Competitor to Fonterra sets up in Canterbury

A new export competitor for Fonterra plans to set up a cheese and milk powder factory at Studholme in South Canterbury to process up to 1.6 million litres of milk a day.

New Zealand Dairies will be just the third new dairy company to establish or announce plans to start business since the Dairy Industry Restructuring Act which was introduced in 2001 allowed the creation of Fonterra. The others are Canterbury-based Synlait and Waikato-based Open Country Cheese.

Chaired by Waikato accountant Kelly Diprose, New Zealand Dairies has bought the former Food Processors' vegetable-processing plant at Studholme from the Skeggs Group which retains less than a 5 per cent shareholding in the new business.

The new plant will process milk sourced from farms between Oamaru and Timaru and also from Fonterra, as allowed under the act.

Dairy Farmers of New Zealand chairman Frank Brenmuhl said he thought there would be more new dairy companies than was the case, but the high cost of plant and securing milk supply may be deterring investors.

Mr Brenmuhl said private companies were not required to take all their suppliers' milk, a major shift in an industry traditionally run by co-operatives, which are required to do so.

Farmers who had sold their Fonterra shares to supply a new competitor may find themselves having to buy Fonterra shares at a higher price, should the private company fold.

Suppliers to Kapiti Fine Cheese, owned by Foodstuffs, had found that when the company was resold to Fonterra they had to buy their shares again at a higher price, Mr Brenmuhl said.

- OTAGO DAILY TIMES