Local research speeds up new product launches by Fonterra

Five new products launched by Fonterra, a New Zealand dairy giant, made their global debut in Shanghai on Tuesday, showcasing the company's operational agility in China, its largest and fastest-growing market.

Products like a new type of cheese and milk powders for adults and children are an outcome of research by the company's research and development teams at its headquarters in Auckland, New Zealand, and at the Fonterra-ACC Shanghai Innovation Center, which was launched last year to better tap into the fast-changing dairy preferences of Chinese people.

"China is Fonterra's largest and most important strategic market," Teh-han Chow, CEO of Fonterra China, said in a press release. "We will continue to pay attention to the nutritional status and needs of all age groups, and provide Chinese consumers with more high-quality, healthy, nutritious and delicious dairy products in innovative ways."

The new products include milk powders rich in probiotics extracted from four fruits and vegetables, as well as those rich in lactoferrin, a key protein to boost immunity.

The vice-president of Fonterra in China, Cao Hui, said the products are an outcome of in-depth customer research, which suggests Chinese consumer are looking for dairy products that enhance their immunity and intestinal health.

"You do see this particular desire for immunity enhancement, especially after medical experts and influencers advocated the health benefits of milk in light of the COVID-19 pandemic," Cao said. "We are definitely seizing that opportunity to upgrade our products to feature probiotics."

Chinese dairy consumers also want to control their calorie intake while seeking nutritious food. This pursuit of a balanced diet is driving the need to manufacture low fat, or skimmed milk.

"The 'zero fat, low calorie' wave is sweeping the food and beverage sector in China, and it's something we are training our sights on," Cao said, adding that Fonterra is replacing sugar with fresh fruit extractions.

Euromonitor International, a consultancy, projected dairy product sales in China would reach $56.9 billion last year. According to a survey carried out by market researcher Ipsos last year, 49 percent of Chinese respondents planned to improve their health by consuming dairy products while 50 percent planned to increase their spending on dairy products.

"We are definitely seeing three noticeable trends in China: people are longing for customized, high-end and occasion-based dairy products," said David Rao, managing director of Ipsos China. "That means dairy products should be designed to cater to different scenarios." Beverage-like offerings, for instance, are suitable for social occasions and workout sessions, while others should be packaged to fit into snacking or cooking at home.

Localized consumer insights, through tie-ups with e-commerce platform Tmall, helped tailor the products.

"The local R&D center managed to expedite the innovation process," Cao said. "Thanks to the local innovation center, our fruit and vegetable milk powder hit markets in just six months. It would otherwise have taken us two years."

Bilateral trade between China and New Zealand reached NZ$30 billion ($21 billion) last year, according to data from New Zealand Trade and Enterprise, the New Zealand government's international business development agency. Dairy products formed the largest share of the trade volume, registering 10 percent year-on-year growth to reach NZ$6.8 billion.