Fonterra is aiming to adjust its sales base to increase the proportion of revenue generated by its portfolio of nutritional brands, while also increasing its focus on emerging markets.
Speaking during a media briefing following the The New Zealand dairy giant’s full-year results today (25 September), chief executive Theo Spierings said the firm’s nutritional strategy was built around a platform of developing consumer-facing brands in the infant nutrition and senior nutrition areas.
“I am very much focused not on dairy but on nutrition, because that is what we sell to consumers. Nutrition for the young, that is very much a key platform,” he said. “The ageing population is critical, so we are committed to that and even drive harder.”
Fonterra’s adult nutrition brand – Anlene – focuses on its high calcium content and communicates messages around bone health. However, the company intends to “move from bone health to healthy ageing” and therefore “widen the scope” of the brand, Spierings said.
In infant nutrition, Fonterra is pushing ahead with plans to launch an infant formula brand in China. “In the maternal situation [we see] lots of opportunities… as we speak we are launching in China and Hong Kong,” he revealed.
Spierings insisted Fonterra is stepping up its efforts in China in the wake of a botulism scare that forced the group to recall whey powder concentrate. The recall turned out to be a false alarm but the scare dented the group’s reputation and prompted the introduction of export bans in a number of markets.
However, Spierings did concede the incident forced Fonterra to evaluate its investment strategy. “When you go through an event like [the concentrated whey powder recall] you have to be honest with yourself. You have to say what am I going to drive harder? Where do I slow down? And, possibly, what do I put in hibernation or in the freezer. There are certainly things which we have said we will stop putting resources in for the next six to nine months, but there are also areas where we go much faster,” the chief executive said.
Fonterra is reducing its investment in expanding in new geographies. However, it is “pushing much faster” to drive growth in China and other emerging markets.
“We have come out of an event – the WCP80 event – but we are just back from China. Emerging markets, cities, the need for protein is massive… there is a huge demand for our products, especially in the Asian context. So protein into emerging markets is key.”
Earlier today, Fonterra reported a fall in annual operating profit thanks to a drought that hit milk prices and the reorganisation of its business in Australia.
Revenue was down 6% to $18.6bn, as the drought meant New Zealand milk production fell 9% in the last six months of the fiscal year.
Fonterra’s net profit rose 18% to $736m, boosted by lower financing costs – which were down $41m – and a tax credit of $68m.