Fonterra looks to cheese to grow Korean market

By Jim Cornall

- Last updated on GMT

Fonterra is hoping to grow sales of cheese in South Korea following growth in exports since a free trade agreement signed in December 2015. pic: ©iStock/colematt
Fonterra is hoping to grow sales of cheese in South Korea following growth in exports since a free trade agreement signed in December 2015. pic: ©iStock/colematt
As New Zealand marks the one-year anniversary of its Free Trade Agreement (FTA) with South Korea, Fonterra Co-operative Group says it is looking to grow sales of its dairy products there, particularly cheese.

Since the FTA was signed in December 2015, New Zealand has experienced 16% growth in exports of food and beverage products to South Korea.

The country is New Zealand’s fifth largest cheese market, worth $50m a year, which Fonterra says is on the same level as the country’s cheese exports to the US.

New Zealand’s new annual duty-free quota of 7,000 metric tonnes (MT) of cheese to South Korea will increase by 3% a year.

Tariffs phased out

Tariffs on cheddar and block mozzarella will be removed seven and 12 years after the FTA agreement started respectively, with all cheese tariffs eliminated and quotas removed after 15 years.

Quotas and tariffs on butter, anhydrous milk fat and infant formula will also be phased out over 15 years.

Market share growing

Fonterra has seen strong interest in its products since the agreement, reflecting a growing demand for dairy in South Korea, Jason Murney, Fonterra’s country manager Korea, said.

He said the FTA will help Fonterra deepen its commercial relationships in the market over time, as access increases.

“We have already seen positive results, with government import statistics showing that New Zealand’s share of the Korean cheddar market has grown to over 60% in 2016, up from 50% in 2015,”​ Murney said.

Consumption on the rise

Fonterra has developed a new cheese specifically designed for pizzas in South Korea.

The company has expanded its Korea team and is investing in a warehouse to import and distribute its products.

Consumption of dairy products is rising in South Korea, as dietary trends follow those of neighboring Asian countries. In 1990, Koreans consumed 43.8kg liquid milk equivalent per capita, but by 2014 that had risen to 72.4kg.

Murney said the development of the South Korean market is in line with Fonterra’s strategy of moving more milk volumes into higher margin products.

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