“Premiumisation forms the core of our new strategy,” chairman John Monaghan has said.
NZ Milk Products division chief operating officer Kelvin Wickham explains the nature of such premium products and prices in a video released to farmer-shareholders last week.
He said it is embedded in all NZMP does in markets built up over many years.
“In our surveys of customers we ask what does NZMP mean?
“The answers revolve around New Zealandness, consistent quality and our ability to be innovative.”
Across all NZMP ingredients and all geographies customers pay more for Fonterra products than those from other countries or companies.
Fonterra’s skim milk powders sold on the Global Dairy Trade platform consistently attract US$150 a tonne premium over European products and that is worth $50 million annually.
In Japan customers pay higher prices for NZ butter and cheeses because they can make consumer-ready products that attract premium retail prices.
“We spent three years on a mature cheddar cheese with added functionality for one Japanese customer that is hard to copy, attracts a premium and is now contracted long-term.”
Fonterra now intends to concentrate on making more from NZ milk, not milk from overseas pools that require extra investment, infrastructure and people, Monaghan has said.
NZMP generates 60% of Fonterra’s revenue, transacts more than 20% of all globally traded dairy products and has 1100 customers.
Advanced ingredients now account for 40% of all dairy products with higher values and functionality than the base ingredients, called reference products – milk powders, butter and anhydrous milk fat.
In the 2018 financial year NZMP sold non-reference products for an average NZ$786 a tonne more than reference products, a margin of 16.2%.
Two of the fastest-growing advanced ingredients categories are sports and active lifestyle and medical nutrition, both concentrating on milk protein opportunities.
