KEY POINTS:
MELBOURNE - New Zealand may have the world's biggest dairy exporter -- but at home consumers are being managed from Australia.
Fonterra has long said it needs to treat both New Zealand and Australia as its "domestic market" because a population of four million is not a big
enough platform for its global operations.
It runs its branded retail foods in New Zealand from Melbourne.
"We've brought our New Zealand domestic businesses together with our Australian businesses and created ... a single strategic business unit," said John Doumani, managing director of Fonterra Australia.
Mr Doumani has been running both the New Zealand and Australian branded businesses for five months.
In New Zealand, Fonterra was the leader in every market category, and on both sides of the Tasman it had brands and products in common.
"There's a big overlap," Mr Doumani said.
Most consumer companies were bringing their Australian and New Zealand businesses together, and leveraging initiatives across both.
"Australians and New Zealanders may beat each other up on the rugby field -- and I'm sure there'll be a lot of ribbing between each side of the Tasman over the next six weeks -- there's a lot of similarities between the consumers.
"What tends to work in one market will work in the other ," he said. By putting the businesses together, "we get a bigger bang for the buck".
Asked whether New Zealanders had reacted to having their domestic dairy foods controlled from Australia, Mr Doumani said that was not the way consumers saw it.
"We are Fonterra, and we are a New Zealand company," he said. "That doesn't change."
In Australia, Mr Doumani said Fonterra had had a strong year, increasing its operating profit by 47 per cent to A$71 million ($83.6m) "over and above paying a competitive milk price".
"We're starting to capture some significant opportunities for efficiencies and we also grew our top line by just under 4 per cent."
More than two thirds of Fonterra's business in Australia is fast moving consumer goods (FMCG) and it is the market leader in cheese with a 30 per cent market share with brands such as Bega, Mainland and Perfect Italiano.
It is also the market leader in spreads, with an 18 per cent share, mainly based on the second-ranked brand, Western Star.
But it is a relatively small player in liquid milk and yoghurts, relying on a few regional-based brands, including Peters and Browns, which has 32 per cent of the Western Australian market, and the Norco brand in northern New South Wales.
"We're trying to build a stronger presence, starting at a regional level, that hopefully will give us a leverage beyond that," Mr Doumani said.
"I would classify the past 12 months as a good start."
Most importantly, the company would be more efficient in generating growth by applying initiatives in two markets at once.
"Our success is going to be in consumer products -- that's where the growth is going to come from," he said.
Fonterra had the advantage that dairy products were seen as good food across a wide range of product types and consumer ages, though "there is a skew towards younger people".
Fonterra was well developed in catering to children whose parents bought food for them, but was "somewhat underdeveloped" in older age groups.
The children could be retained as dairy consumers as they moved out of adolescence and into adulthood, and products such as the calcium-reinforced milks could be used to drive dairy among older people.
"There's a really huge opportunity, given the ageing population and the specific health and nutritional needs," Mr Doumani said.
Fonterra is rolling out its calcium-reinforced Anlene milk -- which also has Vitamin K added to it in New Zealand -- as a snack bar for adults.
"We can drive the adult consumption more by coming out with truly meaningful products."
Fonterra's biggest single opportunity was in snackfoods, because of the way people "graze" though the day.
"Snacking as a behaviour is growing very significantly and we think dairy has an opportunity to play a stronger part in that," Mr Doumani said.
It had already used technology developed in NZ to turn crispy whey flakes into snack bars for children with a relatively high protein content.
"Snacking is a behaviour that spans children and adults, and Munchables (bars) is our first opportunity to capitalise on that."
Mr Doumani said there was a strong focus on school lunchboxes for children up the age of 12 or 13.
For older children, and teenagers, Fonterra would have to address issues such as perceptions that dairyfoods made people fat.
"The biggest opportunity now is older people, because there is a real nutritional need (for calcium)," he said. These consumers could be targeted as they approached old age and became more conscious of the need for good bone density, and Fonterra had a three- to five-year work programme to develop products for this.
"The ageing population is a huge opportunity," Mr Doumani said.
Older people were loyal to brands and the effects of the baby-boomer bulge would be extended by people living longer and having to deal with health issues.
But by the time people were greying, it was getting late to boost bone density with additional dietary calcium, and Fonterra was also targeting people in the 35 years and over bracket with "bone health" foods.
- NZPA
