South Korea FTA good for cheese

It says the 12-month- old free trade agreement with South Korea offers huge potential for its dairy products there, particularly cheese.

Since the FTA was signed in December 2015, New Zealand has seen 16% growth in exports of food and beverages to South Korea.

It is NZ’s fifth-largest cheese market, worth $70m a year, comparable to the cheese trade with the US.

NZ’s new annual duty free quota of 7000 tonnes of cheese to South Korea will increase by 3% a year. Tariffs on cheddar and block mozzarella will be removed after seven and 12 years, respectively, and all cheese tariffs will be eliminated and quotas removed after 15 years.

Quotas and tariffs on butter, anhydrous milk fat and infant formula will also be phased out over 15 years.

Fonterra’s country manager South Korea, Jason Murney, says many existing custom- ers and new customers are approaching the co-op to develop new business opportunities.

“The FTA will help Fonterra deepen its com- mercial relationships in the market over time, as our access continues to increase.

“We have already seen positive results, with gov- ernment import statistics showing that NZ’s share of the Korean cheddar market has grown 60% in 2016, up from 50% in 2015.”

Fonterra has developed a new cheese specifically for pizzas, to be launched in South Korea. Koreans have a growing taste for pizza and ‘fusion’ foods.

Fonterra has increased its South Korea workforce and will buy a warehouse from which to distribute more of its products.

South Koreans are consuming more dairy products. In 1990 they consumed 43.8kg liquid milk equivalent per capita but by 2014 that had risen to 72.4kg.

The access under the FTA allows Fonterra to invest in product and supply chain inno- vations, and its South Korean business from low risk ingredients to higher value food service.

“The development of the Korean market is in line with Fonterra’s strategy of moving more milk volumes into higher margin products,” says Murney.