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Current as of 25/12/14 07:40PM NZST

Jamie Gray

Jamie Gray is a business reporter for the New Zealand Herald and NZME. news service.

Results from Malaysia buoy Fonterra

Revenue growing in a country with strong economic growth and an expanding middle class.

David Ross, managing director of Fonterra Brands in Malaysia, says the milk giant's success comes from identifying and meeting nutritional needs. Photo / Sarah Ivey
David Ross, managing director of Fonterra Brands in Malaysia, says the milk giant's success comes from identifying and meeting nutritional needs. Photo / Sarah Ivey

Fonterra's Malaysian operation has doubled its revenue in local currency terms over the past five years.

David Ross, managing director of Fonterra Brands in Malaysia, said the forces at work there are similar to those seen throughout much of Asia.

Like many of its neighbours, Malaysia has strong economic growth - around 5 per cent a year - an expanding middle class and increasing demand for better nutrition.

Ross, who has 25 years' experience in the business, points out that in China and the Asean countries - Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Burma, Cambodia, Laos, and Vietnam - 60 million babies are born every year.

"It's a lot of new mouths to feed and certainly, for mothers who choose not to breastfeed, there is the next best nutritional alternative in the form of the paediatric formulas," he said.

The Malaysian market has brands that are familiar to New Zealand - Fernleaf, Chesdale and Anchor.

But it also has Anlene and Anmum, which are household names in Malaysia and commonplace throughout Asia.

The Anlene products are enriched with calcium and other nutrients to aid calcium absorption and bone strength.

The Anmum range includes specially formulated milks for women planning to start a family, during pregnancy and while breastfeeding, as well as products for infants and young children.

While Fonterra enjoys a strong market position in Malaysia, it faces significant competition.

The big names are there - Swiss multinational food giant, Nestle, and France's Danone - along with lesser known names of US infant formula and nutrition companies, Mead Johnson and Abbott Nutrition.

Fonterra has in recent years cemented its thinking around where its growth opportunities lie, and Asia features prominently.

It has been in Malaysia since 1975 as the former NZ Dairy Board.

The board became more seriously involved in Malaysia in 1986, when it launched Fernleaf full cream milk powder, which went on to become a market leader within two years.

Since then, Fonterra has added the Anlene products, food service products and the Anmum paediatric range.

Many of Fonterra's broad strategic themes can be seen in Malaysia - growth in everyday nutrition, bone-health and mobility products, food services - cream cheeses, and butters for the bakeries - and paediatric nutrition.

Fonterra has two manufacturing sites - Susumas and Dairymas - in Shah Alam, about 25km west of the capital, Kuala Lumpur.

The Susumas site imports milk from New Zealand, which it mixes, blends, cans and packs. The Dairymas factory was built to help cater to Malaysia's growing appetite for yoghurt and UHT dairy products.

"Malaysia has been a relatively strong growth story for Fonterra in recent times," Ross said. "Over the last five years we have doubled our revenue in local currency terms."

One of Fonterra's strong drivers has been paediatric nutrition - through its Anmum range.

Fonterra has carved out a new product line to deal with folate deficiency - which has been named as a cause for neural tube disorders such as spina bifida. With four out of five Asian women deemed to be in the risk zone, Fonterra grew a segment that previously did not exist.

It was an Asia-driven innovation which involved Fonterra developing a specialised Anmum maternal milk formulation with folate is a key nutrient.

Malaysia was one of the product's first markets.

"It was a matter of Fonterra seeing a nutritional need. We saw the opportunity and did the work to develop the segment," he said.

"We have proven that we can do it in Malaysia and compete successfully and in full compliance with the regulations and we are looking at [what] we can do in all parts of Asia," Ross said.

Ross said that in Malaysia there was robust growth in the premium and mass market dairy categories.

"There is no reason to believe that we are close to maxing out on that, so I am reasonably optimistic about the future growth prospects."

- APNZ

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