Fonterra’s ingredients business keeps up with vast region’s fast pace

By RJ Whitehead

- Last updated on GMT

© iStock
© iStock

Related tags New zealand Milk

When I speak to Fonterra’s Hamish Gowans, he had just been asked by a potential customer if the cows that produce the milk for the New Zealand dairy ingredients co-operative are fed on grass. 

There’s little in Fonterra’s corporate branding to suggests otherwise. The deep green that it incorporates into its logo sums up New Zealand’s dairyland, as do the countless images of happy cows in verdant pastures that the brand puts out to reinforce the country's clean, green credentials. Anyone who had visited New Zealand’s green and pleasant land would not have asked.

For Gowans, it was less a misguided inquiry than a suggestion that dairy provenance is becoming more important for food and drink manufacturers in south and east Asia, his customers.

There is confidence in the quality of dairy products in the region, regardless of who supplies them. But there is also an interest in where a product comes from, and how it can be managed in the supply chain​,” he says.

At the same time, there has been strong regional recognition of the importance of dairy fat in a diet relative to previous misconceptions about the harm it could cause to the cardiovascular system, he adds.

As regional general manager for Fonterra's NZMP ingredients division, Gowans has been witnessing Asia's market tastes and awareness evolving quickly, putting business on a consistently upwards slope. In some market categories, including nutritionals, NZMP has seen high double-digit growth, he says.

When you look at satiety, healthy ageing or muscle maintenance, people are living longer, are more active for longer. This is well recognised in other parts of the world so the lessons of healthy, safe nutrition has been starting to filter down to south and east Asia​. 

You will see pockets of it popping up. Customers are now starting to talk about protein and the reasons for protein in a diet. It’s healthy whole food in a dairy format that is working so well​,” says Gowans.

NZMP ships ingredients for active nutrition, dairy foods and beverages and consumer powders to over 100 customers in south and east Asia, with the key markets being Indonesia, Malaysia, Singapore Vietnam and Thailand. Strong growth is also coming from less developed markets like Bhutan, Nepal and Sri Lanka.

We have very clearly focused on where we want to play, based on the categories that are moving strongly where our customers play​,” says Gowans.

South and east Asia is a big market that takes in the region of 660,000 tonnes of NZMP ingredients. It is diverse, ranging from countries like Bangladesh, with low GDPs, through to wealthy Singapore. And so the product evolutions the company deals with vary from the very basic, like recombined sweetened condensed milk and repacked whole milk powder, to high-functional medical nutrition products.  

For a sales region so vast, NZMP has been set on communicating more strongly with its customers while financing supply chains and opening a new warehouse in Singapore.

New Zealand is a long way away from our customers, so we look at how we get our product closer to our customers to service short-term demand, and how we build on top of our supply chain solutions to engage with customers​,” says Gowans.

He says that global volatility in the dairy market “is here to stay​”, and to mitigate this the company has been working closely with its customers around Fonterra’s commodity risk and trading platform. “We work with them as well as our farmers to help reduce this volatility​,” he adds. 

Asked to tip the next big market surge for dairy ingredients in Southeast Asia, he suggests this would be sports nutrition—albeit starting from a low starting point.

He says that some of the larger local players in the region think they can hear a rush from sports nutrition on the back of trends from American.

Is it here in a major way yet? No, but they can hear it coming and want to know how they can position themselves for the future​.”

Elsewhere some of the less developed markets are moving to more fluid formats of milk like UHT and even fresher. Cheese and butter have been performing well in the food service category, while consumer powders continue to grow strongly, especially in Sri Lanka and Bangladesh.

And customers are looking at how they differentiate themselves, to “premiumise​" their products, Gowans adds. “Where we can we add value to them as well as to the New Zealand farmer or shareholder, so we have solutions across the board​.”

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