World Dairy Leaders' Forum: Fonterra
At the World Dairy Leaders' Froum during the IDF World Dairy Summit in Cape Town in November 2012 Nicola Shadbolt, CEO at Fonterra, spoke about meeting the dairy demand challenge.
New Zealand used to have a defined local market, and when they joined the global market they were in many ways just getting rid of the milk. But now they are moving into a demand driven market, and this creates new opportunities and choices. Now they have to decide where to play, where the opportunities are.
The Fonterra CEO talked about current mega trends that drive the dairy industry:
- The rise of the emerging markets with a growing income, wanting to purchase more.
- There is a growing demand for the nutritional benefits of dairy, with aging people wanting to look after their health and consumers looking for nutrition for their families.
- Urbanisation is creating great opportunity, where people more often eat on the go, and there is a demand for different packaging of the product.
The demand for dairy increases a whole New Zealand production a year, said Nicola Shadbolt, but where will this milk come from?
Meeting the demand for dairy and other agricultural goods will be a challenge. There are constraints. A stable policy environment is required, with clear pricing signals to producers. We need to produce more food from fewer inputs with less impact on the environment. Water quantity and quality is key to both food production and food security
Investment in food and land production must be encouraged, not only for producing, but also for delivering to the supply chain. Infrastructure, R&D, people inv in ppl, so that theu have the resources to deliver this product
Shadbolt explained that the dairy industry today is in an environment of VUCA – Volatility, Uncertainty, Complexity and Ambiguity. We just have to live with that and as farmers we have to develop farming systems where we can manage that volatility. Make sure we don’t have too much of what the Irish call cost-stickiness. “We have to make sure we understand the uncertainty and complexity”, said Shadbolt.
The cross border trade, now at $54b (8%) needs to grow to about $80b in $2020 – the CAGR of 4-6% is challenged by price and exchange rate volatility and differing government policies on trade. This requires imports to be complementary with local production –not competitive. Together we must deliver to local demand and meet the nutritional needs of the world.
“We have a product we are proud of and we know that we can do more” Nicola Shadbolt concluded.