New Zealand-based dairy giant Fonterra is developing plans to cut costs by around NZ$1 billion (US$600 million) until 2030, as it needs to weather the challenging market amidst slump in global dairy prices and inflation.
The strategy includes trimming operational and manpower costs and digitisation of business.
Fonterra had also revised down the volume of milk it would collect in the current 2023/2024 season to 1,465 million kg milk solids from 1,480 million kg in the previous period.
A reduction in demand for whole milk powder from China has affected prices, which in turn affected the supply of milk. China recently ended the pandemic lockdown but nevertheless, demand for fresh milk products had not recovered to pre-pandemic levels.
Fonterra is however expecting demand to pick up back in 2024, and this also coincides with the removal of the remaining tariffs on New Zealand dairy products from January 2024 as part of the NZ-China Free Trade Agreement. China is still the world’s largest market for dairy imports.
Fonterra is also one of the world’s largest dairy exporters, producing 16 billion litres annually and exporting to more than 140 countries.
Dairy was New Zealand’s biggest export commodity last year with milk powder, butter and cheese accounting for 28% of total exports, worth US$12.3 billion.
