Fonterra's growing UK momentum two years into market return
Two years after the NZ-UK Free Trade Agreement (FTA) reopened the door, Fonterra is steadily growing in a high-value market that once defined our global footprint.
After 50 years of limited access, New Zealand dairy products are back in the United Kingdom following the FTA that came into effect on June 1, 2023.
A return to a historic market
For New Zealand dairy farmers, this agreement carries historical significance. Up until the 1970s, the UK was New Zealand's largest export market and a key revenue driver for the dairy industry. For many in the Co-op, the UK feels like a return home. The new ‘gold standard’ agreement removes all UK tariffs on New Zealand dairy over a five-year period, creating opportunities for growth across the Co-op's entire product range, particularly our grass-fed butter and cheese.
This FTA is one of New Zealand's most comprehensive trade agreements, enabling open market access to what was once our largest export destination before the UK joined the European Union.
Early success
Despite only recently re-establishing its presence, the agreement is already showing benefits with growth across several products including butter, cheese, AMF, protein and skim milk powder.
The UK market opportunity
The UK represents a substantial opportunity as the world's second-largest importer of dairy with strong local demand. The "Kiwi brand" carries nostalgic value among certain UK consumers who remember New Zealand dairy products from decades ago.
The market seems to value qualities that align perfectly with Fonterra’s strengths, with consumers showing to appreciate quality and innovation, as demonstrated by multiple wins at the International Cheese and Dairy Awards in Cheshire, England in recent years.
Both customers and consumers also place high importance on sustainability credentials, appealing to their environmentally conscious mindset and high regard is also given to animal welfare standards with Fonterra’s farming practices matching these expectations.
Sustainability as a competitive advantage
Fonterra's grass-fed farming credentials and sustainability practices are proving to be valuable selling points in the UK market. Despite the distance between the UK and NZ, emissions from transportation makes up only 1% of the Co-op's total emissions, with the real carbon footprint benefits coming from behind-the-farm-gate practices and our production sites.
The hard work the Co-op's farmers are doing in the sustainability space has a direct impact on Fonterra’s ability to succeed in the UK market and partner with customers who value the goodness of New Zealand dairy.
Our strategic approach
Re-entering the UK market after 50 years hasn't been without challenges. Building customer relationships takes time and cannot be scaled up overnight, with every decision made with the goal of generating value that flows back to the Co-op and its farmer owners.
Fonterra is taking a measured, strategic approach to the UK market focusing on efficiency and simplicity while selecting the right partners and sales channels. We're positioning New Zealand dairy not as a commodity export, but as a premium, high value offering that complements the UK market ensuring we're developing sustainable relationships with partners who value our world-class products for their quality, sustainability credentials, and innovation.
Looking forward
As the Co-op continues to re-establish its presence in the UK, the path forward is marked by promising opportunities.
Access to high value markets through comprehensive FTAs provide important market optionality and resilience for Fonterra, while continuing to maximise returns for farmer owners.