Fonterra invests $75m to meet booming global butter demand

Richard Allen, Fonterra’s President of Global Ingredients, says "butter is definitely back". Photo / Christine Cornege

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Fonterra is ramping up butter production in response to surging global demand, announcing a $75 million investment in its butter plant at Clandeboye in South Canterbury.

Richard Allen, Fonterra’s President of Global Ingredients, told The Country Sport Breakfast’s Brian Kelly the expansion was “good news” for both the co-operative and the local economy.

“We announced we’re investing $75 million to upgrade and expand our butter plant at Clandeboye,” Allen said.

“As part of this expansion, we’re including a new line that effectively doubles our site capacity, up another 50,000 metric tonnes, which is a pretty big amount of butter.”

For reference, that’s equivalent to about 22 Olympic-size swimming pools full to the brim of butter.

The upgrade will also create 16 new jobs at the site and help ensure farmers’ milk is directed into high-value markets.

Allen said demand for Fonterra’s grass-fed butter was strong across more than 100 global markets, with particular growth in China, the United Kingdom and Southeast Asia.

“Butter is definitely back,” he said.

“In China and Southeast Asia, butter is going into our Foodservice sector, where it’s supporting croissants, breads, and cakes.

“That’s our unsalted butter. But we’re also producing a new lactic butter, which is more of a European style, which will support some growing demand pools we’re seeing, particularly up in the UK.”

The Clandeboye investment is the third major South Island upgrade Fonterra has announced in the past year.

It follows the development of an advanced protein hub at Studholme and a new UHT cream plant at Edendale.

“This is about Fonterra investing behind the next phase of our strategy,” Allen said.

“We signalled in our annual results that we really are targeting to get our earnings back to the F25 levels in the next three years, and that’s if we divest the Mainland Group.”

If the proposed sale of Fonterra’s Anchor and Mainland brands to French dairy giant Lactalis goes ahead, it could unlock up to $4.5 billion in spending.

“This investment, along with those other investments, really ensures that we continue to get our products into the highest value demand around the world,” Allen said.

“We’re going to invest up to another billion dollars over the next three to four years in more projects that will continue to ensure that we’re adding value to our farmers’ milk back here in New Zealand.”