Fonterra looks to China exports for future

Related tags Milk China

New Zealand dairy giant Fonterrra has outlined ambitions to tap in
on anticipated growth in demand for dairy imports to China.
Speaking at a conference in Auckland today CEO Andrew Ferrier said
that the country represented 'considerable long-term opportunities'
for the company.

Currently milk consumption in China is relatively low at around 8 litres per person, compared to 30 litres elsewhere in Asia, but, as Ferrier pointed out, consumption is expected to grow rapidly.

"One of the drivers here is Government policies to encourage milk consumption and not only because of the health benefits,"​ said Ferrier. "Their view is that higher demand for milk will transfer wealth to local dairy farmers. Higher demand is being actively promoted through programmes such as agricultural subsidies, milk in schools and the setting of per capita consumption targets rising from 18kg in 2010, to 41kg in 2030."

Emphasising the reasons for his company's aims to concentrate on exporting its products into China, rather than setting up manufacturing operations over there, Ferrier pointed out that, although China is investing rapidly in domestic production, the low proportion of arable land, means that future demands will have to turn to dairy imports.

"We have taken a long-term view of this reality,"​ said Ferrier. "Our starting point is the established base we already have in China. Our consumer dairy products company and our Ingredients business achieved combined sales of $188 million last year."

Fonterra has been trying to increase its presence in the China markets by forging a joint venture with the San Lu dairy company, a major player in the market. Discussions have been on-going for some time now, but, despite the fact that the country sees the future in exports, it will still be of vital importance for it to forge a foothold on the domestic market in order to establish a sales and distribution network.

"We believe it is important to work collaboratively in China, working with the local industry to grow the consumption that will benefit both the domestic producers and exporters like ourselves,"​ said Ferrier. "As just one example, Fonterra worked with the Ministry of Agriculture in its Milk in Schools Programme, sharing our expertise to provide training in food safety, technology and quality management to providers to that programme. Trust is important in doing business in China, so our focus is as much on building relationships as building sales."

Currently Fonterra​ sells its dairy products in 140 countries. The US is its largest single market and Asia is the largest export region.

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