Looking forward to China’s dairy market in the post epidemic period, the head of Fonterra Greater China region, who took office in December last year, is still optimistic.
In a written reply to the snack food agency today, Zhou Dehan, acting CEO of Fonterra Greater China, said that after the epidemic was under control, Fonterra’s dairy raw materials and catering services business in Greater China had gradually recovered. Previously, Fonterra group has said in the semi annual report that the group will maintain the full year revenue forecast of the fiscal year unchanged.
In addition, Zhou also talked about the consumer performance during the epidemic period, the work in the second half of the year and the plant based protein outlet. Let’s have a look.
Food dairy products become the highlight
During the epidemic period, the business performance of various sectors in Fonterra Greater China region was different. At present, its business includes catering services, dairy raw materials, consumer brands and so on.
In the dairy raw materials sector, Zhou Dehan said the impact of the epidemic is very small. “Prior to the outbreak, we had signed a large part of the milk supply contract for fiscal year 2020 (Note: August 2019 to July 2020), which helped to effectively mitigate the impact of the new outbreak on the business.” He explained.
Due to the fact that part of the consumption outside the home during the epidemic turned back to the scene at home, Zhou Dehan said that when most restaurants were closed in February, the catering service business in Greater China of Fonterra was affected to a certain extent. During the same period, some consumer brand businesses in Greater China of Fonterra realized counter trend growth.
“At a time when people have to live at home for a long time because of the epidemic, we see an increase in sales through online channels.” “One of the biggest highlights is our catering dairy business (including butter, cream, cheese slices, etc.), which has grown very well, especially when most people are at home in February and March,” Mr Zhou said
Speaking of consumer performance during the outbreak, Zhou Dehan believes that the most obvious trend is that the nutritional value of dairy products has been more recognized.
This has benefited from many aspects. “For example, the government talked about the benefits of dairy products for immunity, and the China Dairy Association has increased the official daily intake of dairy products for children, pregnant women, expectant mothers and the elderly from 300 grams to 500 grams. All of this helps to raise awareness of the nutritional benefits of dairy products. ” Zhou Dehan said.
So in many dairy products, which category does Fonterra Greater China value? One of the answers is the above mentioned food.
According to Zhou Dehan, adjuvant dairy products still maintain a good growth momentum after the epidemic situation is stable. “Although it may not reach the sales level in February, we are still optimistic that the demand for complementary dairy products will be higher than before the outbreak of the epidemic.”.
Maintain full year earnings guidance
After the epidemic situation has been effectively controlled, China’s catering industry has gradually returned to normal business rhythm and other factors have also provided certain confidence for Fonterra group to maintain the revenue guidance of the whole fiscal year.
In terms of catering services, Zhou Dehan revealed: “we can see that the passenger flow of bakery customers has begun to pick up, and the business of coffee shops and tea brands is gradually picking up. For example, almost all Starbucks stores in China are back in business. “
As for dairy raw materials, he said: “we see that almost all customers in the dairy ingredients business are back in production, although they may not be all operating at full capacity.”
Out of the industry and economic environment recovery optimistic, Fonterra maintained the performance expectations given before.
Fonterra’s global revenue grew by 7% to NZ $10.4 billion in the first half of fiscal year 2020, according to the company. Among them, Fonterra Greater China catering service department has achieved double-digit growth in the reporting period.
“In terms of financial performance, the good momentum we saw in the first half of the financial year continued into the second half.” Zhou Dehan revealed. According to Fonterra’s financial year 2020 interim report previously released, considering that the epidemic situation in the second half of the fiscal year may still bring significant risks, the group has adopted a prudent attitude and maintained the earnings guidance range for the whole fiscal year unchanged.
In order to maintain the growth momentum, Zhou Dehan believes that the first task of Fonterra Greater China region in the second half of 2020 is the mentality of “being flexible and ready to try new ways of doing things”. He said this mentality is an important experience Fonterra has learned in the past few months.
As introduced by the snack agent, Anman milk powder is an example of Fonterra’s flexible response in Greater China. In order to ensure the normal supply of milk powder in various regions during the epidemic period, Anman milk powder, a subsidiary of Fonterra group, cooperated with New Zealand logistics company to open up cross-border products and quickly reach China. Meanwhile, it also comprehensively upgraded the logistics and distribution services in the domestic sector.
Under the epidemic situation, Fonterra Greater China has not stopped launching new products. According to Zhou Dehan, Fonterra Greater China plans to release a number of new products, including cheese and probiotics, at the Expo to be held in the second half of the year.
He said that the company hopes to participate more deeply in the development of China’s dairy industry through the platform of the China International Fair. According to its introduction, Fonterra Greater China has become Fonterra’s largest, most important and fastest-growing strategic market, and nearly 25% of Fonterra’s total sales volume has been exported to greater China.
Differential layout of plant based proteins
Interestingly, snack generation also learned that Fonterra, whose main business is milk, has already set out to lay out a new outlet for “plant based protein”. But different from some dairy giants, Fonterra’s current approach is to target the b-end market, rather than launch products directly facing consumers such as soybean milk.
According to Zhou Dehan, Fonterra’s dairy raw materials team in Greater China has combined animal milk protein with plant-based protein and recommended dual protein solutions to customers in need. As early as 2017, the team applied an emulsifier based on milk protein concentrate to coconut milk, and last year it was extended to oat milk products.
In addition, Fonterra R & D center has used plant-derived raw materials in consumer products for many years. The company said it had used ingredients from plants in butter mixtures, infant formula and milk powder, according to Fonterra’s global website.
As for the layout reasons, Zhou Dehan said that since vegetable protein and plant drinks have been in China for thousands of years, such as soybean milk, plant based drinks are not new to the Chinese market and consumers. However, due to the continuous development of consumers’ eating habits and market preferences, Fonterra Greater China still hopes to continuously innovate and provide consumers with more diversified protein choices.
He revealed that Fonterra R & D center is still studying the development and innovation of plant based protein products, and there may be opportunities for further exploration in this field in the future. “We will give full play to the existing advantages to find new market opportunities, and ensure that the products produced have a variety of high-quality nutrition and high-quality.”.
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