Fonterra targets China sweet tooth with eat-at-home ice cream tubs

[WELLINGTON] New Zealand dairy group Fonterra plans to trial online sales of eat-at-home ice cream tubs in China as it shifts its focus to higher-margin consumer products following a slump in dairy prices.

Fonterra will sell its 'Tip Top' brand of ice cream on T-Mall, an e-commerce provider operated by Alibaba Group , the co-operative said on Thursday.

China is the world's biggest ice cream market and sales soared 90 per cent to US$11.4 billion in the six years to 2014, according to research by Mintel, although the firm warned that a vast array of locally produced, low-price brands would be a challenge for international competitors.

Fonterra said the Chinese market for ice cream eaten at home was still small. "It is critical to get into the take-home segment early, get our systems up and running and learn what consumers want so we can quickly capture opportunities as they emerge," Tip Top director Kim Ballinger said in a statement.

Dairy prices have tumbled by more than half since early 2014 due to global oversupply and a slowdown in China, but have shown some improvement in recent weeks.

Low dairy prices, while financially devastating for Fonterra's farmer shareholders, help boost profit margins for the co-operative's consumer products such as ice cream by lowering ingredient costs.

The New Zealand-made Tip Top ice cream would be sold in 2 litre tubs identical to those sold domestically and come in six flavours, including a honeycomb variety popular in New Zealand called 'hokey pokey'.

"Our research tells us that Chinese consumers want to know they are buying the exact same product that we eat in New Zealand," said Mr Ballinger.

REUTERS