Fonterra: A view of the dairy
market in Asia
2 March 2011
Confidential to Fonterra Go-operative Group
Bruce Donnison
General Manager, Sustainability
About Fonterra Cooperative Group
• Formed in 2001 with the merger of the New Zealand Dairy Board, New Zealand
Dairy Group and Kiwi Co-operative Dairies
• Largest milk processor and largest dairy exporter in the world
• Annual revenues of NZ$16 billion
• 15,000 employees
• Sales network that reaches customers in more than 140 countries.
• Cooperative structure – owned by 10,500 New Zealand dairy farmers
• No matter where we are in the world, dairy is what makes us tick
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Today’s presentation
• The dynamics of the dairy market in Asia
• How Fonterra operates in the Asian market
• The importance of a sustainable approach
– Nutritional innovation
– Security of the supply chain
• Delivering the nutritional needs of Asian consumers
• The role of the Australian dairy supply chain
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Fonterra
Our Vision:
To be the natural source
of dairy nutrition for
everybody, everywhere,
every day
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Total dairy market in Asia and Middle East
• Total market AUD $9bn
• Roughly twice the size of
Australia
• Growing at 4-5% per annum
• Consumption will continue to
rise
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China also a major driver of growth
Percentage of global imports
– China
– Mexico
– US / Japan
– Russia
– EU
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China on track to exceed 1 million tonnes of dairy imports
Plenty of room for growth
Per capita milk consumption
100
90
80
Litres per capita
70
60
Latam average = 57 lts/capita
50
40
30
Asia average = 11 lts/capita
20
10
0
Source: Euromonitor, powder converted to its rate of 1kg = 8.33 lts. 2005 data
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• Low base per cap
consumption
• Huge populations with
increasing incomes
• Interest in healthy eating is
growing
• Milk is seen as a ‘gold
standard food’
Fonterra’s approach in Asia
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Sustainable
cooperative
performance
• Investing in-market: “Behind Borders”
• Disseminating knowledge to locals
Grow lasting
customer
partnerships
• Focus on specific customer needs
• Develop value-added products to suit
Build trusted
brands
• Anlene and Anmum – flagship brands
• Backed by research and innovation
Sustainability is key to success
Climate change
/ carbon
• Improve carbon
footprint
• Monitor
international
carbon change
policy
• Influence NZ’s
climate change
policy
• Research on the
nutritional value
of foods given
carbon impacts
Water
• Improve
performance
around Clean
Streams Accord
• Manage
manufacturing
site issues
• Respond to
regulatory
changes
• On-farm storage
and irrigation
technology
Animal welfare
• Address
concerns around
inductions,
housed cows,
and skinny cows
Biodiversity
• Develop a
biodiversity
strategy for
Fonterra
Nutrition
• Develop
understanding
and improve the
nutritional profile
and nutrient
density of
Fonterra’s
product portfolio
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All underpinned by a safe, secure, integrated supply chain
Delivering on nutritional needs in Asia
• Leading adult dairy nutrition product in Asia
• 286 million Chinese expected to suffer osteoporosis/low bone mass by 2020
• Anlene is high-calcium, clinically proven to prevent osteoporosis
• Backed by continuous research and innovation
• Leading product for pregnant women in Asia
• Unique ingredient builds brain connections in infants
• Supported by educational programs on maternity/infant nutrition
• Science behind Anmum building broader paediatric product range
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The role of the Australian dairy supply chain
On-farm
• 1,500 farmer
suppliers;
300,000
cows
• 20% share
Australian
industry
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Milk
Collection
• 1.8 billion litres
per annum
• 50,000 on farm
pick-ups p.a.
Manufacturing
• 12 sites
nationally
• Manufacture
consumer and
foodservice
products ,and
bulk ingredients
Storage and
handling
Sales and
marketing
• 300,000 tonnes
of Australian
product per
annum
• Research
• Innovation
• Product
development
All underpinned by our principles of sustainability
Summary
• Fonterra is on a journey to deliver the nutritious dairy products the world
needs in a sustainable way
• Milk is a product of nature so this journey starts with clean water, green
grass and healthy cows
• Asian consumers have unique demands from dairy, the market is
growing rapidly and is a key focus for us
• We are committed to meeting demand from Asian consumers by:
 Investing in R&D so they can enjoy the best of dairy
 Ensuring a safe, secure supply chain to build confidence about
where our products come from
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