Fonterra: Resurgence of butter in Asia is down to understanding health foods and demand for premium products

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04 Dec 2017 --- Globally, annual butter consumption has increased 1.7 million MT over the last 10 years. In recent years we’ve seen the world adopt a better understanding of the health benefits of butter. While historically experts advised people to reduce their fat intake, they now agree that some fats are actually beneficial for people’s health – especially natural dairy fats. 

Millennials are looking for natural, authentic whole foods such as butter, driving a resurgence in this area. But even with older consumers, the changing recommendations around butter have given them “permission” to finally eat butter again.

In Asia, disposable income is increasing and consumers are looking for more premium food options. According to Fonterra, consumers are willing to pay 15 percent more for bakery products made with butter compared to margarine.  FoodIngredientsFirst caught up with Fonterra’s Regional Foodservice Director Stanley Goh who discussed the changing preferences to butter. 

“We have seen a significant resurgence of the demand for butter over the last 12 months,” he notes. “This demand for butter is mainly driven by 2 factors; the first factor is what we like to call the “healthy halo” effect, which is mainly driven by the fact that butter is now seen as a natural, more nutritious, form of ingredient. This perception is very different from what was perceived in the 80s, where synthetic alternatives were deemed to be healthier. That whole perception and trend has changed and butter is now seen as a natural and healthy ingredient. This is also coupled with the fact that with the rise of millennials and Gen Z we also see this resurgence because this group of people actually does see butter as a healthy alternative or ingredient.” 

“When consumers are looking for a natural ingredient, they will look at butter as a form of choice, and last year we did see butter being used in other forms of diet, that had more or less gained popularity in the likes of ‘bulletproof diet,’ where they are using butter in coffee instead of creamer or milk, which has really taken off in the US,” explains Goh.  

“The second reason for an increased butter demand is premiumization, which is driven by a group of consumers which we call YER, (young, educated and rich). These are typically young millennials or Gen Z who are educated by the use of internet and the fact they can obtain information at their fingertips,” he continues, “They are more educated and knowledgeable on the types of ingredients that they want to consume, rich in the sense that they are now able to afford things that their parents or grandparents couldn’t, they make their own choices and spend their earnings on what they like.”

“We did some interesting research in south-east Asia, which showed that these groups of consumers were actually willing to pay 15 percent more in terms of premium, for the end product that they consume, if they knew it was made using butter or some form of a natural ingredient,” reveals Goh. 

Combined with this group of YER consumers, urbanization is happening globally and throughout Asia in particular. Consumers are moving to urban cities and because of this, they have busy schedules which have led to an even further increase in butter consumption. 

For Fonterra, this is good news: “With us being the largest exporter for butter and anhydrous milk fat in the world, we are certainly trying to capitalize on this growth in demand,” says Goh. “We are continuously increasing production of butter and it is also important that we work closely with our customers, to forecast for the right demand and supply. Capacity for butter is constrained by our ability to produce and already we are one of the largest producers in the world,” he notes, “So we are working closely to ensure that we meet these demands that ensure us the ability to supply to our key customers moving forward.” 

In Southeast Asia, the trends and needs for natural butter are definitely present, showing itself very clearly despite the fact that market is still developing. According to Goh, Fonterra does see their customers making a move away from synthetic ingredients and substitutes such as margarine in applications that typically use butter. And one sector which is really taking shape is the bakery sector.  

He says: “Bakery is a channel that has moved more towards butter, and not just for the application of croissants, but for cakes, buns, and other pastries, so the bakery sector as a channel is gaining most from this movement.” 

“Traditionally, if you look at the market, margarine has been an acceptable form of an ingredient, especially in bakery items, however, even those consumers who used to think that margarine was a good ingredient, have now moved on and started to ask for butter as an ingredient,” he adds. “Not only for the natural aspects but the whole creaminess and mouthfeel that butter provides, the texture of the end product is significantly superior to that of margarine.” 

In light of discussions around natural fats vs trans-fat, consumers are increasingly more aware and the international awareness is constantly changing. Goh says that “contradictory facts always change, and now butter is seen as a healthy option, the best advice is ‘everything in moderation’”.

Based on the current trends Goh believes that the resurgence of butter will continue to make a positive move upwards: “The usage of dairy is likely to grow 3 percent year on year in Southeast Asia, but if we read the numbers of how we have performed over the last few years we do see an increase in forecast. For example, bakery as a foodservice channel is the largest growing single channel and that trend based on customer feedback which will continue over the next couple of years,” he states.  

“Our foodservice pision at Fonterra was relaunched last year, we have renamed our Fonterra foodservice to Anchor Food Professionals and the main reason that we have done that is because we are very serious in the business of food and understand our customers’ needs. We have renamed ourselves as we produce superior dairy products for the foodservice sector, but we also want to bring insights and knowledge for our customers and work closely with them on their many applications across our key markets,” Goh notes. “We also work with a network of chefs and drive our customers’ business opportunities, front and back of house, so that jointly, we can sell more dairy ingredients and products to the end consumers,” he finalizes.  

By Elizabeth Green

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