hristopher Adams and Jamie Gray report on Fonterra's big push into the Middle East and Hong Kong.

Alan Fitzsimmons still gets a buzz out of opening up new markets for Fonterra after more than two decades selling New Zealand dairy products to the world.

The 52-year-old Kiwi relocated from Singapore to Dubai last year to become managing director of the cooperative's brands business in the Middle East, Africa and Indian subcontinent.

Fitzsimmons, who was previously general manager for Indochina, says he's spotting opportunities in his new region that existed in Asia more than 20 years ago.

Earlier this year he was in Ethiopia, a fast-growing African market that Fonterra Brands has big plans for.


"Going into Ethiopia for the first time I got that same sense of excitement I had when I first started my career because you just see the opportunities," Fitzsimmons says. "I remember going to Indonesia for the first time 25 years ago ... the market structure [in Ethiopia today] is similar."

While Fonterra's business in Asia, especially China, has a higher profile than than its operations in Middle East and Africa, the latter region accounts for roughly 20 per cent of the co-op's overall sales.

That would be around $3.7 billion in the last financial year.

However, Fitzsimmons says Fonterra's brands - such as Anchor, Anlene and Chesdale - are not as strong in the Middle East and Africa as they are in Asia.

"Asia has had a higher priority in terms of developing the branded business than this part of the world," he says. "But that is changing."

Fitzsimmons says Fonterra is pushing to grow its branded milk powder sales in Ethiopia and other sub-Saharan African countries, as well as the Gulf Cooperation Council (GCC) nations, which includes Saudi Arabia, the United Arab Emirates and Kuwait.

Anchor and Anlene, a high-calcium formulation, are the company's main powdered milk brands in the region.

Fitzsimmons says the cooperative has a plan for cracking Ethiopia, together with a local business partner who can help the dairy giant negotiate a retail market dominated not by supermarkets but tens of thousands of small-scale "mom and pop" stores.


"Generally in Africa the strategy is providing affordable, high-quality dairy nutrition - underline affordable."

Known in the west for war and famine, Ethiopia has gone through an economic renaissance in recent years to become one of the so-called "African lion" economies.

GDP growth has averaged above 10 per cent over the past decade, admittedly from a low base, while an expanding middle class is fuelling a construction boom in the capital, Addis Ababa. The World Bank estimates Ethiopia could reach middle-income status - per capita gross national income between US$1026 and US$12,475 - by 2025 if the same historic growth rates continue.

But Fonterra will have to tweak its milk powder offering in order to succeed in a country where per capita income is currently just US$430, according to the World Bank.

"We're looking at new ways of delivering high-quality protein," Fitzsimmons says.

In Nigeria, for example, one of Fonterra's ingredients customers is selling New Zealand milk powder in 7 gram sachets.

"You'll see kids open the sachets and just lick the powder out," says Fitzsimmons.

"It's just unbelievable."

European consumer products giant Unilever has had great success in Africa selling washing powder and toothpaste in small, affordable pack sizes.

Fitzsimmons says there's huge demand for "high quality dairy protein" on the continent.

"There's a billion people in Africa. Yes, they start from a low base of income but it's rising rapidly," he says.

"Every man and his dog is jumping in there."

Fitzsimmons says European dairy companies already have a strong presence in the region.

"Certainly we see far more European dairy companies in Africa than we would in Asia," he says.

"Typically in Asia we see only the very largest of the European dairy companies."

But doing business in African markets doesn't come without challenges, Fitzsimmons says, especially around foreign exchange availability.

"As you would imagine, getting paid is rather important."

Fitzsimmons says Anchor is a much better known brand in the Middle East than in Africa.

"We've been here [in the GCC markets] for 20 years and we've got good, established relationships," he says.

"If you go into any hyper-market in the UAE you'll see the Anchor products.

"The same if you walk into stores in Saudi, Bahrain or Qatar."

But the co-op isn't resting on its laurels in the Middle East.

Fitzsimmons says Fonterra is the No2 player in branded milk powder in the GCC, behind Switzerland's Nestle, and the company wants to "strengthen that position".

"It'll be a challenge to get to No1, but we see a lot of potential for growth in milk powder offerings in the Gulf."

Fitzsimmons says the company will leverage its blending capabilities at its manufacturing plant in Dammam, Saudi Arabia, to take on Nestle and other competitors in the region's branded milk powder market.

The company is also beefing up its sales and distribution capacity in the region as it pushes to grow market share not only in milk powder but other branded dairy products, including cheese.

Fitzsimmons says Anchor is the No1 brand in the Iraqi spreadable "jar cheese" market and Fonterra wants to emulate the success it had with that product in Iraq in the GCC.

"Iraq has been and is a very successful business for us."

Fonterra launched Anchor jar cheese - which Middle Eastern consumers typically eat spread on Arabic bread - in Iraq following the US invasion of the country in 2003.

Fonterra now sells close to 20 million jars of cheese annually in Iraq, Fitzsimmons says.

The jar cheese market in the GCC is worth about US$500 million, but he says Fonterra currently has only a small share it.

Fitzsimmons says the company recently increased its cheese manufacturing capacity from 6000 to 12,000 tonnes at the Dammam plant, where Feta cheese is also produced.

Meanwhile, Fonterra opened a new ingredients warehouse in Dubai in March, which the co-op says will hold up to 5000 metric tonnes of product and reduce delivery times in the region.

The co-op's ingredients business involves selling bulk dairy products, such as milk powder, to other food manufacturers.

Fonterra's general manager for the Middle East and Africa, Miles Hurrell, says the warehouse will give the firm's ingredients customers access to product when they need it.

"Our ingredients imports into this region have continued to grow 10 per cent year-on-year and our investment in this facility reflects this growth," Hurrell says.

Christopher Adams travelled to the Middle East with assistance from NZTE and BurgerFuel.