Fonterra is expanding its organic dairy business by developing its organic milk supply in response to growing demand. 

Craig Deadman, business manager for Fonterra's Organics, met with farmers this week to stress that the company is committed to growing its organic business in the long-term. 
"Following our review, we have refreshed our growth strategy to enable us to grow the business, profitably and sustainably. This strategy reflects the volumes our customers have indicated they need to satisfy increasing demand for organic dairy," Deadman said. 

Deadman said that, while organic remains niche, the group is experiencing demand growth as more consumers opt for organic options. In Asia in particular, Fonterra has seen growing demand for organic milk powders such as infant formula and fortified milk powders.

Demand growth is expected to be particularly strong in South East Asia, China and the US, Fonterra predicted.  

"Chinese consumers are quickly developing a strong liking for organic dairy and organic options are always welcomed," Deadman noted. "We have recently launched Anchor organic milk powder in China and it is already proving very popular with shoppers there."

Selling organic products also enables Fonterra to move its dairy products up the value chain, generating higher returns, Deadman added. "This approach enables all Fonterra farmers to benefit from heightened returns," he said.

In order to encourage organic production, the world's largest dairy supplier is increasing its payout to organic certified farmers. The company currently pays an organic premium of NZ$1.05 (US$0.77) to its organic farmers. In June this will increase to NZ$1.50 per kilogram of milk solids, the cooperative revealed.