Judith Swales, CEO, global markets, of the global dairy company Fonterra, grew up helping her milkman father make his daily runs. Swales was previously CEO, Asia-Pacific, and prior to that, she led the innovation and transformation business unit, shaping Fonterra’s future by relying on innovation, emerging technologies, and the company’s distinct business model to maximize its impact across a range of stakeholders. She discussed Fonterra’s impact in her recent interview with Richard Webster, leader of Bain’s Global Consumer Products practice.

Q: How do you define the impact Fonterra aims to have across its different stakeholders?

Swales: First, we have a big impact on our dairy farmers. As a dairy co-op formed more than 20 years ago, we bring together generations of dairy families that started us on the course of becoming one of the most recognizable dairy companies in the world. Collectively, our farmers went from being famous in New Zealand for their quality product to being famous as major players on the global dairy stage. We’ve helped them create maximum value from the nutritious milk they produce.

Second, we have an impact on consumers by making a difference in their health and lives with that nutritious dairy, which has established Fonterra as a leader in dairy science and nutrition. For example, in Japan, where a significant portion of the aging population suffers from sarcopenia, a muscle wastage that affects the elderly, we launched a new whey protein concentrate that is easy to digest so that people can more easily add more protein to their diet to help support muscle development. When you get into the proteins, lipids, and probiotic space, it isn't only about selling milk; it’s about having an impact by offering consumers healthier solutions. And this, in turn, allows us to also support our customers by supplying them with more innovative products their shoppers are looking to buy.

Finally, we are uniquely positioned to have an impact on the planet. In New Zealand, we have a pasture-fed farming model, where our cows are free to roam, grazing mostly on grass. We’re farming the way nature intends, where our farmers have a focus on protecting and continually improving soil health, biodiversity, climate, animal, and water outcomes while supporting resilient, intergenerational farming businesses. It’s a very natural process that is in sync with the needs of the planet. In other countries, cows are barn fed, meaning that dairies must purchase food to supplement their feeding. Our pasture-fed farming model means our New Zealand farmers are among the most emissions efficient in the world, giving us one of the lowest carbon footprints of dairy producing nations.

Q: How does the co-op business model enable Fonterra to deliver a greater impact?

Swales: Our co-op model creates a true owner’s mindset that has enabled us to control the quality of our end-to-end supply chain and better address the unique needs of local markets. Post-Covid, we recognized the need to use our global scale to better reach local markets—to adapt our global platforms for the last 5% to 10% nuance with local tailoring. It’s the opposite of trying to find a way to push global brands into every market, and we can instead create more of a pull model. With our local roots and global participation, the co-op model was instrumental in helping us make that shift.

The co-op business model is very much akin to a partnership model, and we bring that partnership mentality to our relationship with our customers. We have a long-term view in our relationship with farmers that we try to replicate when we partner with customers. For example, product innovation isn’t something that fits neatly into a six-month or annual budget cycle. We think about longer-term horizons and, as a result, can bring to market more meaningful propositions.

Q: You’ve obviously had a lot of success in delivering an impact with multiple stakeholders. Can you talk about some of the challenges?

Swales: One challenge involves the recording of on-farm emissions data from farmers. At Fonterra, 86% of our emissions come from farms. Our farmers told us that collecting data and inputting it into systems was taking time away from what they do best, which is farming. So, we have been working with our farmers and partners to make this process easier. This data helps our big global customers track their progress toward their emissions reduction goals. For example, our recently launched NZMP Carbon Footprinter allows our ingredients customers to find out the carbon emissions of their products along with a projection of what they will be in 2030. We need our customers to feel comfortable in their ability to meet their targets by partnering with Fonterra, and we need our farmers to feel comfortable as participants in making that happen.

Q: What’s next for Fonterra?

Swales: We’re focusing in many areas. How do we simplify and improve efficiency through manufacturing? What is the role of artificial intelligence in that process? How do we serve the growing middle class in developing markets as their palates become more westernized?

Above all, we need to understand the problems that our customers are solving for consumers. That means an emphasis on innovation, and that requires looking at key trends, such as the fact that the aging population wants to stay active for longer. That plays to some of our strengths in delivering healthy dairy solutions with protein and requires us to address the increasing need for lipids for brain health, cognition, and focus. We currently have two of the world’s best probiotics and are looking at further innovations. What’s next for Fonterra is to reach the next level of health and wellness in ingredients.