Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
The company has an exclusive infant formula deal with Canterbury processor Synlait; last week a2MC increased its stake in Synlait to almost 18%.
Managing director Jayne Hrdlicka told Dairy News a2MC is talking with Fonterra “about potentially establishing another production facility to give us greater capacity”.
“We have a great and longstanding relationship with Synlait, a partner of a2MC from the very beginning.
“We are impressed with them as a company; they continue to grow from strength to strength, very innovative and high quality.
“That partnership will continue to grow and develop in the future as well.”
With Fonterra, a2MC is also looking at cheese and butter made from A2 milk.
But Hrdlicka says the most important thing is to get a2 fresh milk off the ground in New Zealand. Fonterra and a2MC this month launched Anchor brand a2 fresh milk in Auckland. It is now sold in Pak ‘n Save and New World North Island stores and will go national by October.
Fonterra Brands New Zealand acting sales director Grant Watson says the co-op is “very confident” that Anchor a2 milk will do well.
“Firstly, we believe it will be helped by the strength of the a2 brand along with our distribution network through NZ,” Watson says.
“Secondly, looking to the success of a2 milk in Australia, that’s a lead indicator as to what could play out in NZ.”
In Australia, a2 Milk is said to be the number-one premium brand fresh milk, with 10% of the total market share.
Watson says Anchor is set to give consumers more choice beyond its present ten varieties of milk.
“Anchor will continue catering to a variety of diets, ages and stages so that as many people as possible have the option to consume milk products,” says Watson.
Hrdlicka says the company is pleased to be finally providing its own brand of a2 milk to New Zealanders for the first time, “especially given this is where our company was founded”.
a2 Milk supply base to grow
Fonterra says A2 milk for recently launched Anchor a2 fresh milk is from a farm it owns in Manawatu.
However, to bridge the gap between now and the start of the season, the co-op is sourcing milk from a winter milker near the Longburn site at the normal farmgate milk price.
The co-op will look at growing its A2 milk base as demand grows, says Fonterra Brands New Zealand acting sales director Grant Watson.
He says farmers interested in supplying A2 milk to Fonterra should tell its subsidiary Farm Source.
“As we understand what demand is over time, we can work with those farmers to bring them on board,” Watson told Dairy News.
“The process will take some time but we expect our farmer base to grow over time for A2 milk.”
Asked about the milk price for A2 milk, Watson says it is the
same as conventional milk but will be “reviewed in time by Farm Source”.
He says Fonterra will know more about the demand for A2 milk once Anchor a2 milk is marketed from early October.
Anchor a2 milk is important to the value-added business that contributes to farmer shareholders’ dividends.
