Fonterra to triple its consumer dairy product sales in China

New Zealand's Fonterra, the world's biggest dairy exporter, is planning to triple its consumer brand Anchor's sales in China, including ultra-high temperature and pasteurized milk, to further consolidate its market position, a top company official said.

Fonterra's core consumer brand Anchor already sells 100 million liters equivalent of liquid milk products every year in China, including ambient yogurt, dairy foods and adult milk powder.

According to Christina Zhu, president of Fonterra China, the company's main focus will be to strengthen the long-term, standardized, large-scale and value-added businesses in the country.

From its first UHT Anchor milk sold in Shanghai in 2013, Fonterra has expanded its product range to over 47 products across 13,000 stores nationwide. The company has also been making steady progress in online sales, which now accounts for 55 percent of its overall sales.

"Over the last five years we have sold nearly 1 billion glasses of milk in China," she said.

The company' growth has also been buoyed by the growing demand for high-quality and diversified dairy products from Chinese consumers. High-end UHT milk and high-end ambient yogurt have maintained annual growth rates of more than 20 percent for several years. Online adult milk powder and dairy foods sales have also shown an average annual growth of more than 50 percent, according to data from Fonterra.

UHT and pasteurized milk areas are key investment sectors for the company to boost sales in the short term, said Chester Cao, vice-president of consumer brands for Fonterra China.

Butter, cheese and cream, are expected to see an uptick following their integration into everyday Chinese home cooking, he said. Fonterra is also looking forward to getting into the pasteurized low temperature yogurt sector, he said.

In December, the company launched a pasteurized milk product by collaborating with Hema Fresh, the grocery unit of Alibaba Group Holding Ltd. The pasteurized milk, named Daily Fresh, has a shelf life of 24 hours so that it retains its freshness and quality, he said.

Daily Fresh was the top-selling pasteurized milk on Hema Fresh, said Cao, adding that innovative marketing campaigns such as printing daily news on the packet helped gain traction with consumers.

The company is also the category leader in both the food service and ingredient markets in China.

"One in four liters of the milk we collect ends up in China. This is why China is such an important export market for Fonterra," said Zhu.

Song Liang, an independent dairy analyst, said sandwiched by international dairy peers and intense competition from domestic players, Fonterra's goal to triple consumer sales looks quite challenging due to competitive UHT milk products, adult milk powder and infant milk formula products flooding the market.