Lewis Road Creamery founder Peter Cullinane is accusing Fonterra of negotiating a "greedy" deal with supermarkets which would limit the ability of smaller dairy brands to get space in the chiller.
In an open letter to Fonterra chief executive Theo Spierings, Cullinane questions whether Fonterra is playing fair.
He said he understood that "Fonterra is looking to use its market power to introduce an exclusionary deal with supermarkets in the North Island that would all but remove non-Fonterra brands".
The deal would give Fonterra's white milk brands 95 per cent of the chiller space, he says.
Cullinane noted that the domestic market represents just a fraction of Fonterra's $20 billion business and calls on Spierings to be "supportive of the little guys" and not to crush innovation in the New Zealand market.
Leon Clement, managing director Fonterra Brands New Zealand, said: "Fonterra agrees that all Kiwis want to see fair play and have plenty of choices in the milk chiller. New Zealand consumers have, and will continue to have, a wide variety of choices when it comes to fresh dairy."
Fonterra was making significant investment in growing the premium milk segment to encourage more New Zealanders to enjoy premium milk, Clement said.
"Competition, including in the premium category, is critical to the success of the New Zealand dairy industry. It promotes efficiencies and innovative new products to meet public demand."
Cullinane also raised concerns about packaging similarities between Lewis Road Creamery products and new Fonterra brand products "which is likely to confuse shoppers".
"Surely anything more than four out of five bottles for Fonterra is greedy? Especially when it stifles the efforts of our progressive farmers and innovators? Is that fair play by kiwi standards?"
Yesterday a representative for the Countdown supermarket chain said it was not involved in any deal with Fonterra.
"Countdown does not have any deal with Fonterra of this nature, and would not enter into any agreement like this," said Countdown general manager merchandise, Chris Fisher. "We treat all of our suppliers fairly and shelf space is determined based on the merit and popularity of each product," Fisher said.
A spokesperson for Foodstuffs North Island said the company had "an agreement in place with Fonterra, as we do with other suppliers including Lewis Road Creamery, to supply a range of dairy products, the terms of our supplier agreements are confidential".
"The issue here seems to be a competitive one between Lewis Road Creamery and Fonterra in the premium milk market," the spokesperson said in a statement.
Cullinane is a former advertising industry executive and a director on the board of NZME, which owns the New Zealand Herald.