2024 Year in Review

Welcome to the 2024 year in review for our NZMP™ Perspective newsletter where I will share my thoughts and reflections on key trends from the past year.

As I reflect on the year gone by, it’s clear that collaboration, innovation, and a deep understanding of consumer needs have been at the heart of the dairy industry’s progress. Across the sector, we’ve witnessed remarkable advancements in R&D models and performance metrics, which have bolstered innovation pipelines in high-value dairy categories.

At Fonterra, innovation remains a cornerstone of our strategy and a key to maintaining our competitive edge. By committing to ‘innovate to drive our advantage’, we’re harnessing science and technology to address challenges faced by consumers, customers, and our Co-op. This approach strengthens our leadership position and enhances the value we deliver to our NZMP™ customers worldwide. An example of this is the establishment of our corporate venture capital arm, Ki Tua, which connects us to cutting-edge knowledge, technology, and new business models. Coupled with enhanced support tools for Fonterra farmers, this has driven transformative innovation throughout our value chain. These achievements have been made possible through strong partnerships and collaboration with our farmers and other key stakeholders.

Meeting the evolving needs of our global customers has been a significant focus, alongside delivering dairy nutrition to consumers worldwide. We’ve placed particular emphasis on growing our protein business, addressing the challenge of global nutrition. Through NZMP™ dairy proteins, we’ve developed advanced medical nutrition solutions and created innovative sensory experiences that we’re incredibly proud of. This success is a testament to the power of collaboration—both internally and externally—and highlights how we continue to drive innovation to meet consumer needs globally.

It should come as no surprise that sustainability is a core component of Fonterra’s long-term strategy. New Zealand farmers are amongst the world’s most emissions efficient dairy producers¹, and we are committed to reducing our emissions even further². Fonterra has an ambition to be net zero by 2050 and a detailed action plan for how the Co-op will deliver emissions reductions across our value chain³. Over the last 12 months we have been making progress towards delivering our near-term targets, but there is more work to do, and we look forward to continuing our sustainability journey next year and beyond.  

As we start to wind down for the holiday season, we hope the following highlights from 2024 will provide you with some inspiring reading and novel insights for 2025.

Consumer trends to watch

In February, we spoke to Fonterra’s GM of Global Consumer and Customer Insights, Tim Opie, who unpacked three key consumer trends for 2024. Whilst Tim has seen multiple reports on new consumer trends, these are the ones that stood out for him: exploring new foods and flavours, a heightened awareness of healthy ageing, a desire for a more holistic approach to inner wellness, and the ever-increasing concern for the environment:

Exploring new foods and flavours:

Exploring unchartered territories in flavours and cuisines is now back on the menu, creating the opportunity for brands to develop exciting new products and flavours. More than 82% of global consumers are occasionally or frequently on the lookout for new foods or flavours to try⁴ and 32% of global consumers are most influenced by how exciting or novel a cuisine is.⁵

Healthy aging:

In the United States, the number of Americans aged 100 and over is projected to more than quadruple over the next 30 years.⁶ Statistics like these appear to be driving concern for physical health and mental wellbeing for global consumers aged over 35.⁷ As a result, there’s a big opportunity for food and beverage brands to address this concern.

Holistic approach to inner wellness:

Globally, consumers are also searching for a holistic approach to inner wellness, but they can get overwhelmed by the sheer number of possibilities when it comes to foods, ingredients, and functional benefits. Consumers want sleep, immunity and long-term health, but struggle to address any deficiencies⁸. Brands can capitalise on this opportunity gap by developing products that both engage consumers by highlighting how they may resolve or improve an identified deficiency, as well as supporting their general need for good nutrition.

Mintel’s food and drink trends

Back in June, Caroline Roux from Mintel shared their food and drink trends alongside a roadmap for dairy brands which included an overview of Generation X. The importance of the particular age group to the dairy industry was highlighted, with brands urged to nurture the loyalty of this demographic as Gen X consumers look to food and drink consumption to ensure good health as they get older.

