Dairy Crest had previously announced a £45m investment to manufacture demineralised whey powder. This is the base ingredient in infant formula and will be produced from the whey generated at its cheese-making factory at Davidstow in Cornwall.
Fonterra will receive a commission to sell all of Dairy Crest’s demineralised whey production and will provide technical and engineering support.
The agreement is for a minimum of five years.
Dairy Crest is also announcing a new £20m capital investment at its Davidstow site to manufacture galacto-oligosaccharide (GOS). GOS is a lactose-based prebiotic widely used in infant formula.
Dairy Crest will enter into a joint venture to produce GOS with UK-based Fayrefield Foods Limited, which will provide access to the necessary enzyme and other intellectual property.
Fonterra will supply lactose and will take responsibility for marketing and selling this product. This project is anticipated to provide an eight-year cash payback for Dairy Crest.
The £45m capital investment in demineralised whey powder is already under way and on track, with commercial production expected to begin early in 2015/16. Production of GOS is expected to commence later that year.
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