Premium lines such as medical and high-protein sports nutrition products will be processed at the new plant.
The building project will employ about 60 contractors over about 16 months, and when completed will support six new roles.
Work is due to start this month, with the first products expected to come off the line in 2026.
Central and Upper South Island operations general manager Derek Woodworth said the upgrade would be an asset for the local community and the country.
He said the protein plant would add to the site’s capability and interact with some of the existing equipment.
"The $75m investment of capital into the site is fantastic for the site and the region.
"Not only will that bring some job opportunities for people in the Waimate and wider region, but there will obviously be a big team of contractors who will be supporting the project, and hopefully that will have a really positive impact on the local economy surrounding the site as well.
"The site will still be a really important asset for processing milk and some other products as well.
"We currently have buttermilk powder and whey protein concentrate there as well, but this will enable us to make some specialised protein which will absolutely [be good] for farmers as well."
Specialised components for the project unable to be sourced domestically will be shipped in from overseas.
The site was built with the possibility of being extended, and an existing pad will tie in with the new plant for an overall 700sq m footprint.
Mr Woodworth said the high-returning final products would be new to Fonterra sites.
In addition to producing advanced proteins, the site will continue to support the South Island’s milk processing, as it has done since Fonterra took it on in 2012.
Once the protein plant is completed, Studholme will join other Central South Island sites with specialised facilities.
On top of milk powder production, Clandeboye has its mozzarella plant and functional proteins, while Darfield has a cream cheese plant.
"We’ve definitely got some of those higher-returning products within the region, which is awesome. Some of it’s because of that whole milk drop and what we do with all of its components to maximise some of the cream as well as some of the proteins."
Global markets ingredients president Richard Allen said the project team had reviewed Fonterra’s worldwide network before deciding on Studholme.
“The Studholme site was chosen as it is the right size, relatively new and had been built with future expansion in mind.
"It makes sense economically and we’re confident in the longevity of the site to supply these ingredients for the long term."
He 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$10 billion ($NZ1.61b) over the next four years, at an annualised growth rate of 7% per annum.
"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.”
Mr Woodworth said Studholme was already one of the larger employers in the area with the six new positions to be be added to an existing workforce of 47.
Fonterra has confirmed the project will support the conversion of Studholme’s existing coal boiler to a coal-free alternative in line with its commitment to exit coal by 2037.
Mr Woodworth said an alternative had yet to be announced.
"So it’s early days for that decision and there will likely be some other conversions in the region prior to that, and I think we will probably take some of those learnings on board before we make a decision.
"There’s lots of different technologies being compared at the moment and we have done different types of conversions across the co-op — like Edendale with our electro-boiler going in, and at Stirling there’s wood chip and the North Island we have some sites on pellet — so we are just weighing those various options up to see which would be the best for Studholme in the future."
He said no further expansion projects on the horizon were at the announcement stage for the central to upper South Island.
Chief executive Miles Hurrell said the investment was part of the co-op's strategy to grow value through its ingredients business.
“We have valuable expertise in dairy science and innovation, making us leaders in the manufacture of dairy proteins and other advanced ingredient solutions.
"The expansion of our Studholme site will allow us to increase production of this high-value product and ultimately grow returns to farmers."
