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New Zealand dairy group Fonterra has begun construction on a NZ 75 million ($45 million) expansion of its butter plant at the Clandeboye site in South Canterbury, as the co-operative looks to lift returns by increasing output of higher-value milkfat products.

The project forms part of Fonterra’s plan to invest up to NZ 1 billion over the next three to four years in manufacturing upgrades aimed at improving product mix, operational efficiency and resilience across its processing network.

The Clandeboye expansion, first announced in October 2025, will add a new butter production line, increasing capacity and enabling the site to produce a broader range of butter formats, including Halal and Kosher-certified products.

Fonterra says the additional flexibility is intended to support demand from international ingredients customers and foodservice operators.

Construction entered a new phase in January, with demolition and groundwork underway ahead of the build of a new butter processing hall.

Installation of new piping linking milk treatment to the butter line is expected to begin shortly, while key equipment is being assembled off-site.

The exterior of the expanded facility is due to take shape by April. The company says commissioning of the new line is scheduled for early 2027, with first commercial production expected in April that year.

Fonterra has increasingly prioritised value-added dairy categories such as specialised milkfats and ingredients as it seeks to improve earnings volatility and reduce reliance on bulk commodity products. Butter and anhydrous milk fat are among the co-operative’s higher-margin offerings, particularly in export markets.

The investment is also aimed at strengthening Fonterra’s South Island manufacturing footprint by increasing processing flexibility and reducing operational risk.

The project is expected to create 16 new roles at the site.