Fonterra Co-operative Group Ltd is accelerating product development with Chinese customers as the New Zealand dairy giant seeks to capture growing demand for protein-rich foods and dairy products tailored to local tastes.
The company is leveraging its six application centers in China to help bakeries, beverage chains and food manufacturers bring new products to market faster, supported by investments in production capacity in New Zealand, CEO Richard Allen said in an interview during the China International Import Expo in Shanghai.
"We know how fast the China market moves and how quickly trends change," Allen said. "Alongside our customers, we can work with them to create new products with new selling points."
A recent visit to Chengdu, Sichuan province, highlighted how much the market had evolved since he worked in China's foodservice sector many years ago.
Allen said dairy products had become more prominent in bakeries, supermarkets and membership stores, with a growing number of products emphasizing their protein content.
Chinese food and beverage brands are also increasingly highlighting the grass-fed origins of New Zealand dairy ingredients to differentiate their products and strengthen their premium positioning.
However, turning those attributes into sales requires products that deliver both quality and value.
Fonterra works with customers to select ingredients that meet nutritional and taste requirements while keeping costs affordable for consumers and commercially viable for producers, Allen said.
"You've got to have nutrition, but it also has to taste good," he said.
Its six application centers in China bring together chefs, marketing specialists and sales teams to develop products suited to local and regional tastes.
For one bakery customer, Fonterra explored incorporating Sichuan's signature mala, or spicy and numbing, flavors into baked goods. Allen also cited the pairing of Anchor butter with pineapple buns as an example of how dairy ingredients can be incorporated into established local food traditions.
"By being on the ground, close to our customers, to their consumers, it allows us to work every day with our customers on developing new products very quickly," he said.
China is also becoming a source of product innovation for Fonterra's operations elsewhere in Asia.
Dairy-topped tea drinks developed in China, for example, have created opportunities among the company's foodservice customers in Southeast Asia, Allen said.
Meanwhile, the overseas expansion of Chinese restaurant and beverage chains is opening another avenue for growth.
As these brands enter international markets, they increasingly seek consistent supplies of familiar ingredients to maintain product quality and taste across their global operations.
Fonterra is supporting Chinese customers expanding into Southeast Asia, the United States, Europe, Australia and New Zealand, drawing on its international supply network and foodservice expertise.
"Not only can we support our local customers in other markets, but we can support Chinese brands in accessing other markets," Allen said.
The strategy builds on Fonterra's established ingredients and foodservice businesses in China, where the cooperative has operated for nearly five decades.
Allen described China as one of Fonterra's cornerstone markets, with demand for dairy ingredients and nutritional products continuing to create opportunities for long-term growth.
To support that demand, Fonterra is investing NZ$150 million ($87 million) to expand ultra-high-temperature cream production at its Edendale facility in New Zealand.
The additional capacity will serve customers in China and other markets, complementing investments in local application centers and culinary, marketing and sales teams.
The expansion comes as Fonterra reported stronger financial results for the year ended July 2026. The cooperative posted revenue of NZ$27 billion and total group operating profit of NZ$3.4 billion in results released on Sept 24.
Fonterra has also announced an additional NZ$1 billion investment over three years to expand its protein manufacturing network in New Zealand's South Island and improve environmental performance.
In China, Allen sees further opportunities in protein-rich products. During his visits to Chinese supermarkets, he was struck by the growing number of products promoting their protein content.
"For us, being agile and moving fast, and ensuring our customers are agile and moving fast, is about being close to the market and really understanding what's happening," Allen said.
