Globalization and adaptation: The future of dairy cooperatives

A session, titled The Shifting World Marketplace: A Co-operative Perspective, brought together four co-op executives that deal with a combined $40bn in revenue, billions of consumers and hundreds of billions of gallons of milk and dairy got together to discuss the future of the industry.

Global vs. local?​

While many in the industry focus on expanding across the world, Peder Tuborgh, CEO of Arla Foods, said his company is still exploring exactly what “globalization” means. The company has yet to find a real path forward in that way, but he said he does believe it is a big opportunity to expand business.

“The next 10 years will be about understanding consumer needs and protecting innovation models rather than technology,”​ he said. “[It will be about] really understanding and having the people on board in your company who comprehend and understand Chinese consumers and Indian consumers. That will be a challenge and not all of us will succeed.”​

On the other hand, Roelof Joosten, CEO of Royal FrieslandCampina N.V., believes the rise of local companies may be just as important as the rise of global business. Local dairy companies can be “far more agile, far more swift and very good at innovation​,” he said.

A big issue moving forward for both global and local could be affordability could be affordability of the products, especially with the rise of the US dollar. Kelvin Wickham, managing director of global ingredients of Fonterra Co-operative Group Limited, said he considers China and how to escape the world commodity basket as the “two big bucket” issues of the global market.

“One of the challenges I have is… the affordability issue so we can get more consumers into dairy sooner so more profit in the industry,” he said.

Faster pace of information calls for quicker innovation​

Gary Helou, managing director of Murray Goulburn Co-operative Co. Limited, said he believes the rise of milk production in Asia, specifically China, is a “massive shock to the system”​ that is sure to continue. One big challenge the entire industry will need to meet, in addition to China’s rise, is the greater amount of power and faster speed of data and information online, as well as consumer activism.

“In the developing world, the consumer now has massive amounts of information to understand where to buy the [brands they prefer],”​ he said. “It’s empowering consumers like we’ve never seen before.”​

This faster speed of consumer knowledge and industry growth means a need for innovation across the entire company, Helou said. Innovation needs to be more than just a concept; it instead must work from the delivery of milk through the distribution center and into the markets.

When asked how he believed the US market was set up going forward, Tuborgh said it’s a very different market than any other due to its ethnic differences and cultural food patterns. However, he believes it could be seen as something of a microcosm of the entire industry. It’s a very attractive market to companies that also has an opportunity for its companies to go global. The question will remain how US companies understand the need for tailor-made innovation outside of the US, he said.

“It requires American companies to utilize fantastic resources,”​ he said. “How are you going to play when you go outside of the US?… For many years to come, the US will be the most important market and most profitable. But, increasingly, they will need to understand how you’re going to organize [in new markets].”​