He said the funding announcement followed years of work building a detailed business case outlining risks and opportunities.
The funding, which Carruthers said could involve a loan or equity, would be combined with private backing to operate a big new processing plant 11km north of Invercargill.
"Certainly from our perspective, equity's probably something that we're more enthusiastic about because it shows the Government has skin in the game."
That kind of investment would also help taxpayers share in the company's success, Carruthers said.
He said today's $6 million investment from the Regional Strategic Partnership Fund was a big vote of confidence.
He said Sir Stephen Tindall came on board with funding in 2020 and the company was continuing to raise capital.
The successful funding proposal demonstrated alternative land use models and was as detailed as could be, Carruthers said.
The Makarewa plant would use locally-grown oats which Carruthers said thrived in the temperate climate, and did not rely on irrigation.
Boring Oat Milk founder Morgan Maw. Photo / Supplied
He said New Zealand currently imported about 80 per cent of oat milk consumed domestically but NZFF hoped to start producing at Makarewa by the end of 2023.
"When we get to full capacity we'd expect to have about 50 people."
Carruthers said although some people might think of oat milk as a competitor to dairy, research showed about a third of oat milk buyers bought dairy too.
Oat milk was used in meals on breakfast cereals, in smoothies and in coffee, he said.
"The thing with oat milk is it has a very similar mouth feel to dairy, and it has a background flavour not too dissimilar to dairy in coffee."
Mark Piper, Fonterra group research and development director, said potential existed for flexitarian consumers who adopted a semi-vegetarian diet.
A Boston Consulting Group report published on Friday said alternative proteins in recent years had gone from being niche products to mainstream.
"Plant-based meats are now a fixture at fast-food restaurants around the world, and plant-based milk is a household staple," the July 8 report said.
By 2035, alternative proteins would reach full parity in taste, texture, and price with conventional animal proteins, the BCG study said.
Plant-based milk alternatives are a fast-growing part of consumer markets, Regional Development Minister Stuart Nash said. Photo / George Heard
By that time, at least 11 per cent of all meat, seafood, eggs, and dairy eaten worldwide would be alternative, the report added.
The Government today cited soaring demand for plant-based milk in the Southland funding decision.
"Plant-based milk alternatives are a fast-growing segment of domestic and international consumer markets," Regional Development Minister Stuart Nash said.
He said people in New Zealand spent $144 million on plant-based milk in 2019, almost triple the amount spent just two years earlier.
"Producing oat milk locally is a lucrative way to diversify our strength as a quality food producer," he added.
"We know that oats grow well in Southland, and being low in water use, land use and emissions, they are an excellent raw ingredient for an environmentally sustainable alternative-milk option."
Nash said currently there was no appropriate processing facility to domestically produce the volumes of oat milk required.
But with the new investment, the Makarewa plant should be able to produce up to 80 million litres of plant-based milk a year.
New Zealand's Ministry of Foreign Affairs and Trade said almond milk was the leading milk alternative in the US, with oat milk second most-popular.
Mfat said plant-based milk, yoghurt, cheese and ice cream offerings were a fast-growing segment of the US consumer market.
