Synlait's proposed $260 million specialist dairy manufacturing plant at Pokeno will contest only about 2 per cent of milk production in the Waikato, the least competitive major dairying area in the country, says chief executive John Penno.

The Pokeno plan, which requires Overseas Investment Office approval and other consents, is listed Synlait's first manufacturing foray outside its Rakaia, South Island base, and the north Waikato township has been chosen as much for its proximity to ports and good energy and people resources as much as milk availability, Penno said.

With New Zealand's second biggest dairy manufacturer and exporter Open Country currently building its second big plant in the Waikato, at Horotiu, north of Hamilton, Synlait's announcement of its Pokeno site purchase at first blush further challenges Fonterra's dominance of farmer supply in the region.

But Penno said there was so much milk in the Waikato it was the least competitive dairying region, and while Synlait's proposed first dryer at Pokeno would be sizable by infant formula site standards at 7-8 tonnes an hour capability, it would be small in the New Zealand dairy manufacturing scheme of things.

Advertisement

The Waikato has the country's largest concentration of dairy cows at 23 per cent of the national herd. Taranaki is next with 9.7 per cent.

The proposed plant would initially create about 50 jobs, Penno said.

Synlait said in November it was looking to buy land in the North Island to develop a second manufacturing site. Its Dunsandel plant in the South Island has about 200 contracted farmers.

Penno said Synlait needed more manufacturing capacity to meet demand for infant formula products from its customers, which included A2 Milk, New Hope Nutritional and Bright Dairy.

A Pokeno site would also balance the company's exposure to a single powder manufacturing site and single milk supply pool in the South Island.

Synlait would be seeking Waikato dairy farmers to supply milk to the proposed plant.

"Giving farmers choice is a good thing. Not just in providing price pressure but by getting farmers to think strategically about their milk production," said Penno.

Synlait had long had farmer inquiry from the Waikato, he said.

Advertisement

"With the addition of Pokeno, we will have a national portfolio of added-value capability to leverage for our future growth."