Multi-million investment in New Zealand dairy highlights Australian decline

Fonterra's NZ$75m butter plant expansion marks NZ's third major dairy investment this year, while Australian processors continue to close factories.

New Zealand is boasting its third dairy factory expansion project this year, at a time when Australia’s milk manufacturing sector is shrinking.

Fonterra’s Auckland management this week announced a $NZ75m ($A66.3m) investment to expand butter production at its Clandeboye site, 150km southwest of Christchurch.

The investment will enable construction of a new butter line at the factory, located 30km from Timaru in south Canterbury region, expanding the site’s current butter production capacity by up to 50,000 tonnes per annum.

Fonterra chief executive Miles Hurrell said construction at the Clandeboye site would start in December 2025, with commissioning scheduled for early 2027 and first product expected off the line in April 2027.

“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,” he said.

The $NZ75m Clandeboye project is the third major NZ project undertaken by Fonterra in 2025, on the back of another $NZ75m into a Studholme protein hub and a $NZ150m investment in a new UHT cream plant at Edendale.

On the Australian side of the Tasman, several factories have shuttered in recent years — with Bega Strathmerton and Saputo Maffra among the casualties.

Australian Dairy Products Federation executive chairman John Williams recently acknowledged the impact of cheap imports flooding Australian supermarket shelves.

“Our industry is facing significant challenges that affect the entire supply chain,” he said.

“Surging production costs, coupled with a long-term decline in milk supply, are being compounded by supermarkets narrowing product ranges and prioritising their own brands or imported dairy. Today, one in four dairy products consumed in Australia is imported.”

Rabobank dairy analyst Michael Harvey said New Zealand’s milk pool had expanded in recent years while Australia’s output had simultaneously contracted.

“New Zealand is pivoting towards where the growth is and where the value returns are,” he said. “Butter has been a strong performer in recent times, NZ is not selling as much whole milk powder to China as they’ve done in the past, so it’s about handling more volume as well as accessing new markets and diversifying their offerings.”