A new $240 million mozzarella plant at Fonterra's Clandeboye site will be the single largest foodservice investment in the history of New Zealand's dairy industry.

It will double Fonterra's capacity to produce individually quick-frozen mozzarella cheese and also make the site the largest producer of natural mozzarella in the southern hemisphere.

Demand from China and wider Asia continued to grow as more consumers sought out natural dairy products, Fonterra chief operating officer global operations Robert Spurway said in a statement.

The plant, like the other two on the site, used patented technology to produce natural mozzarella without using chemicals in the production process, Spurway said.

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''It is the only process of its kind in the world that can significantly reduce production time while still remaining 100% natural, something our customers and their consumers place great value in,'' he said.

The innovation behind IQF mozzarella reduced the processing time from three months to just six hours.

The technology, which was a tightly kept secret, was developed by the Fonterra Research and Development Centre.

It was supported by Transforming the Dairy Value Chain, a $170m Primary Growth Partnership programme between the Ministry for Primary Industries, Fonterra and DairyNZ.

Once the expansion was complete, Fonterra's mozzarella sales would have increased by more than 60 per cent since 2008, when the first IQF plant was built.

Fonterra chief operating officer global consumer and foodservice Jacqueline Chow said Fonterra's IQF mozzarella was already topping more than half the pizzas in China and continued to grow.

''Forty percent of people in urban China now eat at Western-style fast-food outlets once a week, and the use of dairy in foodservice has grown by over 30% in just five years.

''We see massive growth potential and our teams in the market are continually working to grow this valuable part of the business as we work towards foodservice becoming a $5 billion business by 2023,'' Ms Chow said.

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Work had already begun on the expansion and the first product destined for markets was due to come off the line in September 2018.

More than 1000 people would be involved in the project during that time and the plant would create full-time employment for 100 people.

Associate Primary Industries Minister and Rangitata MP Jo Goodhew said the investment would be a ''major boost'' for the regional economy.

''I went to school next door to the Clandeboye factory, which is now the education centre for the expanded site, so I know how important Clandeboye is to the local community.

''All of this investment and innovation is creating new jobs in South Canterbury, scaling up production and contributing to the region's economy,'' Goodhew said.

Primary Industries Minister Nathan Guy said it was ''another success story'' for the PGP and for innovation in the primary sector.

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