The appointment in July of Bao Xiufei as general manager of Beingmate was the first step in addressing the very real problems that company faces.
Fonterra took the 18.8% stake in Beingmate for long-term strategic reasons and it represents only 5% of Fonterra’s Chinese enterprise value – the total revenue, assets and debts in its number one export market.
Zhu is one of two Fonterra-appointed directors on Beingmate’s board.
“It has been a big disappointment for us and we are working hard to improve its performance.”
While in New Zealand to mark the five-year anniversary of the Anchor brand in China, Zhu highlighted 40% compound annual growth figures and cumulative consumer sales equivalent to a billion glasses of milk.
Anchor is now the number one brand for both off-line and on-line sales of imported UHT milk to Chinese consumers among 60 to 70 foreign competitors.
Fonterra supplies either directly or indirectly 11% of China’s dairy needs and NZ is the country of origin of 36% of China’s dairy imports.
China is the destination for 26% of Fonterra’s output, worth $5 billion annually.
Its investment in China is integrated, being grass to glass, for the long term and done at scale, not in niches, she said.
Fonterra ingredients are clearly the market leaders among imported dairy products with annual sales of 3.4b litres of liquid milk equivalents.
Anchor food service sales represent 80% of all butter used and 50% of all mozzarella cheese and cooking creams.
China food service made sales into 20,000 businesses and accounted for 70% of Fonterra’s worldwide food service sales, something Zhu called the crown jewel of Fonterra.
China Farms is now producing more than 330 million litres of milk annually from 28,000 cows on two completed farm hubs and one being developed with partner Abbott.
The five-year journey for Fonterra Anchor in China began with just one product – a 250ml UHT white milk into one Shanghai store.
There are now 47 Anchor products on sale in 13,000 stores.
Sales on all e-commerce platforms will account for 100m LME this year.
On-lines sales are 55% of all Anchor product sales to Chinese consumers and Anchor milk powder is the market leader in store sales.
Many Anchor products attract 20% price premiums while outselling their competitors.
“The number of people employed by Fonterra in China has reduced slightly but the volume of sales per person has increased by seven times over five years,” she said.
“With small numbers at the beginning, 40% annual sales growth may be easy to achieve but now when we are so much bigger it is much harder. China is no longer an automatically growing market.
“Some of the biggest fast-moving consumer goods companies in the world now have declining sales figures in China.
“To sustain our rate of growth takes a lot of work.”
Anchor brand awareness among Chinese consumer has grown from zero to 72% in the five years, Zhu said.
Fonterra’s Chinese employees had returned a high engagement score even though their workload has increased considerably.
“I think that shows that people want to work for a winning team.”
She also said standing out in a noisy place like China requires constant work and for Fonterra China standing still is not an option.
“In order to be sustainable we have to have a start-up mentality – such a complex and uncertain market demands constant re-invention.”