Fonterra has invested in a new foodservice application centre in Guangzhou where it tests innovations like cheese lollipops and tea macchiato with its Chinese customers as it looks to accelerate the fast-growing business.
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SUPPLIED/STUFF Fonterra’s cream cheese lollipops are proving popular in China.

Greater China was Fonterra’s standout performer in the six months to the end of January, and that was largely thanks to its foodservice business, which supplies bakeries, tea houses, coffee shops, restaurants, convenience store chains and supermarkets with innovative new dairy products created at its research and development hub in Palmerston North.

Guangzhou, the capital city of the fast-growing southern Chinese province of Guangdong, is part of the Greater Bay Area of 11 cities targeted by Chinese President Xi Jinping for development as an integrated economic and business hub comparable to the Tokyo Bay Area or the San Francisco Bay Area. Guangzhou has a strong food history as the origin of popular Cantonese cuisine and the blueprint for the city sees its development as a centre of culinary excellence.

As a trading port, Guangzhou has had access to many imported foods, spices and ingredients, resulting in a wide variety of dishes, and many new food concepts and consumer trends originate from the area. With a young and fast-growing population and a strong cuisine culture, Fonterra sees the area as having huge growth potential.

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“In terms of innovation potential or new product development potential, I would say it would only be constrained by our thinking” said Justin Dai, Fonterra’s vice president of foodservice in Greater China. “Consumers keep looking for new experiences, new flavours, new textures, and new varieties and they keep looking for better, healthier, tasty ingredients to bring into their traditional cuisine or even new kinds of products.

“Nothing is off the table,” he said. “There’s nothing we won’t try.”

From the hundreds of ideas that Fonterra and its customers come up with, not all will translate into commercial success, however the food culture is very open with consumers driving producers to develop new ideas and keep surprising them, Dai said.

The cream cheese lollipops are proving hugely popular as a healthier snack for children, as is tea macchiato, which adds a dash of cream cheese and cream to tea, and the addition of probiotics to coffee is an emerging trend. Beer and cocktails with cream cheese macchiato are also offered through handcraft beverage outlets.

Innovation is one of Fonterra’s three focus areas, alongside sustainability and efficiency. Developing new dairy products also generates higher profit margins than the cooperative can get from commodity products like whole milk powder.

To appeal to the Chinese market, Fonterra has developed cream cheese pastry, steamed dumplings with mozzarella, cream that doesn’t require refrigeration, mozzarella cheese that retains its stretch for pizza delivery services, and single serve pizzas that are ready in one minute.

“There will be applications that just don’t work, but as far as what you can try it with, we haven’t found a limit yet,” said Mark Piper, who oversees Fonterra’s team of researchers, engineers and scientists in Palmerston North.

“China has had an appetite to introduce more western foods and that will continue to grow, but also the team in China is thinking about how they can get it into everyday Chinese foods,” Piper said. “The growth has just been staggering to date and we do sit there quite often and think jeepers you can see so much potential for the future, it’s incredible.”

To introduce and trial new products, the cooperative has about 10 chefs demonstrating for customers in Guangzhou, with feedback relayed back to Palmerston North. Fonterra has added a beverage area to the revamped application centre, alongside dedicated dining and bakery areas which can be combined or used separately, as part of its new Guangzhou office. It declined to say how much the new facility cost.

Fonterra also has application centres in Shanghai, Beijing and Chengdu and plans to open an additional centre in Wuhan this year.

Dairy products and, in particular, grass-fed products are performing strongly post-covid in overseas markets.

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