Two former senior Fonterra executives are advising a group of local and overseas investors on setting up a $90 million dairy factory near Gore.
Max Parkin, responsible for Fonterra's operations from its start-up, headed up its international manufacturing from 2005, but was now advising Mataura Valley Milk on the factory at McNab, 7km north of Gore.
Mr Parkin was chief executive of the local Southland Dairy Co-op when it was taken over by Fonterra and has extensive farmer contacts in the region.
Another advisor was John Shaskey, of Global Dairy Network, who resigned as Fonterra's global trade managing director after a 30- year career in the dairy industry.
The only shareholder listed on the Companies Register was James Williams, a Rangiora entrepreneur.
Mataura said chief executive Singapore-based businessman Chris Shelley developed projects for private equity funds looking to invest in light/medium scale industrial businesses in the Asia Pacific region, and had invested personal funds in the dairy company.
"Our proposed plant will produce highly functional milk powder products, targeted at high value market segments, and designed to meet the needs of large scale global brand owners," he said.
Mataura said the plant would also give Southland dairy farmers further choice in terms of selling their milk: Fonterra farmers are allowed to sell up to 20 percent of their milk to other companies.
"Our market analysis shows smaller, independent dairy companies are providing sustained, superior returns to milk suppliers at or above the industry benchmark," Mr Shelley said.
Farmers would be able to sell milk to Mataura Valley on long-term contracts at a market price, but because they would not have to buy cooperative shares, they could cash up shares in Fonterra.
"Existing dairy farmers can free up capital to expand their production, pay off debt and invest elsewhere," he said.
The factory would use a custom-built Danish drier able to process up to 200 million litres of milk a year, and would employ 200 people during construction of the plant and about 45 dairy technicians and support staff once the plant was operating.
Milkflows in the region had been increasing by 10 percent a year over the past nine years and this level of expansion was expected to continue in the plant's catchment area over the next five years.
Mr Williams said in a statement that farmers should be able to choose who they supplied with milk and should have the opportunity to see their returns more closely aligned to "added value" dairy processing.
In this year's forecast $7.30/kg milksolids Fonterra payout, only 22c is expected to be drawn from added value processing such as branded consumer goods and specialty ingredients.
Fonterra has said that section of the business has been squeezed by having to pay high prices for its raw material as milkpowder has soared on international commodities markets.