Demand for functional foods in Greater China
Greater China is an important market for Fonterra, accounting for about one-third of the Co-operative’s milk.
With 1.4 billion people and the world's second-largest economy, China offers significant opportunities for Fonterra. The Co-op has built a successful presence there for nearly half a century with Fonterra’s ingredients brand, NZMP, establishing strong recognition and trust in the region and recognised as a trusted partner and preferred dairy ingredients supplier by many of the Co-op's customers.
Regional customers range from category leaders to emerging brands, with strategic partnerships supporting each customer’s business growth.
One such example is Want Want, one of the world's largest dairy beverages manufacturers. Their popular product, Hot Kids Milk, achieves an extraordinary USD 1.66 billion revenue a year, demonstrating the impressive scale of dairy consumption in the Greater China market.
Another is in Taiwan, where customer Uni-President, one of the largest food companies operational in Taiwan and the largest food production company in Asia, has unveiled a new and improved version of their high-protein bread – this time with a powerful three-way collaboration between Fonterra supplying the premium ingredients, and a globally acclaimed award-winning chef.
Meeting evolving needs
China is a dynamic market with key consumption trends focused on health and naturalness, value for money, and instant indulgence. The Co-op collaborates with customers on new product innovations to meet evolving consumer needs - ranging from sugar-free milk tea, to introducing lipids (a vital energy source and key vitamins for infants) into the Chinese market, and advancing medical nutrition offerings in Taiwan.
Fonterra has established itself as a dominant force in the Chinese market, with continued strong demand for its milk powder and growing interest in ingredients that deliver specific consumer benefits. More customers and consumers are looking for products that feel natural, are good for you, taste great, and offer value for money.
In response to these evolving needs, the Co-op is actively supplying to the region a range of high-performing ingredients including protein, cheese, and specialty ingredients such as milk fat globule membrane (MFGM), helping customers create innovative, functional products sought out by health-conscious consumers.
What is driving growth?
Several factors are driving increased dairy demand in China. The Government's Healthy China 2030 initiative has significantly boosted demand for health and wellness solutions with the program increasing the recommended daily intake of dairy from 300 up to 500 grams per person per day. This roughly adds up to an extra 700,000 tonnes of dairy consumed daily across the country, equivalent to more than 30,000 Fonterra tankers of milk every day.
Chinese consumers are also moving beyond basic nutrition, seeking dairy products that offer specific health benefits tailored to different life stages – from children's development to adult wellness and elderly care. Additionally, China's growing urban population creates more opportunities for dairy consumption, as per capita dairy consumption in urban areas is more than double that of rural areas.
The Co-op continues to see strong demand for its natural, grass-fed dairy products, benefiting from New Zealand's reputation as a producer of high-quality dairy. The unique proposition of grass-fed dairy distinguishes the Co-op's products in the Chinese market. By effectively communicating the story behind New Zealand grass-fed dairy, we ensure that our value proposition resonates profoundly with Chinese consumers.
With cheese penetration significantly lower in China than in Western countries, there is substantial opportunity for growth.
Partnerships driving product innovation
Fonterra has developed strong partnerships with major players in the Chinese market.
Customer By-Health has recently completed a clinical trial showing that a combination of ingredients, including the Co-op's MGFM, can enhance cognitive functions, including memory, in subjects with mild cognitive impairments. This result is significant, opening new doors in the healthy ageing market, especially in China and across the Asian market.
Another example China’s largest ready-to-drink milk tea producer, Uni-President, that has recently upgraded its classic Assam milk tea by launching a new ‘truly zero-sugar’ version. The product continues to champion Assam’s positioning by blending real brewed large-leaf black tea with high-quality imported dairy with the Co-op is suppling both Whole Milk Powder and Milk Protein Concentrate. By combining these premium ingredients with a zero-sugar concept, the product is offering Chinese consumers a healthier, lighter milk tea option.
The Co-op has recently launched two new cheese ingredients in China: Cheddarsan and Low Salt Mozzarella curd. Cheddarsan combines the intense flavour profile of Italian Parmesan with the smooth texture of Cheddar and has gained popularity among Chinese customers due to its cost-effectiveness and ease of processing. The Low Salt Mozzarella curd addresses Chinese customers' demand for healthier options with reduced sodium content. These ingredients have already been applied to various cheese snacks such as mini round cheese, cheese sausages, and string cheese.
Innovative ingredients addressing health needs
Fonterra continues to respond to changing nutritional demands with sophisticated dairy ingredients that go beyond traditional milk powder. Innovations include formulations targeting gut health, brain function, and bone strength by combining milk proteins, milk calcium, milk fat globule membranes, and probiotics to create nutritional solutions addressing complex health needs.
Through science-driven innovations and by leveraging New Zealand's grass-fed heritage and dairy expertise, Fonterra is well-positioned to support industry growth and enable product innovation in this crucial market.