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Fonterra rides on back of China's consumer growth

By Graeme Kennedy

Friday 28th November 2003

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Dairy giant Fonterra expects continued record growth from China as increased affluence lifts consumption of imported milk products, Asia regional managing director Brent Taylor says.

The country's market leader has lifted sales from 42 million tonnes in 1998/99 to 100 million tones last season, worth $300 million.

Its performance in the past 12 months has been further boosted by local milk production failing to match consumption and the crippling Australian drought which hit its traditional competitor's output.

Fonterra also supplied Southeast Asia with 50% of milk solids by volume and 55% by value, while total receipts for the region were $US1.1 billion for ingredients used in food manufacturing and $US500 million for consumer products, Mr Taylor said.

"We have achieved that by exporting to Asia since the 1960s, invested heavily in infrastructure including people and offices ­ and because we are good at what we do," he said.

Chinese people consumed an average 7kg of milk products a year compared with New Zealanders' 120kg although in wealthier cities such as Shanghai consumption rose to 25kg he said.

"About two-thirds of China's population do not consume even one kilo of imported product but that will rise as incomes increase," Mr Taylor said.

"And with affluence they will start buying different types of higher-value product such as sweetened condensed milk, milk powder, long-life UHT and yoghurt."

He said ease of doing business in the region varied ­ Japan and Thailand protected their domestic dairy industries but most other countries were relatively free.

"It is generally easier to do business in Southeast Asia where you can achieve things in a shorter time and people are more open and straight-forward," he said.

"In Japan you must be prepared for the long-haul and have done plenty of homework and detail.

"And in Indonesia and the Philippines you can often do business on the first visit ­ although anywhere it is very easy to get it wrong.

"A basic requirement is seeing things through the customer's eyes and to develop a patience, a quietness and a measured way of dealing with negotiations ­ knowing not to press when you don't have to but to be firm when it is needed."

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