Ingredients business increasingly important

NZMP chief operating officer Kelvin Wickham attends Fonterra's farmer conference in Dunedin....
NZMP chief operating officer Kelvin Wickham attends Fonterra's farmer conference in Dunedin. PHOTO: PETER MCINTOSH
Fonterra is not just about milk, cheese and butter.

That is the message from Kelvin Wickham, chief operating officer of NZMP, which is the ingredients arm of Fonterra.

He was in Dunedin last week for the My Connect Conference, an event attended by hundreds of Fonterra farmers.

Many people thought it was just about volume - "pushing product out to the world", Mr Wickham said.

But what they did not realise was that there was a lot of value in the ingredients business - which was there to drive value - and some nice stories within it.

On hearing those stories, farmers felt good that their milk was being "turned into goodness" that was making a difference in people's lives, he said.

It was going into various applications, in varying degrees of components, in such market segments as paediatrics - supplying ingredients to customers making infant formula; sports and lifestyle - providing products to people wanting to enhance their physical or mental performance; and medical nutrition and healthy ageing.

A lot of those components were protein-based, leveraging probably 100 years of protein technology in New Zealand which had been world-first in the large-scale manufacture of whey protein concentrate and milk protein concentrate.

People wanting to use protein ranged from body builders and active sports people to the general public wanting to improve their protein intake.

Some of the protein products that utilised NZMP ingredients were used by performance athletes around the world.

There was a misconception about malnourishment with people thinking that it was solely in developing countries, Mr Wickham said.

But the reality was it was prevalent in the developed world. People were not getting enough protein as they aged and their muscles were wasting away.

That meant that when they got a disease or required medical treatment, they were in a worse situation, he said.

Trends were NZMP's "friend" and big trends included gut health.

"When your stomach's not feeling well, you're not feeling well", he said.

Other trends included beverages on-the-move which provided protein and also consumers seeking traceability of where the products they consumed came from.

NZMP could trace all the ingredients back to the milk, where there was also the "great story about New Zealand" which was one of the best places in the world to be producing pasture-raised protein.

There were also big themes around wellness, cognition, more active lifestyles, and the rise of "snackification". All of those factors meant New Zealand was "right in that sweet spot".

New Zealand was unlikely to see the milk volume growth there had been historically, so increasingly, Fonterra had to concentrate on value, extracting every dollar it could.

To do that, it had to focus on what consumer needs were, bring innovation to meet those needs, and then be able to match it with supply.

And that innovation was right across the whole supply chain, starting with farmers on-farm to meet the likes of environmental standards.

A key theme was partnerships as it could not do it alone - "it's a big world" - while focusing on where its strengths were.

New Zealand was a long way from its offshore customers and it needed to provide what their customers wanted.

Mr Wickham was excited about the opportunities that existed in the world for the ingredients business.

With a 30-year career with Fonterra, it was that world he enjoyed working in, while still staying "grounded in New Zealand".

That experience was right across the supply chain since he joined as a graduate. His previous role was as president greater China and India, focused on directing the development of Fonterra's business in those expanding markets.

Before that, he led Fonterra's supplier and external relations team, and he oversaw the launch of GlobalDairyTrade. From 2005 to 2007, he was the director of sales and operations planning.

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