Westland Milk Products plans to spend $40 million to upgrade its Hokitika factory in a bid to double production of its consumer butter brand Westgold to 42,000 tonnes a year.
The investment was part of the dairy companys strategy to move away from being a producer of bulk dairy commodities to focus on producing consumer products, sales and marketing general manager Hamish Yates said.
The demand for grass-fed butter was increasing and Westland already had major markets lined up, including the United States, Australia, China and Japan, Yates said.
The plan had been five years in the making, backed by new owner, global dairy giant Yili.
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Westland was bought by the Chinese company in 2019 after 94 per cent of farmer shareholders voted to accept its $588m offer and the deal.
Westland resident director Shiqing Jian said the investment highlighted the important role Westland played in Yilis plans to supply consumer and industrial markets overseas.
New Zealand is one of the worlds major butter producers and industry and consumers widely recognise the value of dairy products of New Zealand origin.
In future, demand for butter production and processing of Yili and Yili subsidiary brands will be considerable, and the upgraded Westland plant will play an important role, Jian said.
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Annual global butter and spread sales were predicted to grow from a current estimated $US44 trillion (NZ$62.8t) to $US59t by 2025 with the US, Russia and China regarded as the worlds largest importers of butter, he said.
Yates said the expansion would not create new jobs at this point because the total volume of butter produced wasn’t changing, rather the packaging was changing.
The current capacity to produce consumer packaged butter sat at around 20,000 tonnes but the investment would allow all 42,000 tonnes to be made into retail and food service products, increasing the value of the product enormously.
A large part of what Westland supplied currently was bulk commodity butter. Dairy commodities were susceptible to big price swings, and the move would bring more stability to the business, he said.
The existing single churn, commissioned in 1978, would be replaced with two German-built churns, allowing one churn to run on salted and the other unsalted. This gave Westland the ability to choose the product mix it wanted to run rather than have it dictated by the current factory design.
Increasing global sales of Westgold butter had been planned since 2017 but the configuration of the factory had capped production capacity, Yates said.
Westland Milk Company plans to double production of Westgold butter to 42,000 tonnes a year.
Westland chief operating officer Richard Hickson said new packaging lines would be developed and pallets would be upgraded to make export to different markets faster and more efficient.
A cool store upgrade would also add more remote stacking and racking capability to allow for speedier transport, he said.
Yates said Westland would leverage the West Coasts reputation as one of the most unique dairy catchments in the world to engage more directly with domestic and global consumers concerned about the provenance of food.
Currently, 409 dairy farms supplied Westland’s milk pool, which were audited every year for their feed records and were shown to have a diet of more than 95 per cent foraged pasture, he said.
The scale of the investment showed how much demand there was for grass-fed butter, he said
Westland’s butter was made using a traditional churning method called Fritz churn, from cream and salt. The slower processing method resulted in a higher-quality product. The butter would continue to be made this way.
Site works, construction and installation was expected to begin shortly before Westlands winter shutdown in May and run for three months.