Oceania Dairy in South Canterbury, owned by China’s Inner Mongolia Yili Industrial Group, was commissioning the second stage of its development, incorporating a canning and blending operation for infant formula and two UHT manufacturing lines.
Stage one included a 10-tonnes an hour infant formula capable dryer.
Another dryer would significantly increase capacity to produce a wider range of products and generate export revenues of more than $300m a year.
Yili announced a three-stage, five-year development when it opened the factory at Glenavy in 2014.
Total investment so far was $400m, general manager Roger Usmar said.
Stage three would likely include a second, larger dryer and a lactoferrin plant though the dryer’s size had not yet been determined.
“We are working through the approval process,” he said.
Oceania had a small onsite laboratory for testing but expected to begin construction of a far larger laboratory to support the operation by mid-2018.
The new laboratory would let Oceania do all in-process quality checks and most of the final product grading.
It was partly in response to increased quality oversight from China.
“Clearly the standards from China are very high and in actual fact are exceptionally high and getting higher.
“They are certainly not getting any easier.”
An onsite laboratory would give the company total control of the value chain, including testing.
Total investment including the laboratory and third-stage development would cost about $600m, even possibly north of $600m, Usmar said.
When all three stages were complete the factory was expected to handle more than 630m litres of milk a year.
Oceania had 73 suppliers, all within 50km of the plant.
“It is a very tight collection base that gives us some great efficiencies around our milk collection costs, which are exceptionally low.”
With another dryer the company could double or even triple the milk intake.
“We have a very healthy level of interest from other suppliers in other companies who have signalled that when we have a need they will be very keen to supply us,” he said.
Oceania offered a premium over Fonterra’s price but he would say what it was.
Fonterra expected to pay its farmers $6.75 a kilogram of milksolids this season.
Yili, China’s largest dairy producer and the eighth largest dairy company in the world, had revenue of US$8.6 billion in 2016.
The Glenavy plant was specifically designed to make milk powder for export to China where it was used by Yili in infant formula.
