US Leads Rapidly Maturing Global Protein Sector, Claims Fonterra’s North American Ingredients Head

25 Jul 2016 --- New Zealand headquartered Fonterra is the world’s largest dairy exporter and was actively promoting its protein portfolio to the trade at the IFT Food Expo in Chicago last week. Last month, Joe Coote was appointed as President of NZMP for the Americas [Fonterra’s global ingredients brand], which is headquartered in Chicago, Il and has a strong presence in the North American market.

Coote, who has worked at Fonterra for 7 years, comes from serving as Fonterra’s Director Operations & Supply Chain Asia Pacific Middle East Africa (APMEA) business unit based in Singapore from mid-2013 to mid-2016, following a spell as Optimization Director for Fonterra’s NZ Milk Products division in New Zealand.

At IFT 2016, Innova Market Insights reported how dairy is thriving on indulgence platforms in the US and beyond. The researcher noted that 20% of Americans are most influenced by indulgence when purchasing dairy and that 10% of global soft cheese desserts feature an indulgent & premium claim. Adding elements of ultra indulgence, like new textures and more experimental flavors, is trending in dairy. New opportunities for product hybridization and eating occasions are emerging, according to the research.

Coote (pictured here) is amazed at the quality of products now on offer in the US. “In the last 5 years, businesses such as Whole Foods Market and Organic Valley have raised the bar and I think the breath of offer, price points and value is amazing. But also the premiumization in some of the dairy categories like yogurts, butters and cheeses,” he told FoodIngredientsFirst in an interview at IFT. “There are innovative snacking products, which are packaged up and very convenient for the consumer. Dairy is represented across the fresh offer, for example the pizzas they bake in store contain mozzarella as a dairy ingredient, which is very interesting,” he notes.

But overall it is the protein space, where NZMP expects the biggest opportunity, with several concepts of high protein drinks and bars on display at the company’s booth. “We are excited globally about the growth in protein. If we think about it from a consumer perspective, we have a very strong view on where protein is today, but also on where it will go in the future. As the demand from consumers grows, we want to work with partners on supply and innovation and become a bigger part of this growth story,” he says.

Coote believes that global protein opportunities exist within four subcategories:
1. The medical category, with products for susceptible people who require specialty nutrition.
2. Healthy aging, which plays under the company’s “move as young as you feel” tagline. In some Asian markets, the company offers the Anlene brand and is a strong player.
3. The sports nutrition category – which goes beyond the elite athlete to those living active lives and want to recover quicker from workouts and eat healthy.
4. Weight management, where a lot of people are aspiring to live healthy lives and lose a few kilos.

“There is really something in it for everybody and those megatrends line up pretty nicely with some of the lifestyle trends.” he claims.

In terms of protein, Coote notes that the US is the leading market globally, with several recent innovations. “A lot of brands are getting into protein, with Gatorade having a full protein offer, for example. The protein drinks that Kellogg’s are doing are interesting. So there are a lot of adjacent category players who are getting into protein and some of them are using dairy proteins. We are not yet seeing the same level of that activity in other parts of the world,” he notes.

Coote is also impressed by the level of consumption of protein powders and bars in the US and the prevalence in the retail aisles of protein bars. “It is still a maturing market and there will be a lot of players who will continue to evolve. It is still the early phase out of specialty into mainstream, but I think that the expansion into mainstream will really see the category accelerate growth,” he says.

Proteins are also evolving into other application areas such as gel formats, which are not yet as prevalent in the US as in Japan, for example. “So the question is, what other formats are people going to bring to market in the next 3-5 years and how will consumers embrace those opportunities?,” he says.

While Coote was coy on specific R&D platforms, protein as a whole will remain key for Fonterra. “We invest a significant amount of money into dairy R&D, with a dedicated facility in Palmerston North in New Zealand. A lot of focus of our R&D pipeline is in the protein portfolio and it is a priority area for us to invest. So we have a number of exciting projects that in the various stages of R&D and we will bring those to market, when we feel they are ready and that the market will embrace them,” he adds.

In terms of Fonterra’s North American business, Coote was also non-specific in targets, but certainly optimistic. “We aspire to a double-digit CAGR growth target as a whole, but it varies by category, dollars and metric tons,” he says.

Fonterra has been present in the US for many years and Coote foresees strong opportunities, even for foreign headquartered companies such as themselves. “The US dairy is big, it's growing so fast and evolving to become a global base for innovation and supply – there is plenty of opportunity for players in the global dairy industry. We have some partnerships on the supply side and with US and global customers,” he notes.

A new era of trade deals will also help. “It is an exciting time in the dairy industry in North America. You have the onset of TPP [Trans-Pacific Partnership], which we will be watching in terms of how it plays out. There is NAFTA [North American Free Trade Agreement] between Canada and Mexico. US businesses are doing more global business. There is a lot of US product that is going overseas and we are competing in many markets, which we think is healthy. If we are all evolving together in a high growth segment then this is a positive thing for our industry,” he concludes.

By Robin Wyers

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