What the customer wants

Solving customers’ problems has resulted in Fonterra producing mozzarella cheese that can stretch further than rival mozzarellas, cheesecakes that look alluring after sitting in a window display for several hours, and cream that doesn’t split when chefs are making sauces.
“Superior and highly functional products are built on some amazing science and technology,” Dedoncker said.
He focused on the fusion between commercial and market knowledge and science at a conference in Wellington on research, development and the Primary Growth Partnership organised by the Ministry for Primary Industries.
Fonterra’s food-service business aimed to move more and more milk into true value-add solutions for customers in more than 50 countries.
“The customer typically is the chef,” Dedoncker said.
The “chef-led model” tried to understand those customers better than anybody else. Information was gathered by working in restaurants and talking to chefs, marketers, quality controllers and technical staff.
The importance of providing a new process that opened up floor space in a McDonalds restaurant was among the many lessons learnt.
Shake mixes and sundaes required two different formulations and two different machines.
Fonterra had been working with an equipment supplier and used the science behind the way it made its dairy products to come up with a solution that could provide shakes and sundaes from one machine, using half the space.
“That is something McDonalds will pay more for.”
Chefs were part of the Fonterra team.
“If we are talking to chefs, we need chefs on board,” Dedoncker said.
“The chefs help train us, help us talk to customers.”
Distribution partners were another component.
Fonterra had teams in 40 cities in China, adding 13 in the previous 12 months.
At the time Dedoncker gave his presentation in Wellington, he had teams checking out prospects in six more Chinese cities to determine if they were ready for Western dairy foods.
“There is no data. You have to walk the streets and you need to work out how many restaurants there are, so you do a representative sample and look at the menus that these restaurants are using – and that’s what we do.
“And when we know certain demographic profiles and certain statistics we get ready to go.”
One critical sign was the opening of a KFC restaurant, “because they are actually better at this than us in terms of their statistics and demographics and whether the city is ready”.
Once that happened Fonterra moved in, taking distributors with it, and set about ensuring its products were solving problems uncovered by its research.
Among the examples:
Croissants: Butter is the critical ingredient, and not just any butter. Fonterra made butter sheets at a certain time of year when the milk properties gave the best results for chefs. The butter sheets were a simple idea developed from understanding what customers needed and how chefs used the product.
Another challenge for McDonalds was to trim costs by reducing waste from croissants left over after breakfast. Fonterra built menus for chefs, and croissants gave great results when used to make bread and butter puddings.
Cheesecake: Cheesecake consumption is high in Asia. Bakers invested huge amounts in window dressing to attract customers and expected their wares to look good while on display. Fonterra built new cream cheese factories in the past two years “because we are making a product that can be used as an ingredient that can stand for up 24 hours and still look as good as when it was first put on display”.
Pizza: Fonterra technology reduced the time taken to make a mozzarella block from three months to a day. But functionality challenges were met too. Pizza Hut in China had mozzarella-stretching competitions every Friday. The longest stretch won customers a free pizza. A 30-40cm stretch had been typical but by getting the fat, protein and moisture mix right, “we can get over a metre”, Dedoncker said.
When Fonterra first partnered with Christine’s Bakery chain in China, it was involved in product design. It helped with the presentation to customers, including finding window dressers, and built recipes. The customer’s expectations from butter and cream included taste and the need for products to stand and look good for 24 hours. The bakery business had been franchised to more than 1000 stores and was Fonterra’s third largest customer in China.
One measure of the value-add for Fonterra from the food service business was the price premium. The cream that doesn’t split, developed by the co-operative, had a price premium of 20%. Another measure was the return on capital of about 26%, more than three times greater than the co-operative’s overall return of 7% in 2014-15.