In addition to reducing bone loss and improving digestion, dairy products may also help to address mental challenges faced by Gen X. For these consumers, milk is perceived as a legitimate sleep aid and is often consumed as an evening or night-time snack. Gen X consumers will also seek natural solutions that support mental wellbeing, such as adaptogens, nervines, probiotics, or nootropics (e.g., L-theanine, GABA).

For menopausal and perimenopausal women, dairy brands can look to add functional health ingredients to their products that may help with “brain fog.” Further, Gen X consumers may also benefit from “diabetes-friendly” snacks. Due to its low-carb formulation, cheese may be a suitable option for consumers who want to help support stable blood sugar levels.

Why consumers are willing to pay more for organic dairy

Research suggests that organic products including dairy, typically command a price premium of 20% to 50%.⁹ In July, we spoke to Fonterra’s Insights Content Visualisation Lead, Suwan Meng, about the importance for organic brands to justify this premium by effectively communicating their benefits and unique selling points. Organic product claims like ‘non-GMO’ and ‘free from additives’ appeal to 71% and 66% of global dairy consumers respectively.¹⁰ This appeal translates to a price premium, with 52% of global consumers willing to pay more for dairy that is ‘non-GMO’, and 34% of global consumers willing to pay a higher price for dairy that is ‘free from additives’.¹⁰

Research suggests that over 37% of global consumers are also on the lookout for animal welfare initiatives when purchasing dairy products, and 28% are willing to pay a premium for it.¹⁰ Organic dairy brands across both mature and emerging organic dairy markets are catering towards this interest by placing animal welfare claims at the forefront of their products.

Additionally, organic farming is perceived to be strongly associated with sustainability.¹¹ When purchasing dairy, 65% of global consumers find sustainably sourced ingredients to be appealing ¹⁰, and sustainability claims are an important factor to 78% of shoppers.¹⁰ At a more granular level, packaging-related claims are suggested to have the greatest influence on purchasing decisions for global dairy consumers.¹⁰

With health, ecology and care being core principles of organic farming,¹² consumers may go on to attribute organic with nutritional benefits. 71% of global dairy consumers find the absence of antibiotics, hormones and pesticides appealing, and 51% of global consumers are willing to pay a premium for these attributes.¹²

By capitalising on its alignment with consumer needs, organic dairy is poised to not only justify its premium price point, but also thrive in the competitive dairy market.

The possibilities of generative AI

Generative AI refers to artificial intelligence that can create new content such as copy, images, music, and even videos based on the data it has been trained on. Unlike traditional AI, which often focuses on identifying patterns and making predictions, generative AI can create entirely new content that resembles the examples it learned from. In October, Fonterra’s Head of AI, James Lawrence, shared an opinion piece focused on how generative AI is changing the face of business and providing a range of opportunities within the dairy industry.

Globally, the technology industry is investing billions of dollars in research and capacity, people and data centres, to advance and support the explosion of AI driven potential. For example, Fonterra uses AI from traditional machine learning to identify potential defects in NZMP™ milk powder bags, and uses modern generative AI; the brains behind ChatGPT, to drive Fonterra’s internal version for staff use. Generative AI supports a transformation across the way we work which comes with incredible opportunities.

For Fonterra, we have taken a multi-faceted approach leveraging industry leading “bought” options such as Microsoft 365 Copilot targeted at our corporate functions; specific GenAI-powered solutions for our marketing and sales staff; and, we have built our own secure internal Co-op GPT for all our corporate workforce. Fonterra has seen strong adoption of these tools amongst teams and with them a growing awareness of the potential and productivity gains, however, our real opportunity is to leverage our information and data, in a considered and safe way to truly realise value.

The opportunity within the dairy industry for AI as an enabler is profound, ranging from on-farm uses to simplifying and automating aspects of managing herd health, movements, pasture use and feed. We expect this to improve outcomes across the business:  from the animals, through to greater efficiency for office staff and being able to deliver better customer experiences.

For dairy businesses, the advancements in generative AI present significant opportunities to propel the industry forward, by enabling innovation and creating value. By leveraging these technologies, businesses and brands can more easily create highly personalised and engaging content and provide enhanced customer interactions.

The views expressed above are the opinion of the author, not those of Fonterra, and Fonterra is not responsible for any decisions taken in reliance on the same.