Fonterra Cooperative Group Ltd, the New Zealand-based multinational dairy cooperative, has established its first overseas innovation center in Shanghai, a fresh move demonstrating its confidence in and long-term commitment to China, according to a senior company executive.

The Fonterra & ACC Shanghai Innovation Center, serving all consumer and food service businesses, stands to help the company develop products that "are much closer to the needs of Chinese customers", said Paul Washer, chief financial officer of Fonterra in China.

"As one of the world's largest dairy companies, Fonterra is very optimistic about China's future," Washer said during a launch ceremony on Friday. "For Fonterra, China is not only a consumer market, but also a very important source of innovation and an important part of the global industry value chain."

Hou Haifeng, chairman of the Anchor Center for Research and Development and Certification (Shanghai), said: "The partner agency of the innovation center." I believe this will be a win-win cooperation, and we will be able to provide safe and high-quality products to Chinese customers and consumers at a faster pace of innovation."

As an extension of Fonterra's research capabilities worldwide, the Shanghai facility is designed to be responsible for everything from product development, technical skills, sensory assessments, consumer science, nutrition science to packaging.

China has been the biggest and most important market for Fonterra, and accounted for nearly 25 percent of the volume in the overall business. The company said its Anchor brand accounted for half of the mozzarella cheese used in pizzas in China, and it served half of the mainstream bakeries and tea houses.

"The Fonterra chef team will cook some fancy, tasty, fun and innovative applications that fuse New Zealand dairy and Chinese cuisine," Washer said, adding some new debuts included cheese walnut pastries and black gold cheese pastries.

He said the choice of Shanghai as the first overseas innovation center is due to the city's favorable investment environment and resources for R& D businesses. The Shanghai office was also upgraded to the regional headquarters for Fonterra China.

In the first half of this year, the city became home to 26 regional headquarters and 10 research and development centers of multinational corporations, taking the total to 746 and 471 respectively.

Fonterra is also gearing up for the upcoming China International Import Expo, bringing not just everyday milk, yogurt, cheese and butter, but a few new launches such as premium ice cream brand Tiptop.

Dairy consumption has maintained a steady growth momentum given the influence of COVID-19, suggesting people's recognition of lactoferrin's role in enhancing immunocompetence, said Jason Yu, general manager of Kantar Worldpanel in China.

"The 'stay-at-home' trend due to the pandemic has spurred spending on higher margin products like cheese, whose consumption level has remained rather low" said Yu. "This suggests the huge potential of all-category dairy consumption in China."

"The most evident trend in the China market we see is the trade-up in a lot of areas, which is good news for us as our high qualified products could meet the rising needs of good and nutritious products people are looking for," Washer said.

Yu said that Fonterra also supplies to many business-to-business companies, including bubble tea shops, cafes and restaurants. which saw noticeable recovery of business after June.

"These are the long-term drivers of China's consumer market," he said. "Locally relevant innovation in product and services offered by Fonterra will help empower success of these business."