Fonterra may build plants in China

By Dairy News

FONTERRA IS considering building plants in China for processing milk from its farms there.

Fonterra Greater China president Christina Zhu said third-party manufacturers now process fresh milk from the 28 000 cows on its two farming hubs; a third hub is being built with global food company Abbott.

"We have farms, we have a big downstream business and we need manufacturing capability.

“Right now, it’s done at a few carefully audited third-party sites and we have Fonterra people working on these sites fulltime to make sure the products are safe," she said.

"There is a natural cap on how much you can do through third parties, so we’re assessing all the options, but we’re not in a position to say a definite timeline or make a commitment at this point."

Fonterra’s greater-China sales are at least $5 billion; foodservice and ingredients make the most.

Fonterra’s Anchor milk is now the number-one consumer milk brand in China.

Anchor milk is now sold in 13 000 stores in 220 Chinese cities. Anchor UHT milk is also the online bestseller in China with 55 per cent of total sales made online.

Ms Zhu said the 45 per cent vs 55 per cent offline/online sales mix is working well.

“A lot of fast moving consumer goods (FMCG) companies would kill for this mix in China,” she says.

She said fighting for market share isn’t easy with 64 imported milk brands, but Anchor is proud to be retaining the number-one spot. Anchor sales have grown 40 per cent year-to-year.

She said many FMCG companies are not growing in China.

“Some of the global FMCG brands are declining in China; the 40 per cent plus growth is huge; in fact it makes a lot of people very jealous of us in China.”

From day one e-commerce has been part of Anchor milk’s strategy and ‘genetics’ in China. Fonterra works with China’s two giant e-commerce retailers Alibaba and

China’s internet usage is astounding -- 770 million internet users. Online sales last year topped US$812 billion, versus US$821b in the US, UK, Japan, Germany, Korea and France combined.