Thursday, March 28, 2024

E-commerce pays off for Fonterra

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Fonterra sold more than $9 million worth of dairy products in one day this month, the “Double 11” e-commerce extravaganza in China.
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It sold 200% more than on the same day in 2014, bringing in 38m renminbi direct from consumers on November 11 this year.

Double 11 is the biggest one-day, online shopping event in the world and total sales this year were US$14 billion, which was 60% growth on 2014.

Fonterra sold Anchor UHT milk packs, Anlene and Anmum enhanced milk powders and Anchor blue and trim milk powder sachets.

Its newly appointed greater China managing director Christina Zhu came to New Zealand last week to address the co-op’s annual meeting at the Waitoa, Waikato, plant where all its export UHT packs are produced.

Sales in the first quarter started this financial year very well, as evidenced by the Double 11 achievement, she said.

Earlier in the month, when addressing the NZ China Business Summit in Auckland, Fonterra chief executive Theo Spierings said the revenue target for 2020 in China was $10 billion, of which 60% would remain dairy ingredients, 20% food service and 20% consumer products.

“The majority of our consumer business will be e-commerce – we are not going head-on with the established players that have vested interests in tier one and two cities,” he said.

Food service business for Fonterra was now worth $1.5b in 40 Chinese cities and consumer business had grown 33% in volume in the last financial year though it was only early days for the roll-out of the Anlene and Anmum brands.

Spierings talked of disruptive forces in the Chinese market, number one being the demographic changes around the end of the one-child policy and growth of the middle class to 400-500m people.

He also mentioned that 200m people would be over 65 years of age in 2020 and they were the target market for Anlene, the bone health brand.

Second was the growth of e-commerce, where 20% of premium milk was now sold.

China has 650 million internet users and because the country did not have western-style distribution networks outside of the biggest cities, the e-commerce channels were growing exponentially.

Zhu told the annual meeting that food service sales so far were only the tip of the pyramid and that there was a “fat middle” to target.

It was made up of the bakeries and restaurants using non-dairy cream, cheese and spreads that could be converted to dairy.

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