Fonterra’s president global markets ingredients, Richard Allen, said the co-op’s dairy ingredients were highly sought after by customers globally.
“We see significant opportunities in the global high protein dairy category, which is projected to grow by close to US$10 billion ($16b) over the next four years, at an annualised growth rate of 7% per annum,” he said.
“Increasing our manufacturing capacity for functional proteins will enable us to continue to strengthen our offerings with existing customers as well as attract new business.”
Site works at Studholme will begin next month with the first product due to come off the line in 2026.
The site will continue to support the South Island’s milk processing as it has done since it was acquired by Fonterra in 2012.
Allen says the project team reviewed Fonterra’s worldwide asset network before deciding on Studholme.
The project will also support the conversion of Studholme’s existing coal boiler to a coal-free alternative in line with Fonterra’s commitment to exit coal by 2037.
In May, Fonterra said it was looking at full or partial divestment options for some or all of its global consumer business, including well-known brands such as Anchor, and its integrated businesses Fonterra Oceania and Fonterra Sri Lanka after conducting a strategic review.
At the time, chairman Peter McBride said it was a significant move for the co-op, and would set it up to grow long-term value for farmer shareholders and unit holders.
Last week, Fonterra increased the midpoint of its farmgate milk price forecast for the current season by 50c to $8.50 per kg of milk solids.
The co-op also increased its advance rate schedule for the 2024/25 season, allowing farmers to be paid earlier in the season.
Fonterra also said its earnings from continuing operations were expected to be at the top end of the forecast range of 60-70 cents per share.
The announcements reflected the recent lift in Global Dairy Trade auction prices as well as the strength of the co-op’s balance sheet.
They followed a strong lift in Global Dairy Trade prices on August 21, which saw the GDT price index gaining 5.5% - the largest gain in a single auction since March 2021.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.