“There’s explosive growth in developing markets particularly China,” he told the Vegetable Product Group Conference in Auckland late in June.
Fonterra had exported $400 million worth of dairy products to China in 2008 but now that had grown to 40% of its sales, he said.
Some commentators believed China would become the world’s largest economy as soon as next year.
“That shows the dynamism and changing shape of the world we live in.”
Turner, who was previously Fonterra’s managing director in China, said the Chinese bought one-third of the world’s android phones, semi-conductors, and luxury goods. The entire annual Australian milk production equated to the gap between demand for milk products and what China could produce itself.
There were 250 supermarket chains in China servicing 1.3 billion people. There was no magic bullet to succeeding in the market, which relied on finding good partners, perseverance, and forming good relationships with government and quarantine officials.
“Respect the market,” Turner said.
“There are nearly as many competitors as consumers so expect really tough competition.”
He said there were an extraordinary number of entrepreneurs in China, who he described as massive and serial risk-takers.
“They make money in one place then rapidly expand with a number of big ventures under way at once.”
NZ and Australian businesses were cautious in comparison, just entering one or two ventures at a time.
“Often foreigners are viewed as being just too damn slow,” he said.
Due to the lack of corruption in NZ “that can make us naïve”.
“The Chinese have no hesitation about picking winners.”
Turner compared China with a teenager growing and testing its economic muscles and said the best response companies could often make was to not cry foul when rules changed.
“China is more open, consistent and less captured by lobbies than Japan, the European Union, or the United States,” he said.
“All companies are guests in China and need to be aware of what the Government is trying to achieve.”
India might be even more exciting but that was still on the horizon, Turner said. By 2050 it could be the world’s third-largest economy and it had a population that traditionally drank milk, so imports were likely to be needed.
There were also other substantial emerging markets in central Asia and the Middle East. Indonesia was exciting, with a market of 250m people, and Myanmar and Vietnam presented great branding opportunities for those who were first in.
“We tend to get fixated on China because it’s right here now in front of us.”
Quality and safety were consumers’ number one concern.
“They want to know where the product is coming from and that favours integrated chains or individual producers.”
Asked about the power of supermarkets, Turner said Fonterra was involved “in that bloodbath in Australia”, referring to Coles discounting milk to A$1/litre.
“You can try to appeal to politicians but it’s hard to say the milk price is too low,” he said.
The whole of the Australian industry was struggling as a result, with Fonterra trying to find niches in that market avoiding the fresh milk sector.
Asked about any ways in which the vegetable growing industry could share in dairying success, he suggested there could be efficiencies in shipping between the sectors through Kotahi, Fonterra’s joint venture with Silver Fern Farms.
“Can we find better ways of doing things?” he asked.
“There’s a big milk curve which means we have full ships from October to March.”
Fonterra was talking with other companies such as The Warehouse about how it could link in with its imports.
Late in June Kotahi announced a 10-year freight alliance with the Port of Tauranga along with a separate agreement with Maersk Line.
Kotahi chief executive, Chris Greenough, said the time was right for key players to work together to build a capability within NZ to receive large ships with all the efficiencies they brought.
The strong growth of dairy exports from the South Canterbury region over the past three years meant container ships would again call at the Port of Timaru while significant volumes went through the Port of Lyttleton.
