Fonterra makes play for developing countries

Fonterra aims to provide a more nutrient-rich product than people in developing countries have available today. Photo / AP

Fonterra is making a push to make dairy affordable and accessible for low-income populations in developing regions in the Middle East, Africa, South Asia, and South America - markets that collectively represent more than $1.3 trillion in spending power.

Kelvin Wickham, chief operating officer of Fonterra's giant NZMP ingredients business, said Fonterra had previously sold commodity products in bulk in these markets but now wants to focus on the premium end of the market by developing and selling higher-value ingredients with added benefits.

"If you look at your GDP stats chart at the income per capita gets above $5000 basis generally you start to see the dairy purchases pick up. Generally that's what the trend is.

"But there are all these people sitting there in this bracket below $10, particularly $4-$10 dollars a day - or even less around US$1 a day in income who would aspire to dairy but can't afford that, so we need to provide an offering that gets them into dairy earlier."

Wickham says there is an opportunity for Fonterra to provide a much better nutrient-rich product than people in developing countries have available today.

"The challenge for us, of course, is how do you make that dairy affordable and accessible that's the challenge were looking to crack."

Fonterra was looking at getting the formulations right and tailoring them to fill the vitamin deficiencies specific to each region.

Wickham said 40 per cent of the children in Africa under five were deficient in vitamin A.

"It's easy for us to add the vitamin A and vitamin D and we adjust the protein and fat level to find the right price point."

"And then the second challenge is getting the format so that could be a 10g sachet or a 15g sachet as opposed to trying to putting 1kg or 2kg bags out there which people simply can't afford. So it meets the price point that people can afford on any given day because a lot of people get paid daily or weekly."

Some low income earners are moving into the middle class and want higher value dairy products, particularly in the Middle East and Africa.

Wickham said this offers growing opportunities for Fonterra in areas such as sports nutrition.