In its group strategy refresh, the New Zealand-based firm said it aims to “grow volumes and value by focusing more tightly on emerging markets and products that meet growing consumer demand for dairy nutrition.”
Future set out
Fonterra chief executive Theo Spierings said the strategy refresh would guide the group in growing volumes, targeting high-value areas of nutritional need and executing plans at speed.
"Strong economic and population growth in emerging markets is driving a situation where global demand for milk is forecast to grow by more than 100bn litres by 2020, with New Zealand expected to contribute only 5bn litres of additional supply by that date.
“With overall demand growing, we need to grow volumes to protect our position as the world's leading dairy exporter.”
The strategic refresh outlines more than 100 projects, to focus Fonterra's efforts including a strong push on emerging markets, optimising New Zealand milk business and building integrated milk pools abroad to bring returns to the firms home market place.
Focus on expanding markets
Spierings said Fonterra would continue to focus on fast growing markets in China, ASEAN and Latin America, as well as Middle East and Africa but New Zealand would always be number one.
"With limited milk supply, we can't do it all. We see much lower growth of dairy exports from New Zealand to the mature markets of Europe and North America so will need to refocus our operations there, with a greater emphasis on working with local partners, local added-value processing, and exports through the network.
"Our farmer shareholders receive most of their income from their milk cheques so we need to continue to drive the business that collects New Zealand farmers' milk, processes it, then sells and ships it overseas,” he said.
"We already have big projects underway to improve the way we use our manufacturing plant in New Zealand, drive efficiencies and add value for customers so we can beat base commodity prices.”
The group saw the potential to grow milk volumes outside of New Zealand by developing quality local supply and integrating it closely with business in China, Spierings added.
He added: "Our pilot dairy farms in China are now producing some of the highest quality milk in the country and we are looking to accelerate the development of a quality milk supply in China and integrate that with our local business by manufacturing products for Chinese customers.
"We don't have to fully own the farms or factories - we can achieve the same result through partnerships and supply agreements, which is how we run our integrated businesses in Australia and Latin America."