The country's second biggest dairy manufacturer and exporter, Open Country, says expansion is on the cards in dairy heartland Waikato - most likely on the site of its brand new Horotiu plant.

Chairman Laurie Margrain said Open Country hadn't committed to a firm plan but the company's next expansion would be either at its Waharoa site, near Matamata, or at the recently commissioned Horotiu dryer plant.

Margrain said expansion would help meet strong overseas customer demand for higher-value ingredients.

Both the company's Waikato plants had full milk supply, he said.

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There were no space restrictions at the Horotiu site, alongside the headquarters of the Affco meat company, owned by Open Country's majority shareholder, New Zealand food company Talley's Group.

The publicity-shy Motueka-based Talley family owns 76 per cent of Open Country, with Singapore's Olam International a 15 per cent shareholder and the Dairy Investment Fund holding 6.6 per cent.

Auckland-headquartered Open Country, which had revenue last year of $1 billion, also has processing plants in Whanganui and Southland.

Construction at the Open Country Dairy Whanganui site.
Construction at the Open Country Dairy Whanganui site.

The indication that it is eyeing further manufacturing growth in the Waikato comes on the heels of a warning from Fonterra farmers advocate, the Fonterra Shareholders' Council, that the big cheese of the dairy sector needed to sharpen up its ideas about the way it pays for, and collects, milk in the future.

Council chairman Duncan Coull recently told the Herald that when Fonterra, the country's biggest company, had finished its strategic review of its business, it should turn its attention to these areas to counter the risk of growing competition for milk entering important dairying areas like the Waikato.

Fonterra Shareholders Council chairman Duncan Coull.
Fonterra Shareholders Council chairman Duncan Coull.

Fonterra has several manufacturing sites in the Waikato.

Listed Synlait Milk is set to be one of the newest competitors in the Waikato. The Canterbury-based infant nutrition company is building a $250 million plant in Pokeno.

It has recently run up against a Court of Appeal finding that it has effectively been building in breach of covenants on the 28 hectares it bought last year for the new plant, but the company has said it is confident of resolving the issue. Synlait's purchase of the site was conditional on the seller removing the covenants.

Pokeno also hosts Chinese milk manufacturer Yashili.

Former Synlait managing director John Penno at the time of the Pokeno land purchase said the Waikato was the "least competitive" major dairying area in the country. Waikato has the biggest concentration of dairy herds in the country, according to DairyNZ

Synlait's new plant would only contest 2 per cent of the region's milk production, he said.

Meanwhile, Open Country's Margrain said construction of a $17m wastewater treatment upgrade at the Waharoa plant was well under way and elements of it would be completed by the start of the new dairy season on June 1.

Open Country has been in hot water with neighbours and the Waikato Regional Council over odour issues at the plant.

Open Country has been exporting since 2004 and is the world's second largest exporter of wholemilk powders. It has customers in the Pacific, Asia, Americas, Africa, Middle East and Europe.

It won't reveal production volumes or the cost or details of new plants for commercial reasons.

The new Horotiu plant created 30 fulltime jobs, excluding tanker drivers.