Fonterra South-East Asian global ingredients sales and product sourcing director Fabrizio Jorge said he spent 15 years with manufacturing giant, Nestle, before joining the New Zealand company.
“This is a moment of the perfect storm, for dairy farmers, from the economic and geopolitical situation,” Mr Jorge said.
The Chinese economic slowdown, coupled with the significant growth in European dairy production and the fall in oil prices had led to the Australian dairy crisis.
“China is the fifth largest producer of milk the world, at 35 billion litres a year and while they are still consuming a lot of Chinese milk, they are importing less,” he said.
The war in Syria – and the “Isis factor” – had completed devastated markets in that region as well.
“A lot of people could not forecast where the world market would be,” Mr Jorge said.
Volatility in dairy markets was here to stay, as the world became more connected.
He said it was hard to understand the correlation between what was happening in a country like Algeria and Australian suppliers.
But Europe, which had produced 10 billion litres of milk, from 2014, was an “aggressive seller” into the Middle East, China and South-East Asia.
“The real competition we are experiencing from Australia, is from Europe – we are experiencing unprecedented competition,” he said.
“You see Europe being a very aggressive seller into our key customer markets.
Mr Jorge said Fonterra needed to be an innovator, as Australian consumers wanted quality and value.
The company was meeting the quality criteria, with its release of ultra-filtered milk, which had a long shelf life.
”It is very clear to me the typical household in Australia has an expenditure and budet of $150 a week, that’s more or less what the typical family would spend on groceries, a week.
“Despite a lot of discussion in Australia, we do not witness a slow down in sales of that product, Australia consumers do expect milk being sold at $1 a litre.”
He said technology was critical for Fonterra, as questions were being asked as to whether prices such as $6 a kilogram for cheese was sustainable, for both farmers and processors.
Fonterra was committed to remaining in Australia, as it saw it as a hub for China and South East Asia.
“We are in Australia to stay, this is a very strategic part of the world for us and the reason why our shareholders in New Zealand are writing sizeable cheques,” he said.
The new $120m Stanhope cheese manufacturing facility was evidence Fonterra was committed to Australia.
But he said the company needed to be competitive, in its supply chain.
“The world of freight and warehousing is not as straightforward as it appears,” he said.
“Most of us would think it is more expensive to export from Europe to South East Asia, but a container from Amsterdam costs 30 per cent less than a container from Melbourne.”
Source: Stockland
Link: http://www.stockandland.com.au/story/4060384/fonterra-here-to-stay-senior-director/?cs=4584
