Fusion baler wrapper combination, Irish manufacturer McHale has launched an interesting option at the recent Irish Ploughing…

Amazone unveils flagship spreader

With the price of fertiliser still significantly higher than 2024, there is an increased onus on ensuring its spread accurately at…

» Latest Print Issues Online

Milking It

Tough times

OPINION: Dairy industry players are also falling by the wayside as the economic downturn bites around the country.

MSA triumph

OPINION: Methane Science Accord, a farmer-led organisation advocating for zero tax on ruminant methane, will be quietly celebrating its first…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter