New division thinks beyond the cheese

By LIAM DANN

Fonterra has started the new-look division it is hoping will increase revenue from value-added ingredients and boost farmer payouts.

The new marketing and innovation division has the task of speeding up the transfer of scientific research into commercial products.

The aim was to do things more quickly and on a bigger scale than they had been done before, said director Bob Major.

Fonterra had always had good scientific research, but the new unit would integrate what was going on in the labs more closely with market opportunities and customer demand.

Fonterra came under fire from farmers last month for not matching the payout of the tiny Tatua independent co-operative.

Tatua sells high-tech ingredients. The bulk of Fonterra's sales are still in commodities such as milk powder and cheese.

"Fonterra's prime focus is to sell all the milk its farmers produce," Major said.

"Once that is being done effectively and efficiently, it needs to focus on adding value."

In the past three years, the value of the ingredients business had grown from 5.5 per cent of revenue to just under 10 per cent.

To boost the ratio further, the company would have to develop unique new products and create markets for them. Those products were on the way, Major said.

The number of new products coming from the laboratory to the market would increase markedly in the next few years, he said.



A new organics business and Bsup3 - a business making new-look dairy drinks - had reached the point of commercial viability.

A further six potential new businesses were in the pipeline.

The goal was to work through ideas quickly and put aside those that were not practical before too much money had been invested in them, he said.

The marketing and innovation unit contained elements of several old business units such as NZMP's marketing strategy division and FonterraTech.

But it was not just the aggregate of those entities, Major said. "It is a new organisation."

Marketing and Innovation will be based at the Fonterra research centre in Palmerston North.

As well as promoting innovations it will be responsible for giving scientific and technical support to all other areas of Fonterra's business.

Plans for the division were unveiled last November, but Major said it had taken time to ensure the right structure and right people were in place.

Marketing and innovation has five teams, each with its own general manager reporting to Major.

The teams cover new business creation, planning and integration, research and technical operations, knowledge services and ingredient partnerships.