Background information about Fonterra:
Strategy & Opportunity Fonterra Is Facing in China:
China is a crucial and important market for Fonterra. Firstly, overall dairy sales rose by 8.5 percent in 2011 to 28 billion dollars from the previous year. Secondly, this world’s dairy giant has always been keeping its eyes on the Chinese market for a long time, and now China’s market accounts for half of Fonterra’s revenues from emerging markets.
According to the report from Farmer’s Daily, Fonterra recently reached and signed an agreement with Yu Tian County government, a county located in northeast province of Hebei, to invest 557 million rmb to open its second new farm in China. Mr. Spierings, the CEO of Fonterra, said that Fonterra is planning to establish a total of five farms in China in the next five years with a herd size of 15,000 cows, which is able to produce 150 million liters per year. It marks Fonterra’s attempt to re-rise in China after the setback caused by the relationship with Sanlu and its role in the contaminated formula scandal in 2008. After the scandal, China’s market was critical to Fonterra and showed distrust to its damaged image. For Fonterra, the strategy in China for next decades can be summarized into two aspects – quality and quantity. To ensure a safe supply of dairy products, Fonterra set a goal that “From grass to glass, it will be safe” quoted from Mr. Spierings. Secondly, Fonterra’s ultimate goal is to produce up to one billion liters of milk in China every year by 2020, which means that Fonterra will be investing more money to open new farms in the future.
Credit Photo: Hudong