Fonterra sets up startups as part of internal innovation pilot

Fonterra chief executive Theo Spierings says two startups have been established within the diary giant as a result of its innovation pilot Disrupt.

Speaking at the Future of Food Forum in Auckland in front of the visiting Dutch royals, Dutch-born Mr Spierings says there is a major opportunity through innovation within the agriculture sector given the challenge to feed the world. It's predicted there will be a 100% increase in food demand by 2050.

Some 700 Fonterra managers and staff from three markets have been involved in Disrupt which is aimed at developing the best of a bunch of internal ideas.

Fonterra says from the original 110 startups ideas submitted from the co-operative's 20,000 staff, 50 submissions were narrowed down to 11 to compete in a hackathon, where teams of programmers and designers work collaboratively over a short period of time to develop an idea. A few were then selected to go into a formal acceleration programme.

Top management made decisions last month on which proposals would be taken further but the company is keeping tight-lipped at this stage on how many, what the ideas have been, or the funding made available to develop them.

Mr Spierings says the incubator within the company complemented the work of its 350 staff at the Palmerston North-based research and development centre.

His list of innovation opportunities for the dairy sector through to 2050 includes smart precision farming to revolutionise on-farm productivity though he says the Netherlands was well ahead of New Zealand in this area.

Other opportunities include 3D printing to transform the food service supply chain, genetic mapping to enable individually tailored medical nutrition, block chain to revolutionise food traceability, and digital and e-commerce.

Mr Spierings also talked about the quality of any company based on the talent of its people, and the need to cultivate diversity of age and gender. In a media interview last year he said setting up groups of 20- to 25-year-olds in hubs in different markets to produce new ideas was something he had done in his previous company where they used the same approach to develop a baby food brand.

Fonterra's global strategy is based around providing nutrition in a range of circumstances including making it affordable to the poor, he says.

The co-operative's New Zealand farmer shareholders produced 20 billion litres of milk, double the amount of the Netherlands, though production will be down this season due to farmers cutting back on supplementary feeding. Its other milk pools produced five billion litres collectively.

Mr Spierings says the strategy is based on matching demand growth to the best source of supply with the New Zealand home market supplemented by five offshore milk pools in South America; in Chile and possibly going to Argentina, the US, Europe, China and Australia.

Food security was another big issue for consumers which is why there is also an opportunity for Fonterra around trust, he says. Last week the co-operative introduced a new global food quality seal - Trusted Goodness - that is being rolled out worldwide, including on Anchor fresh milk sold in New Zealand.

The label also says "From Pure New Zealand" which plays on Tourism New Zealand's 100% Pure branding and follows Fonterra farmers having spent more than $1 billion on environmental initiatives over the past five years, including fencing 97% of defined waterways.

(BusinessDesk)