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Fonterra giving up on its brands is a big deal

World 20.06.2024
Source: The DairyNews
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New Zealand’s largest company, Fonterra, has announced its intention to abandon consumer marketing and focus on business-to-business (B2B) trading. This decision will mark the end of Fonterra’s consumer brands, such as Anchor, Mainland and Kāpiti.
Fonterra giving up on its brands is a big deal
Jerry Clode
Jerry Clode
brand specialist and founder of The Solution consultancy
To me, this is a sad time for a nation that prides itself on innovation and creativity. Despite decades of investment, Fonterra has failed to create sustainable consumer brands internationally. This is astonishing, considering New Zealand accounts for over 40% of total dairy exports to China, the world’s largest importer of dairy products.
My disappointment stems fr om growing up in Southland, wh ere there were high hopes around the “transition to dairy”; as well as my adult life which has been focused on creating brands in emerging markets, such as China, India, and Brazil.

One thing that makes me both proud and guilty is my role as an agency head in London, working in the early 2000s on the international branding of Arla, a small Danish dairy company with “big dreams” of becoming a global brand. After a year’s work, we provided our Danish friends with a template, and they went on to create globally leading brands such as Lurpak Butter and Castello Cheese, as well as leading infant nutrition brands.

I only mention the Danes to highlight how little Fonterra has achieved in a similar timeframe. As the sixth largest dairy company in the world, it is almost an anomaly that Fonterra will not have any consumer brands. Ahead of Fonterra on this list are companies like Nestlé and Danone, which have countless household brands across different categories.

Fonterra could attribute this to a strategic realignment, where output from the company’s 11,000-plus stakeholder farmers will be sold as a commodity to overseas suppliers. However, the value derived from this approach is both suboptimal and extremely vulnerable.

First, without branding, our farm output is simply leveraged by others to create value outside of New Zealand. As a nation that “knows dairy”, surely, we want to tell our own story to global consumers, not reduce ourselves to a symbol or byline on the packaging of an overseas brand. By stripping branding from our dairy exports, we become highly vulnerable to volatilities in global dairy prices, especially during significant disruptions in the global economy. Brands not only create added value but also provide assurance during difficult trading conditions.

Furthermore, as New Zealand’s largest company, Fonterra serves as a role model for other exporters and investors in Aotearoa. My concern is that Fonterra’s decision could negatively impact confidence in the brand ambitions of other exporters, at a time when we need to focus on creating higher value exports, in line with the Government’s stated goal of doubling export value in the next 10 years.

In relation to this goal, a respected analyst stated, “we need more Fonterras”. Respectfully, this should perhaps be, “we need more Zespris”. In comparison, Zespri has in similar time period, been laser-focused on building its brand value and intellectual property around the world. In key markets such as China and India, locals have specific names for Zespri kiwifruit, which creates a price two or three times higher than competitors in these markets.

However, what really makes me wonder is, after the Kiwi countryside was turned upside down to support Fonterra and dairy, is it not reasonable to expect that our milk be sold at a branded price internationally, not simply as a commodity that goes into someone else’s brand?

July 2024
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