Interview with Fonterra Zhou Dehan: The cheese market is big enough that there is no need to fight a price war

　　【Expo time】Interview with Fonterra Zhou Dehan: The cheese market is large enough that there is no need to fight a price war

　　Zhongxin Jingwei, November 7 (Yan Shuxin, Fu Yumei) "Chinese consumers want to see new things, but also willing to try new things, whether multinational companies or local companies, how to meet the needs of consumers is the focus." During the fourth China International Import Expo (hereinafter referred to as the Expo), Zhou Dehan, CEO of Fonterra Group Greater China, said in an interview with Sino-Singapore Jingwei.

　　Photo courtesy of Zhou Dehan, CEO of Fonterra Group Greater China

　　The cheese market is big enough that there is no need for a price war

　　In recent years, with the rapid rise of domestic dairy brands, market competition has become increasingly fierce, which has also accelerated the localization of foreign brands.

　　Foreign brands, including Nestlé, Mead Johnson, Wyeth, Abbott, etc., continue to increase their size in the Chinese market, and have established factories in many parts of the country to meet the needs of Chinese consumers. In addition, the use of third-party foundries is also one of the means for foreign brands to accelerate localization.

　　According to Zhou Dehan, at present, many of Fonterra's products are entrusted to domestic third-party foundries to produce, Fonterra is responsible for the early stage of product research and development and the later marketing and sales. Zhou Dehan said that this is a new way for foreign brands to localize. "Chinese consumers want to see something new and are willing to try something new. Whether it is a multinational company or a local company, how to meet the needs of consumers is the focus. ”

　　In recent years, the domestic cheese industry has developed rapidly, of which the cheese stick track is particularly prominent. Nielsen data shows that in the first half of 2021, the retail sales of the domestic liquid dairy market increased by 9% year-on-year, the retail sales of infant and adult formula milk powder increased by 7.7% year-on-year, and the retail sales of the cheese market increased by 35.3% year-on-year.

　　According to Everbright Securities, in 2020, the size of China's retail cheese market is 8.776 billion yuan, of which the cheese stick market size is about 3.5-3.6 billion yuan, and the cheese stick accounts for about 40%.

　　Zhongxin Jingwei noted that at present, more and more players are laying out the cheese stick market, including traditional dairy companies such as Yili, Mengniu and Guangming, as well as new brands such as Miaoke Lando, Miaofei and Dr. Cheese. The influx of players from all walks of life has triggered problems such as industry price wars and product homogenization.

　　"When many manufacturers enter a single field, there will often be a big price war." Zhou Dehan said that the cheese industry is not only popular with cheese sticks, but also other sub-products, such as chopped cheese. "Cheese crumbles are also divided into remade cheese crumbles and natural cheese crumbles, not that which is better, but now consumers have more choices." We feel that the cheese market is big enough, we don't need to fight a price war, we should distinguish the needs of different consumers through products. Zhou Dehan said.

　　Rising raw material costs are a major challenge for enterprises

　　Rising raw material costs are a major challenge for Fonterra in fiscal 2022. Zhou Dehan pointed out that at present, the price of almost all raw materials is rising, including agricultural products, industrial products, feed, etc., some of which have been transmitted to the consumer end.

　　According to media reports, in recent times, due to the rising cost of raw materials, supply shortages and other factors, a number of well-known multinational food companies have announced price increases, including Kraft Heinz, Nestle, Unilever, Coca-Cola, PepsiCo and so on.

　　In China, a number of food sector enterprises such as Haitian Flavor Industry, Qiaqia Food, and Anjing Food have also announced price increases for some products. Recently, Arowana also disclosed that the company adjusted the prices of different oils at the end of 2020 and March-April 2021, and the overall price increase was about 10%-15%.

　　When asked if Fonterra also has a price increase plan, Zhou Dehan said that its price will be determined according to market conditions. "The dairy industry has an authoritative pricing platform called gdt (global dairy trade), which updates the price of some basic dairy products every two weeks, and our product pricing will also refer to gdt data."

　　Zhou Dehan said that although the purchasing power of Chinese consumers is getting stronger, it is still unknown whether their consumption situation will change with the price of products. "If the price rises, how much consumers can accept, or more than which value consumers can't accept, this may be a challenge for us." Zhou Dehan said. (Zhongxin Jingwei app)

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