Fonterra’s Foodservice Business Hits $3b in Revenue

Fonterra's foodservice business Anchor Food Professionals (AFP) has reached a milestone to become a $3 billion annual revenue business.

Fonterra CEO Miles Hurrell said the success is down to the co-op's strong connection to customers who value its sustainably produced, high-quality and nutritious milk and innovative products.

“It’s really pleasing to see this milestone be reached despite the impact of COVID-19 on restaurants and other out-of-home eating. Our people have worked hard to find new ways of working with customers and new product applications to suit the pandemic environment, and we can see this has been a success," explained Hurrell.

“Foodservice is a high-value channel for our farmers’ milk and a key part of our long-term strategy. This is why we’re aiming to increase our milk solids into Foodservice by approximately 50 percent by 2030 and grow our presence across further markets including Greater China, South East Asia and the USA."

“To support our Co-op’s growth to 2030, we intend to invest about $1 billion in moving milk into higher-value products and increase our R&D budget by 50 percent​. These investments will enable further product innovation in the Foodservice channel, among other things, and help put us on track to meet our next Foodservice target of becoming a $5 billion annual revenue business,” he added.

Fonterra's director of global foodservice Paul Harvey said AFP chefs work alongside customers in their kitchens to match their needs with the co-op's dairy innovation expertise.

“To offer solutions we need to know what the problem is, and in many cases, the issues are in the kitchen, and that’s where we are spending much more time with our customers who want our help."

“We now have 55 chefs around the world who go into kitchens like this where they also help their customers design new innovative products to address their problems,” Harvey said.

All new products require an intimate understanding of the science behind the application in order to deliver the right functionality and performance for customers' requirements. Fonterra's Research and Development Centre (FRDC) in Palmerston North plays a pivotal role in bringing these products to life.

“Our FRDC team works closely with our chefs in our application centres and with our in-country sales and marketing people around the world, where they refine some of these innovations for a customer’s specific need – often in response to new food trends."

“A good example of this is in China where over the past 12 months the team has introduced more than 100 new applications for the beverage and dining channel and demonstrated 170 new applications for our bakery customers."

“We believe innovation and new products are key to future growth and will help us build relationships with up to 40,000 new customers over the next five years, and up to 70,000 new customers in the next 10 years,” Harvey added.

In greater China, Fonterra will continue to build on its success in the foodservice channel by expanding deeper into larger cities. In South-East Asia, it is applying what it has learnt from its greater China business to customers in the region. In South-East Asia, dairy is seen as a premium food and it also has a strong link to the growth in the consumption of Western foods.

“We are making the most of this growing demand in the region and in particular we are doubling down on Indonesia and Malaysia where the evolution of bakeries will see us expanding our reach into more cities."

“We are also developing new products that work well in recipes chefs can use in the growing number of online bakery stores."

“In other markets like the USA, where tariff barriers make it more difficult to maximise value from our foodservice channel, we partner with our IP, like we have with one of America’s dairy co-operatives, Land O’Lakes,” said Harvey.

Fonterra's foodservice business was formed in 2013 and the AFP brand was introduced in 2014.