Ingredients lead the charge in a market with the right demographics for dairy.
After 18 months in his role as Fonterra’s Thailand consumer & foodservice operations director, Montien “Joe” Boonpiemsak says the co-op is starting to see the benefits of a focus on tighter supply chain management, delivering improved returns to its farmer shareholders.
Latest data has the Thai dairy market worth about $780 million a year in export earnings for New Zealand, with most of this country’s major dairy operators having a stake in a market that includes a rapidly ageing population and growing middle class.
The dominance of Fonterra in Thailand’s dairy landscape is greatest in its ingredients sector, one that globally delivered a return on capital of 10.2% in FY2024
“Supply operations are really the custodians of the entire business, to ensure we bring good quality products to customers at the right time in the right way, while trying to remain as lean as possible,” Boonpiemsak said.
“We have improved our forecast accuracy by 40% in the past year and removed the differences and silos between cross functions, reducing risks of losses, surpluses, and the need to discount to move product.
“We have spent the first six months shaping an integrated business planning model that is pretty much our ‘Air Cobra’ in the supply chain battle ground.
“We also ensure our supply chain reliability to our customers are in place – and once we are there, it has given us more space for improvement and transformation works in our supply chain.
“It means we’re now starting to have leaner logistics, lower lead times to customers with lead time on product arrival reduced by 28%.”
Fonterra has its eye firmly on continuing to build the number of client products that feature its ingredients and are sold through convenience stores.
“When I left Thailand 14 years ago there were about 7000 stores. Today there are over 15,000 stores. Ready-to-eat products are a big part of what they offer, and our ingredients feature in many.”
Heat-and-eat curry dishes, desserts, cheesecakes and even pre-packaged, pre-“toasted” sandwiches that just need to be heated, all feature.
Thailand is Fonterra’s largest ingredients market in southeast Asia, in a country that does not traditionally consume large quantities of dairy products.
But by importing largely Fonterra ingredients, re-packaging and processing them, then exporting them throughout southeast Asia, Thailand is ASEAN’s largest dairy exporter.
Thais are also familiar with milk from an early age thanks to a nationwide school milk programme that consumes about half the milk produced by Thailand’s 800,000 cows.
The country’s ageing population means the population aged over 65 is likely to have doubled as a percentage from 15% to 30% by 2040, while its birthrate is among southeast Asia’s lowest at 1.3 per woman.
Recognising this, Fonterra’s consumer business has focused on its Anlene brand, with a campaign to build awareness of the value of consuming more of it at a younger stage in life than may normally have been the case.
“While some markets may have it as a powdered product, the biggest market here is for the convenient liquid form, with UHT liquid being our main one here now.”
That campaign is paying dividends, with Anlene’s market share in the last six months reaching an all-time high.
In the food service sector Fonterra has made advances with KFC, incorporating a specialised cooking cream. Globally, food service is a good earner for the co-op, earning $1.8 billion globally last year and generating a 29% margin.
“We had our own chef in our team here and learning from South Korea, looking at how cheese can be incorporated into local dishes.”
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