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Fonterra makes its way into the British dairy market

May 1, 2024 - Klaas van der Horst

Dairy giant Fonterra sees great sales opportunities in the British market, helped by the free trade agreement signed between the United Kingdom and New Zealand at the end of May last year. Mike Bones, director Europe, states that 10,000 tons of product have been sold.

Bones shares this in a conversation with the New Zealand Herald. Thanks to the free trade agreement, New Zealand companies now have tariff-free access to the British market. According to Bones, this is the first time in fifty years.
The products sold now mainly consist of Cheddar and butter, but Fonterra sees room for expanding the range of dairy products. And the mentioned 10,000 tons is just the beginning, according to him.

Fonterra hopes that the United Kingdom, which is the second largest dairy importer in the world after China, can in a way compensate for the decreased sales towards China. When the UK was still a member of the EU, high tariff barriers applied to dairy products from third countries. For Cheddar, this quickly amounts to about €400 per ton. This threshold keeps American and New Zealand dairy out of the EU, but no longer out of the UK.

For the traditional exporters to the UK, especially those in Ireland, but also in continental Europe, the New Zealand supply represents significant competition and likely pressure on margins. Fonterra is not concerned about the climate effects of long-distance dairy transport. According to Bones, transport is only responsible for 1% of the total emissions in the dairy chain.

Klaas van der Horst

Klaas van der Horst is a senior market specialist in dairy at DCA Market Intelligence. He also closely monitors developments in politics and agricultural policy.

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