Fonterra to Invest $1 Billion Over Three Years to Expand South Island Protein Manufacturing

New Zealand dairy cooperative Fonterra will invest an incremental $1 billion over the next three years in the South Island to accelerate and expand its protein manufacturing network and improve its environmental performance, CEO Richard Allen announced on Thursday, 25 September 2026.

Allen said the investment is aimed at shifting more milk out of whole milk powder and commodity products into higher-value offerings. "Using the capital retained from the Mainland Group divestment, alongside our strong cashflow, this additional investment will help us move more milk from whole milk powder and commodities into high-value products, strengthen partnerships with existing customers, and pursue new opportunities as demand for advanced proteins continues to grow," he said.

The South Island protein manufacturing projects, according to Allen, "position the co-op to respond to changes in how people want to consume dairy, with a growing focus on sustainably produced, protein-rich and nutrient-dense foods." He described them as "critical to our future value growth" that "improve our optionality, increase our capacity and, as a result, strengthen returns for farmers and shareholders over the long term."

The announcement came alongside the release of Fonterra's fiscal year 2026 results. Total Fonterra Cooperative Group reported operating profit for fiscal 2026 was $3.4 billion, up from $1.7 billion the prior year, including a Mainland divestment benefit of $1.2 billion. Reported profit after tax was $2.6 billion.

The cooperative's Ingredients business delivered $1,293 million in operating profit, which Allen attributed to "strong global protein demand, favorable pricing and product mix decisions." The Foodservice segment posted $547 million in operating profit, "driven largely by volume and pricing growth across all product categories and markets."

Allen described fiscal 2026 as "a year of delivery," noting that Fonterra achieved "record shipping volumes" despite what he characterised as "challenging conditions, including weather events and geopolitical volatility."

Over the next three years, Fonterra expects total capital investment to be approximately $1.3 to $1.6 billion per annum.

Looking to the 2026/27 season, Fonterra is forecasting milk collections of just above 1.6 billion kilograms of milk solids and a farmgate milk price of $9.50 per kilogram of milk solids, with a range of $8.50 to $10.50 per kilogram of milk solids. The final farmgate milk price for the 2025/26 season was $9.69 per kilogram of milk solids. Allen also noted that while a strong season is expected, Fonterra is "well prepared for an El Niño weather pattern should this eventuate."

Allen also outlined Fonterra's continuing transition to a business-to-business (B2B) cooperative model, with a stated focus on farmer support, including "practical tools and services to make compliance easier and targeted support for the next generation of co-op farm owners."