Fonterra looks to boost butter production after selling off brands

The announcement comes before next week's farmer shareholder vote on its $4.22 billion deal to sell Mainland Group to Lactalis. Photo / Getty Images

By RNZ

Dairy giant Fonterra will spend $75 million to expand butter production as it looks for earnings growth after the sale of its global consumer business.

The investment at its Clandeboye plant in South Canterbury would increase the site’s butter production capacity by up to 50,000 metric tonnes a year.

The announcement comes before next week’s farmer shareholder vote on its $4.22 billion deal to sell Mainland Group to French company Lactalis, as Fonterra looks to focus on its ingredients and food service businesses.

“We’ve said that through focused execution of strategy, we are targeting our earnings to be back at FY25 levels by FY28 if the Mainland Group business is divested,” Fonterra chief executive Miles Hurrell said.

“This investment supports that goal by increasing our production of a high-value product and improving our product mix by adding value to milk fat.”

Fonterra planned to invest up to $1b over the next three to four years to help drive further value.

The co-op said the new butter line at Clandeboye would improve its ability to produce a range of butter formats for global ingredients customers and professional kitchens.

The plant would also be able to meet diverse requirements, including Halal and Kosher certifications.

Butter demand has been strong in recent times, prompting stronger prices globally, including in New Zealand.

Hurrell said demand for butter continued to grow.

Fonterra chief operating officer Anna Palairet said the expansion would create 16 new jobs at the site.

Construction at Clandeboye would start in December 2025, with the first product expected off the line in April 2027.

Earlier this year, Fonterra invested $64m at Clandeboye to convert two coal boilers to wood pellets.

– RNZ