The leader of Fonterra’s strongest business in China has targeted three key points and said that cheese has taken on a “Chinese style”

“If we could take a time machine back 10 years ago, it might be difficult to imagine that the Chinese cheese market would develop so vigorously,” sighed Casey Thomas, vice president of Fonterra Greater China.
Xiaoshi Dai noticed that at the China International Food Additives and Ingredients Exhibition, which ended today, the New Zealand dairy giant exhibited a variety of cheese sold at home and abroad, as well as innovative product concepts and solutions that added award-winning cheese ingredients.
It is reported that Fonterra’s raw material business has five major product families, including milk powder, milk protein, milk fat, cheese, special raw materials, and other products, with a total of over 3000 single products. Among them, cheese is regarded as a key enabling raw material, and currently supplies well-known brands such as Miaoke Landau and Jestine.
During the exhibition, Tang Yi, who is responsible for Fonterra’s raw materials business in Greater China, communicated with Snack Generation and others about the development characteristics and prospects of the cheese market, as well as future strategic priorities. Next, please take a look at the on-site news sent by the snack agent.
1、 Cheese Innovation
In recent years, cheese has been in a high-speed development state in China.
According to the “Global and China Cheese Industry Development Report” released by Euromonitor Consulting last year, the Chinese cheese market entered a rapid growth stage in 2018. From 2017 to 2021, the average annual composite growth of retail sales through cheese retail channels in China was 26.3%, with a scale of 13.1 billion yuan in 2021. From the perspective of shipment volume, the market share of the top three brands represented by Miaoke Landuo accounts for 43% in total.
However, due to the expansion of market capacity and the repeated impact of COVID-19, the growth of cheese slowed down last year.
Taking the mainstream category of cheese sticks as an example, Tang Yi pointed out in the exchange that during the past five years of rapid development, Fonterra’s raw materials business has provided many customers with more raw materials for making cheese sticks. “But judging from last year’s situation, the overall market’s development speed has slowed down a bit, as the market is also becoming mature.” He said, “Take our own example, the speed of the cheese bar sector in 2021 is actually a bit faster than in 2022.”
It also pointed out that at present, the per capita consumption of cheese in China is lower than that in mature markets such as Japan and New Zealand, and there are still significant opportunities for the category in the future. At the same time, the activity of local innovation has also promoted the further growth of the industry, and has taken action to roll up the “Chinese style” for imported cheese.
Tang Yi, who has worked with cheese for many years, said that in the early stage of the Chinese market, consumers followed a common development trajectory, that is, they first learned about cheese through pizza and cakes, and then began to buy cheese ingredients to bake at home.
“What excites me is that in the past five years, the Chinese cheese market has formed its own personality and emerged with some unique products. For example, cheese sticks are unique, and only the Chinese market in the world can put cheese on a stick (to eat), and it is easy to carry around. This innovation is very Chinese characteristic,” Tang Yi said, “We will also follow the innovation of the market consumption trend and find the next outlet after cheese sticks.”
In addition to product form, Chinese consumers also exhibit unique taste preferences. “We have also observed that Chinese consumers have different cheese eating habits and styles from countries such as Japan and the United States. For example, Chinese people prefer sweet cheese,” Tang Yi pointed out.
He also mentioned that locally produced cheese is gaining more consumer recognition. “Compared to some imported products, consumers are actually more inclined to purchase domestic (produced) products. We are also very happy to help local manufacturers manufacture innovative products using New Zealand raw materials.”
Xiaoshidai saw on the spot that Fonterra’s raw materials business demonstrated a variety of cheese application solutions. For example, for cheese snacks, this business has brought innovative forms such as cheese cups, cheese grates, cheese crisps, and cheese sauce. In addition, the Fonterra Raw Materials business has also exhibited several unique NZMP natural cheese ingredients, such as Noble Noble Cheese, which has a 30% lower fat content than strong cheddar cheese and a higher milk protein content.
According to reports, Fonterra has more than 100 years of experience in cheese production, and has an independent fermentation strain bank. There are over 100000 unique fermentation strains in the fermentation strain library, and the high-quality cheese, butter, and cream cheese produced have won 35 industry honors at home and abroad.
“As an excellent dairy company, Fonterra produces high quality cheese,” Tang Yi said.
2、 Strategic focus
As the largest business unit of Fonterra in China, the latest performance of the raw materials business is quite resilient.
According to the Fonterra financial report released yesterday by Snacks Agency, in the six months ended January 31, 2023, the raw materials business contributed more than 61% of revenue in Greater China, reaching NZ $2.153 billion, a year-on-year decrease of 6%; EBIT was NZ $86 million, up 4% year-on-year; The EBIT margin increased by 0.4 percentage points to 4.0%.
“China is the largest market for our global raw material business in terms of both sales and revenue.” Tang Yi said in commenting on the latest performance that the profit growth of the raw material business in Greater China is due to the expansion of high value-added raw materials. “For example, we have established many (new) probiotic partnerships, probiotics have grown very fast after COVID-19, and Chinese consumers’ demand for health and immunity products has increased significantly.”.
It further pointed out to Xiaoshidai that the research and development of probiotics is the strategic focus of Fonterra in laying out high value-added non dairy raw materials. The group is “very optimistic” about the consumption prospects of large health products represented by probiotics, and has been testing water related products in China since 2020.
“For example, we have launched our two star probiotic strains HN019 and HN001. Our focus on the probiotic category has been on researching how to add probiotics from the raw material side and supply them to various types of customers.” Tang Yi said that at present, the company has successively reached strategic cooperation on probiotic projects with the School of Food at Jiangnan University, Viagra Health, Refined Energy, etc.https://www.slw-ele.com/
With the optimization of prevention and control, and the recovery of the consumer market, Fonterra’s Greater China raw material business is also expected to return to a more ideal growth level.
“Our (short-term) goal (after the liberalization) is to help existing key customers maintain market share and position. This is what we have spent a lot of effort to do, but also to maintain customer satisfaction.” He said, in addition, the company will also help key customers find more new opportunities. “There are so many opportunities in the Chinese market that I can’t even count them.”.
Looking forward to the future, Tang Yi stated that the strategic focus of the raw material business will be consistent with the headquarters group, namely, to continue to work closely with customers in terms of technology, innovation, and sustainable development. For example, in the context of sustainable development becoming an important topic in the dairy industry, Fonterra hopes to help customers improve their product capabilities through its own grazing practices.
Xiaoshidai has learned that “grass feeding and grazing” is a consistent livestock heritage of Fonterra. Forage, as a natural food source for Fonterra cows, accounts for 96% of their dietary structure, which can reduce their carbon footprint by reducing the amount of feed required. Fonterra’s carbon footprint is also only one-third of the world average.
“Our cheese customers also use the concepts of New Zealand milk sources and grass fed grazing in their marketing campaigns. Natural dairy products such as grass fed grazing and caring for cows claim to help customers differentiate their products and connect with consumers through the stories of New Zealand origin and sustainable dairy industry,” Tang Yi said.
At this FIC exhibition, in addition to continuing to promote New Zealand’s “grass feeding and grazing” claim, Fonterra’s raw material business also launched its “caring for cows” claim in China for the first time. With the launch of these two claims, Fonterra’s raw materials business has stated that it will provide Chinese customers with more options to utilize the care and well-being of animals that produce dairy products, establish relationships with consumers, and meet their needs for pure and nutritious dairy products.