Fonterra's Johan Priem upbeat on China prospects

The end of China's one-child policy is good news for Fonterra but is not a sudden key to unlocking huge potential, the dairy giant's new president for Greater China and managing director for Asia, Middle East, Africa (AsiaMEA) says.
Share on twitter
Share on facebook
Share on linkedin
Share on whatsapp
Share on email

«That’s clearly going to be helping with our demand. It was already very attractive, even with the only child policy,» Johan Priem said, adding that a number of Chinese families already have more than one child as the policy was gradually loosened over the past few years.
«With this two child policy which is being gradually introduced to the entire population, the whole system in China will need to get adjusted to that. From what is need to be made available from a housing point of view, the way that people are spending their disposable income, the way that education is being administered, it’s almost requiring a complete overhaul of the China system.
But the end game is clear. People in China, those that choose to, will have two children in their family. And that obviously starts with babies, with kids – and that’s exactly the sector within which we are active, also with Beingmate and obviously supplying our customers, so very, very healthy prospects.»
Priem’s cautiously optimistic view – Fonterra has yet to adjust its forecasts to take in the new policy – is shared by some analysts who echo the point that the policy is not a sudden shift to double the number of children.
Priem’s new role is part of Fonterra’s strategy to oversee the development of Fonterra’s branded business across a number of priority markets.
The dairy giant is collectively owned by 10,500 New Zealand farmers, and is the world’s largest exporter of dairy products.
There are four parts to its activities in China:
– commodity milk powder imports
– the consumer and foodservice business (which includes the Anchor, Anlene and Anmum brands)
– international farming there
– the shareholding in Beingmate
«It’s really making [it] work [by] taking all the best parts of what the world has to offer, thinking New Zealand first but not exclusively, and bringing to that portfolio, predominantly New Zealand products and other things that are very complementary,» Priem said.
Planned development in all four areas means Fonterra is on track to increase China milk production from the present 200 million litres a year to one billion litres a year by 2020, he said.
His responsibilities cover a wide area geographically and within this eight key markets have been identified.
Four – Malaysia, Sri Lanka, Chile  and New Zealand – are leadership markets where the company is already number one.
The others-  China, Indonesia, Australia and Brazil – are strategic markets where Fonterra is eyeing a number one or number two brand position.
«I am trying to create that value in four of those eight markets as our focus markets. This does not mean there are no other markets of importance, but this is where our focus is. That’s where we will invest disproportionately with resource allocation,» Priem said.
QUICK FIRE QUESTIONS
How will the Australia-China FTA affect Fonterra?
As a global company we should be open to any opening up of markets whether that affects us or whether that is having impacts on countries like Australia.
At the end of the day we can’t say well let’s have this a little bit closed and this a little bit more open because that suits us.
It’s got to be one story and it is up to us, Fonterra as a company, to make sure that we are at least as competitive in everything that we do – whether that is product proposition, pricing, servicing – that other countries benefit from.
So it’s up to us to make sure that that does not have any impact on us as it the case anywhere else in the world.
Are there any specific steps you will be taking to ensure that?
It’s more than the trade agreements. It’s what propositions do we have, what milk value add do we bring to the table on a like for like basis because products can not always be completely interchanged, some are more similar than others, and other prospects do come in.
It’s about your servicing levels, you contacts with your key accounts. It’s open and it’s up to us to make sure that we are not going to be losing anything.
And you’ve got no concerns, you’re hoping you can achieve that?
Absolutely.
What is the current Chinese perception of NZ quality and safety? 
I think it is a general advantage being known as a company that is operating in one of the most well established dairy markets with a healthy reputation. So it is the combination of the image of New Zealand, together with the image of Fonterra.
So that’s one angle. The second angle obviously is the reputation of companies. And we measure that amongst our peers – when I say peers, we have a number of partner companies that we like to be compared against – so we do a reputation survey and it is great to share with you that for our latest survey – and that is consistent with our survey that we started around 10 months ago, we do this with an interval of six months – that we ranked number two. And no I won’t be revealing who was number one.
What production are you doing in China? 
In China 100 per cent of all the products that we sell under our Fonterra brands trading company name, are imported from New Zealand. We don’t manufacture anything ourselves despite the fact that we could have access to local milk and obviously to high quality local milk of our own.
The idea is that in time we will be having a plant, we want to build a position first – and building that position on the basis of an imports/exports model is the way to go.
And we look at an end game that will involve at least a plant if not more. That can be our own or a partnership, there are different ways to get there.  But at this moment, all of what we sell as finished products is what is made in New Zealand.
What will success look like for you?
Success for me is success for Fonterra. We are growing very fast. If I look at the way we have been growing in this last year, the financial year that closed a while ago but it’s the latest that we have, strong increases in volume, strong increases in value, in ebit. Through our Velocity angle we are implementing different ways of working. Our success is to get to those number one positions in the selected strategic markets and to keep building on our number one and number two positions that we already have. Those market positions are the best predictors of what our financial performance – that is ebit or net profit or cash flows – are looking like.
That’s the key for us in the branded business and in the food service business – market position will translate into the optimal returns that our shareholders are looking for. [farmers and those who buy on the NZ stock exchange].
We recognise that we are much better know for our commodity and ingredients business and we will be doing much better service to Fonterra as a company to become much better known – and we need to work on that, we need to earn that – for what we do in the branded and in the food service.
 
Source: Stuff
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

Te puede interesar

Notas
Relacionadas